Drewry said ocean carriers are planning to add 12 percent more vessel capacity to the Asia-East Coast North America (ECNA) trade by May despite lack of cargo growth.
"It seems like suicide, but new cargo sources may be envisaged,” the Londobn-based consultancy said.
Drewry estimated that in March carriers operating between Asia and ECNA were operating at only 67 percent utilization eastbound, and 56 percent westbound.
In the latest issue of its Container Insight Weekly
, Drewry said container volumes moving from Asia to ECNA in the first quarter of 2013 were 837,000 TEUs, 14 percent fewer than in the third quarter of 2012.
“The decline is worse than it looks, as the first quarter of the year is usually when trade starts increasing after the winter season, partly due to the need for re-stocking,” Drewry added.
“Where the cargo to fill the extra capacity is going to come from has not yet been defined,” the firm said, adding it appeared carriers expect to entice some cargo now moving through North America's west coast ports. But it said for this to happen, the $1,000 per 40-foot container premium in rates to the North American east coast “will presumably have to be reduced.”
Westbound, Drewry said cargo has been static since the third quarter of 2012 at around 500,000 TEUs —“in other words, ocean carriers cannot have been drawing strength from the route to justify 12 percent more vessel capacity being added between March and May, even if it is the agricultural slack season.”
Drewry said a recommendation by the Transpacific Stabilization Agreement (TSA) that freight rates on containers moving from Asia to the U.S. East Coast be increased $800 for a 40-foot container “was totally ineffectual, which is unsurprising following so soon after the success achieved with the previously recommended increase of $600” per 40-foot container on December 15.”
Citing the World Container Index, a joint venture between Drewry Consultants and Cleartrade Exchange, it said all-in rates quoted to freight forwarders for spot cargo from Shanghai to New York shot up from a low of $3,000 per 40-foot container on Dec. 13, 2012 to $3,700 by mid-January.
But “it has since been a gradual downhill voyage, except for a few small exceptions along the way, probably only caused by cancelled sailings," Drewry added.
A recommendation by TSA that rates be increased on April 1 by $600 per 40-foot container “appears to have only been partially successful,” it added.
In an April 3 press release, TSA Executive Administrator Brian M. Conrad said a trend of modest, but steady growth was expected to continue in 2013, with improved vessel utilization already apparent in April, following the traditional post-Lunar New Year lull.
“Coming off a period of close to zero cargo growth in 2012, the outlook is definitely more positive at this point,” he said. - Chris Dupin