Shippers had better prepare for another round of frustration as container carriers start to “manage” their capacity again.
By “managing” capacity, we mean laying it up, of course. Around 12 percent of the global capacity spent most of last year collecting barnacles in quiet waterways, and it looks like it’s going to happen again.
Not on the same scale, maybe, but the last quarter of this year will not see volumes near to those of the last quarter. Container lines have just started making money again and will not want to see profits circling the drain as demand for their ships dries up.
Cargo bookings for October have dropped off sharply, some lines report, and several carriers have been talking of withdrawing capacity from the Asia-Europe trade. With the size of the vessels on the route, the only place for them is lay-up.
Surplus smaller vessels on the transpacific may cascade into the busy intra-Asia trade, but that will have the same result – too much capacity, off to lay-up you go.
But as much financial misery as the slack season may bring container lines, their customers will also feel the impact. During the artificial capacity shortage engineered by the lines “managing” capacity last year, shippers saw freight rates soaring, cargo being rolled, peak season and other surcharges being hiked and they often ended up having to pay more for space despite holding signed contracts on agreed prices.
Shippers were rioting in the streets, firebombing shipping offices and overturning container trucks … figuratively speaking, of course. The point is that they were really annoyed at the disconnect between demand and available capacity that made shipping goods from Asia to Europe and the US such a frustrating exercise. Slow steaming, now a permanent strategy, didn’t make life any easier as it messed up schedules and forced shippers to radically adjust their supply chains, adding more than a week to voyages in some cases.
It is this prospect that is once again looming over shippers’ heads. Tightly controlled capacity by the lines so the smallest surge in demand – and let’s not forget that Christmas is coming up and maybe there will be a few late orders – will quickly create space shortages and all the ugly measures that come with it.
The carriers are currently profitable and should even finish the year in the black. Which is a good thing. As we have said before, profitable lines are happy lines.
Now imagine if they just had happy customers.