Smaller trades are taking on capacity being bumped off the major routes as demand slows, but there is a limit to what they can absorb.
There are glum faces on the Asia-Europe and transpacific trades as carrier executives fret over an anticipated drop in demand in the fourth quarter.
But on one trade the frowns have all been turned upside down. Asia-South America is giving the other major routes a run for their money. Growth on the trade to both the east and west coasts from Asia has hit double digits this year, way better than on Asia-Europe and the transpacific.
This has let to a host of new services and increased coverage, led by the big South American carriers CSAV and CCNI, according to PR News Service. Other lines also boosting existing services are Maersk and Hapag Lloyd. New entrants are Wan Hai, Hanjin and Zim, and the three big Japanese lines, MOL, “K” Line and NYK, are merging their individual services to boost coverage without increasing capacity.
Most of the carriers involved in the trade seldom deploy vessels greater than 3,500 TEUs, which are better suited for the smaller South American ports and offer faster turnaround times. Not that a fast turnaround matters much when slow steaming is in force.
It is fortunate for the carriers that the Asia-South America trade is growing because there is a steady glut of very large container ships floating into service. These vessels are only deployable on the Asia-Europe trade and are displacing smaller ships, forcing the lines to find work for them in the smaller trades.
That work appears to be in Asia-South America, but who knows how long it will last. With so much capacity being thrown into the trade it will soon become a shippers’ market and rates will begin to fall.
There is also the other question of how much demand will come from South America as the year draws to a close. The recession never spared the continent and consumer demand will no doubt be as fragile as it is anywhere else. An added bonus of the Asia-East Coast South America is that the ships can call at South African ports, enabling the carriers to kill two continents with one ship.
So even though depression may lay ahead for line executives, business is good right now, and in these times of volatile rates and wild market mood swings, that’s about as much as the carriers can hope for.