Global News Sharp rise in Asia-Europe Q3 volumes discounted by last year’s import slump

Container volume from Asia to Europe rose almost 13% in the third quarter year over year, particularly to Mediterranean destinations, but the comparisons are heavily skewed by the steep slowdown in demand seen during the same period last year.

Third-quarter Asia to North Europe volume was up 5% year over year at 2.7 million TEUs, Asia-West Mediterranean and North Africa volume of 780,000 TEUs was up 14% and Asia to the East Mediterranean and Black Sea volume of 865,000 TEUs was an increase of 43%, according to Container Trades Statistics (CTS). Overall, Asia-Europe volume increased 12.9%.

“In September 2022, there was a massive collapse in volumes across the Asia-Europe trade lanes as there was no need for companies in Europe to replenish stocks,” CTS CEO Nigel Pusey told the Journal of Commerce. “The overall Asia-Europe volume last year dropped 300,000 TEUs from August to September, which affects comparisons with the third quarter of last year.”

Meanwhile, spot rate levels are falling as the market largely shrugged off mid-November freight all kinds (FAK) price increases by the heavily oversupplied carriers.

Ocean Network Express Holdings, Ltd. (ONE), Mediterranean Shipping Co. SA (MSC), CMA-CGM SA and Hapag-Lloyd AG have announced FAK increases on Asia-North Europe of up to $1,050 per TEU for Dec. 1. Also from Dec. 1, CMA CGM will set its rate at $1,400 per TEU and Hapag-Lloyd is hoping for $1,700 per TEU for Asia to the West Mediterranean.

But the rate aspirations of carriers are far above current levels. North Asia to North Europe rates fell 13.6% during the week to $1,050 per FEU with some services falling below $1,000 per FEU, according to Platts, a sister company of the Journal of Commerce within S&P Global. Asia-Mediterranean rates dropped 4.4% to $1,300 per FEU. Heavily oversupplied market The falling rates have continued despite carriers blanking 21% of available capacity on the Asia-to-Europe trade in November, according to Sea-Intelligence Maritime Analysis, with 24% of the available capacity to be withdrawn in December.

Still, Sea-Intelligence noted that capacity on Asia-North Europe in the six weeks after Golden Week was up 10.7 percentage points compared with the same period in pre-pandemic 2019, and 36 percentage points higher on the Asia-Mediterranean trade lane.

Sea-Intelligence wrote in its latest Sunday Spotlight newsletter with that level of capacity growth, and absent any real demand growth, there were two ways in which the market would play out.

“Either the carriers announce a massive blank sailings program between now and the end of the year, which will reduce capacity but will not go down well with the shippers as it will leave them scrambling to manage these sudden supply-side disruptions,” Sea-Intelligence noted. “Or the carriers ride this wave of capacity injection and the likely downward pressure on freight rates into the new year and compensate for it during Chinese New Year.”

But riding out the capacity wave will not be in the carriers' best interests as they push hard to lift rates ahead of annual tender negotiations with shippers on Asia-Europe, where contracts typically start early in the year.

Andrew Lee, an equity analyst at investment bank Jefferies, said rate increases being attempted by the carriers on both the trans-Pacific and Asia-Europe were quickly being discounted by the market.

“The freight rate increase on Asia-Europe is more important than trans-Pacific given Asia-Europe annual contracts normally begin in January with contract prices historically negotiated close to the spot level,” Lee said in a customer advisory this week.