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Ocean carriers increase blank sailings to put a cap on slumping freight rates

by Başak Ceylan - bceylan@chemorbis.com
  • 01/11/2022 (06:42)
Industry experts expect the big slide in ocean freight rates to decelerate, with some already claiming that it has done so, given increased number of blank sailings by major carriers. This could be the delayed result of efforts to reduce capacity by ocean carriers in response to global slowdown in demand, they argue.

Are China-to-US rates near the bottom? Opinions diverge

According to Freightos, a global freight booking and payment platform, Asia-US West Coast prices remained stable at $2,494/FEU while Asia-US East Coast prices were similarly flat at $5,713/FEU last week. Although these levels were respectively lower by 85% and 71% than last year, they indicated a slowdown in persistent drops that the industry has been facing for a very long time.

According to Drewry, another shipping consultant, however, Asia-US freight rates ended last week with another 3% weekly loss at $2,412 for the West Coast and $6,034 for the East Coast. They are respectively 75% and 55% below last year, but the slump has not taken a breather until last week.

Carriers blank sailings, change routes

On October 26, Maersk announced that they blanked two voyages eastbound from Asia to the US across the Pacific to “cope with demand fluctuations”. This followed two separate advisories released on October 20 and 21, announcing that several sailings would be blanked, and several capacity adjustments for Far East Asia to Europe services, for which the company cited “the forecasted reductions in global demand”.

Maersk also pointed out that they would merge the TP1 and the TP9 onto TP1, covering Vancouver and Prince Rupert by late October, meaning that sailings on this route from China would end. In connection with this change, the company announced that it was also moving Seattle to their existing TPX service while suspending the infrequent TP7 service.

Inactive tonnage at highest in two years

Reduction in global demand for freight was also evident in inactive boxship levels. According to a report released by Alphaliner, a global ocean-shipping consultant, carriers began to take some measures to reduce capacity, in addition to efforts of blanking sailings and combining service routes. The consultant reported that inactive tonnage as a percentage of the overall container fleet reached it its highest in two years.

Accordingly, the number of containerships inactive was over 1 million TEU. Although the proportion of inactive tonnage has grown consecutively since August, it is still equal to the expected delivery of new ships in 2022. The recent data show that 1.1 million TEU of capacity is being added to the global fleet in 2022. They expect 2.3 million TEU to enter the market next year and a further 2.8 million TEU in 2024.

Rates show signs of slowing slump –but is it temporary?

The recent figures show that blank sailings and capacity management methods may have helped ocean freight rates avoid further sharp falls. Several analysts have interpreted this as the initial signs of a market bottom, possibly a new benchmark for post-Covid era for freight. However, there are many who believe that freight rates still have room to decrease.

The latest Drewry’s composite World Container Index for 40-foot container is now 70% below the peak of $10,377 reached in September 2021 and 16% lower than the 5-year average of $3,747. Although this indicates a return to more normal prices, the index is still 121% higher than average pre-pandemic rates of 2019.
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