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The high season that didn't happen

In the first weeks of August, shipping companies partially managed to increase spot rates on the major trade routes from Asia to Europe and North America.

This apparently happened as a result of a small increase in the number of cancelled sailings in the preceding weeks. Not only was the volume of those blank sailings not significant, but the cargo volumes are also stagnating (based on what you hear in the market).


This is a stagnating market

The issue with estimating cargo volumes is that "hard" data becomes available with a delay. The most recent data, released at the beginning of September, pertains to cargo loaded in July. "Stagnating" is the best way to describe the month of July.

At the end of 2022 and in the first months of 2023, global freight transport experienced a significant decline. Over a period of 6 months, there was a decrease of 9-12% compared to the previous year. However, when a shift occurred in March, with growth no longer being negative but essentially hovering around 0%, this could certainly be considered a positive development. In the sense that the collapse seemed to be over. But now, for the fifth consecutive month in July, there is almost no growth. What's even worse is that freight transport is now at the same level as in July 2019, meaning that there has been no growth for 4 years. A stagnating market indeed.

The major trade routes also do not show positive developments. Transportation from the Far East to Europe initially appears to be doing reasonably well, with a 6% growth in July compared to the previous year. However, this is because the market has been weak in recent years, and the number of containers shipped from the Far East to Europe in July is the same as in July 2019. On the Pacific Ocean, freight transport decreased by 10% compared to the previous year, marking the 12th consecutive month of a 10% or more decline. However, this should be seen in the context of a very strong market in 2021-2022. On the key route to North America, freight volumes are still 7% higher than in 2019.

Some trade routes are performing much worse. The number of containers shipped from Europe to the Far East is 25% lower than in 2019 before the pandemic. On the Pacific Ocean, the number of containers has also dropped by -22%.
However, some regions are doing well. In July, for example, there was strong growth in freight volumes to and from the Indian subcontinent and the Middle East, as well as visible export growth from Africa.


Capacity Reductions to Prevent Collapse

Due to this weak development, shipping companies have decided to cancel a significant number of planned departures in the past week. There is typically a customary seasonal dip in the first week of October due to the Golden Week period in China, which often leads to similar blank sailings. By the end of August, shipping companies had announced virtually no cancellations for October. However, by the end of the first week of September, they had acted and cancelled 47 departures from Asia to Europe and North America in October.

From Asia to the U.S. West Coast, nearly 35% of the total capacity has been cancelled in the week after the Golden Week, and to the East Coast, it's almost 30%. From Asia to Northern Europe, more than 35% has been cancelled in the week after the Golden Week, and to the Mediterranean region, a whopping 59% of normal capacity has now been cancelled.

This is a stronger measure than usual after the Golden Week, and it appears that shipping companies are determined to use capacity reductions to prevent the collapse of freight rates.


Signals of Market Consolidation 

For shipping companies operating in the Intra-Asian market, disruptions may be expected in the future. As it is well known, freight rates on major trade routes rose significantly in 2021-22, but this was not the case to the same extent for rates within Asia. While intra-Asian rates also increased considerably, they did not rise as steeply as on the transcontinental routes. At present, rates on some intra-Asian routes are even significantly lower than they were in 2019.

From a strategic perspective, this means that smaller intra-Asian shipping companies have not been able to accumulate the same financial reserves over the past few years as the large global shipping companies. Now that the financial situation in Asia is under pressure, these small companies find themselves in a vulnerable position. This opens the door to market consolidation, where some of the smaller companies may be acquired by financially healthier global shipping companies.

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