In line with this inability to glean what the future holds for their industry through conventional channels, liner executives must have been on their knees every night praying for an increase in China exports.
In the last few months, those desperate prayers were answered. Consumers in the US and Europe unleashed their wallets and the factory orders started rolling in.
And now the wheels are starting to come off.
Here’s what happened. As market demand began to rise, especially on the Asia-Europe trade but also on the transpacific, the carriers were scrambling to introduce more capacity.
According to PR News Service, the launching and resumption of new and suspended services have already pushed up weekly capacity by a staggering 85,000-plus TEU this year.
Maersk and CMA CGM will next month start a service on Asia-Europe using 13,000 TEU vessels, and also expected to pile in with its own megaships is MSC, which has 20 ships of up to 14,000 TEU floating into service in the next two years.
The immediate effect of the capacity injection was downward pressure on freight rates. Creative capacity management has enabled most of the carriers to sail back into the black and they are trying hard to stay there.
But now a new problem has emerged (there is always something else to worry about in the container shipping business) – a shortage of containers.
The shortage is spread across the major trade lanes, a result of curbs or even shut downs of container production during the trade slump over the last 18 months. China’s container production plummeted from 3.2 million TEUs in 2008 to a mere 200,000 TEU last year. Even though production of boxes will be ramped up, the boxmakers will be too late to cater for the peak season.
Ultimately, it is the shippers who will pay via increased freight rates. The more conspiracy minded among us will point to the container production slowdowns that were a direct result of carriers and container leasing companies cancelling or postponing orders for new boxes.
Now that there is a shortage (tee-hee-hee), the carriers and leasing outfits can put their rates up.
As open as we are to wild theories, this one doesn’t really seem to wash. Sure, the carriers will benefit, but if vessels have to sail half full, there’s no way all the costs of that could be passed on to customers.
Still, shippers had better begin factoring in some stiff rates increases, because the carriers are sure to aggressively protect their newfound profitability.