Asia-Europe face ‘perpetual overcapacity’

   Shippers on the Asia-Europe trade lane can expect to see “perpetual overcapacity” out to 2015 unless liner carriers make “significant changes,” according to the Copenhagen-based maritime consultant SeaIntel.
   SeaIntel analyzed supply and demand data to forecast three years out and said the outlook is very clear: “Something has got to give.”
   “The currently announced capacity (service) reductions will only match the expected seasonal downturn in the market,” SeaIntel said in its Sunday Spotlight report. “The current gap between supply and demand will not be reduced. Worst case will see rates decline a further $200 to $300 per TEU.
   “Looking at the longer term, we have taken the existing order book as a starting point. We then conservatively estimate that no new services are launched on the Asia-Europe trade for the next three years. The only capacity increase is through the phase-in of new large vessels being delivered from the yards, replacing smaller vessels. The absorption of these vessels, combined with the need to absorb the already existing overcapacity, results in the conclusion that Asia-Europe demand needs to grow by 46 percent in total over the next three years to maintain market balance,” SeaIntel said. “We find this demand expectation to be unrealistic.”
   SeaIntel said it expects capacity will be removed to restore balance, with consolidation and new alliances formed.
   “We also expect this to give rise to an added focus on hub-and-spoke operations centered around the Middle East, as carriers need to find ways to utilize their large vessels to a maximum extent possible,” SeaIntel said.
   Last week, the maritime consultant Alphaliner said it does not expect consolidation to occur in the next 12 months, despite the pressure placed on the industry by Maersk Line (through its Daily Maersk product) and the recent alliance formed by Mediterranean Shipping Co. and CMA CGM.
   “There is no evidence that any major consolidation moves will occur within the next 12 months,” Alphaliner said. “Within a tight lending environment and weak capital markets, carriers will face significant hurdles to fund any major acquisitions. While carriers could well seek to expand operational alliances through partnerships with other lines, such moves do not result in a reduction of competition.”