Far East/Europe swings severely

Far East/Europe swings severely       The year-on-year swings in the Far East/Europe the past two years are significantly more severe than those in the transpacific.
      Now comparing the Far East/Europe and transpacific on a yearly basis, the same principles seem to apply.
      In fact, the split in capacity volatility become more dramatic. The transpacific saw weekly capacity slide 2.5 percent from January 2007 to January 2008 and 4 percent between January 2008 and January 2009.
      Meanwhile, the Far East/Europe trade saw capacity increase 28 percent from January 2007 to January 2008, while it dropped 13.8 percent between January 2008 and January 2009.
      What's interesting to note is that despite the incredibly volatile manner in which capacity has swung on the Far East/Europe compared to the transpacific, capacity on the Far East/Europe has actually grown 10 percent from January 2007 to January 2009. That's also in spite of all the capacity removed in the last three months of 2008. During the same two years, capacity on the transpacific has dropped 6.3 percent.

'Carriers have been able to get better savings in Asia/Europe by paying attention to this seasonality and being ready to adjust capacity up and down over recent years ' compared to the shorter Pacific and Atlantic loops which it is harder to keep adjusting and so tend to be kept running the way they are.'

Francis Phillips analyst, ComPairData

      There are a couple of potential reasons for the increased volatility year-to-year (as compared to the transpacific), outside of the different contract structures in the two trades.
      For one, carriers operating between Asia and Europe seem more willing to add and subtract capacity due to seasonal demand than those operating on the transpacific.
      'Carriers have been able to get better savings in Asia/Europe by paying attention to this seasonality and being ready to adjust capacity up and down over recent years ' compared to the shorter Pacific and Atlantic loops which it is harder to keep adjusting and so tend to be kept running the way they are,' said Francis Phillips of ComPairData.
      This ability to adjust for seasonal demand is, of course, more achievable due to shorter contract lengths for Far East/Europe cargo. But there's another factor at play here: more intense competition driven by national interest.
      That is to say, the biggest carriers in the world these days come from two locations: Asia and Europe. While some of these carriers are family-owned and others are state-run, all receive significant backing from their respective governments (whether tangible or not). Witness the rush to keep German carrier Hapag-Lloyd in German hands (and out of Singaporean hands) when it went up for sale in 2008.
      This has led to a situation where the biggest lines in the world are battling it out on a trade that can be called home turf for both sides.
In the transpacific, the situation is vastly different. While European carriers participate in the trade, the top three carrier groupings are composed almost entirely of Asian carriers. The Asian carriers benefit from a situation where they see virtually no cross-ocean competition on one of their core trades.
      Asia is the fulcrum of world ocean freight activity, and so Asian carriers have clearly benefited from this position, taking leading market share positions in both the Asia/North America and Asia/Europe trades. Maersk Line, the world's biggest line by fleet capacity, may be tops in the Asia/Europe trade, but not so in the Asia/North America trade when the various alliances that jointly operate services are considered.
      That intense competition between Asia and Europe likely yields more capacity volatility as carriers search for services that provide them profitable business.

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