Maersk’s no-bookings in Europe linked to market cycle

   Maersk’s decision this week to stop accepting export bookings from Europe to Asia is due to a confluence of factors, not a singular spike in demand on the eastbound Asia-Europe trade, according to Mathijs Slangen, maritime advisor for the investment banking firm Seabury Group.
   Slangen told American Shipper Thursday that while westbound demand levels are stable and rising, the growth is not enough to have induced such a decision by Maersk, which has said it will stop accepting bookings through May. Other factors likely influencing the decision are a decline in headhaul Asia-Europe capacity after the Chinese New Year and a parallel drop in westbound demand.
   “Rotations were adjusted for Chinese New Year, but commodities in Europe were not affected by that because it’s a push market,” Slangen said. “It’s normal to see a backlog of Europe exports after Chinese New Year. It’s not that the exports all of a sudden boomed. It’s a combination of strong healthy growth on exports, with Chinese New Year, and a reduction of capacity and services on the westbound side.”
   Slangen also mentioned that carriers have prioritized profitability over market share this year, and that’s in line with the decision to stop accepting bookings on the least profitable cargo that the line carries.
   In a statement that elaborated on the announcement, Maersk said “very low westbound demand from Asia after the Chinese New Year prompted several carriers to cancel multiple westbound sailings and, in turn, eastbound sailings.”

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   “Stronger demand eastbound has been experienced in past months and demand has continued to rise despite general rate increases for February, March and April,” Maersk added. “We have heard from customers that other lines have also stopped bookings until May.”
   Maersk told shippers this week it is “implementing this complete booking stop to ensure we prioritize and deliver on the bookings we have already accepted. By implementing this booking stop, we take action to resolve the situation at the soonest possible, and also hope this will allow you to make alternative arrangements for your cargo flows to minimize impact to your supply chain.”
   According to Seabury’s figures, there’s been a 23-percent drop in westbound demand and a 10-percent rise in eastbound demand since June 2011. However, the demand growth in real terms on the eastbound side is far smaller than the real drop on the westbound side. Also notable is that the westbound and eastbound trades virtually match up with each other from a weight perspective, even if the TEU gap is wide. Slangen pointed to Seabury data showing that the two trades, by metric tons, were virtually identical at the end of 2011, thanks to the heavier weight of eastbound commodity cargos like wastepaper and metal scrap.
   American Shipper liner research affiliate ComPair Data shows a 16 percent drop since June 2011 in allocated capacity made available on the trade.
   “What we’re seeing is capacity is being pulled out of the market,” Slangen said. “All the carriers are looking at profitability instead of looking at market share. The bottom line is that carriers are looking at where they make the most money.
   “In the last six or seven GRIs (general rate increases) for Maersk, only the last one materialized,” he said. “The previous ones had no impact on freight rates. In other words, the gap between supply and demand was too large. Only now, when we see the gap getting smaller, we see the increases materializing. As a carrier, you will look at where do I make my money. Should I increase or decrease my capacity on the money-making direction. There are some backhaul shippers who will have to suffer in this case.” — Eric Johnson