There could be a rate war behind the persistent and continuous decline in rates along the routes between Asia and Europe.
Alphaliner is convinced of this, stating in a post published on LinkedIn that evident external pressures are having a downward effect on this trade.
According to the consultancy firm, there would be no other way to explain the drop in freight rates in a market that has long suffered from a capacity deficit.
Data from the analysis company shows that the nine largest liner operators would currently need 461 container ships to cover all 31 services offered on the Far East-Northern Europe and Far East-Mediterranean services.
However, Alphaliner points out that only 425 vessels have been deployed on these routes to date. This means that 36 container ships are missing, 24 of which are the responsibility of the Ocean Alliance (CMA CGM, Cosco, and Evergreen), which would be short 16 and 8 container ships to cover the services offered on the Asia-Northern Europe and Asia-Mediterranean trades respectively.
On the same routes, MSC has accumulated a deficit of nine vessels (seven of which are on Asia-Northern Europe), while the Premier Alliance, formed by Ocean Network Express, HMM, and Yang Ming, would be short four container ships to deploy on the Far East-Mediterranean routes.
The Gemini Alliance, composed of Maersk and Hapag-Lloyd, is currently the only one that is truly covered.
In its analysis, Alphaliner starts from the consideration that the fleet of inactive ships has now reached insignificant levels (0.5% of total capacity), no longer constituting a resource for liners to draw on to fill a gap that has evidently begun to worsen with the Red Sea crisis.
Over the last two years, the lengthening of routes due to shipping companies’ forced choice to circumnavigate Africa, and thus avoid Houthi attacks, has clearly helped absorb excess tonnage, sinking container line schedule reliability and driving freight rates upwards.
Today, however, rates have taken a downward turn, and this is despite the lamented capacity deficit, which has remained such despite the introduction of new vessels and the arrival of several container ships from the China-US trades.
Last week, the Shanghai Containerized Freight Index recorded declines of around 10% and 12% on Shanghai-Rotterdam and Shanghai-Genoa, respectively. “This is one of the lowest levels since December 2023,” comments Vespucci Maritime CEO Lars Jensen, who, however, does not foresee the conditions for a real return of rates to pre-Red Sea crisis levels. “Let’s not forget that in October 2023, spot freight rates had hit one of the lowest points ever, only to increase by 50% in two months thanks to the general rate increases promoted by shipping companies to keep routes remunerative.” It follows “that even if there has been a substantial decline compared to just a year, a year and a half ago, we certainly have not hit the bottom.”
The problem, however, remains. “Last summer,” Alphaliner recalls, “the shortage of tonnage was the factor that, more than any other, contributed to the growth of freight rates, to a level never recorded before the Pandemic.”
Although the Red Sea crisis is still far from being resolved, it seems that the tonnage shortage is no longer impacting the performance of spot rates, which from Shanghai to Northern Europe have decreased by 45% in the last ten weeks.
“This clearly suggests a rate war among some of the major operators” is the conclusion reached by Alphaliner.
