The trans-Atlantic, the mature granddad container trade lane where nothing much happens, is looking forward to a rare burst of excitement in 2014.
That’s because it’s one of the three liner routes, along with the giant Asia-Europe and trans-Pacific trades, preparing for the planned launch of the P3 Network among the world’s three largest carriers — Maersk Line, CMA CGM and Mediterranean Shipping Co. — in the second quarter of the year.
With the alliance awaiting regulatory approval and yet to publish details of its five new services, the trade got a taste of things to come with the news in early December that the G6 Alliance of APL, Hapag-Lloyd, Hyundai Merchant Marine, MOL, NYK Line and OOCL plans to expand on the Asia-Europe and Asia-east coast North America routes to the trans-Atlantic. Also, in early January came news that Hanjin Shipping will withdraw entirely from the trans-Atlantic, not even serving the market through slot-charters.
For now, trading conditions are as calm as ever, with vessel capacity stable, traffic subdued and no larger ships being cascaded from the major east-west routes.
Although cargo growth between northern Europe and the east coast of North America remains poor, carriers are still effectively managing vessel capacity, according to London-based consultant and research analyst Drewry.
Westbound shipments from Europe totaled nearly 700,000 20-foot-equivalent units in the third quarter of 2013, up 3 percent from a year earlier, according to PIERS, the data division of JOC Group Inc. But the 3.7 percent growth in traffic in the first nine months of the year was down from 4.7 percent growth in the same period in 2012. Eastbound traffic totaled 484,395 TEUs in July-September period, up 4.3 percent year-over-year. Year-to-date eastbound volumes of nearly 1.5 million TEUs were up just 0.8 percent, according to PIERS data.
PIERS expects solid westbound growth of 8.3 percent, to 2.9 million TEUs this year, but the eastbound trade likely will be flat at just more than 2 million TEUs.
Spot freight rates have risen, in contrast to declines on other routes, driven by carriers’ vessel capacity management and general rate increases. The spot rate for a 40-foot container from Rotterdam to New York had risen 14 percent between February and the end of September, while the eastbound rate jumped 17 percent over the same period.
Trading conditions on the West Mediterranean-east coast North America route are a lot tougher, with capacity utilization slumping to just 40 percent on the eastbound leg in September. “It’s not a nice place for carriers to be,” according to Drewry.
Nevertheless, a quiet new year is in the cards, especially on the North Europe route, before the P3 shakes up the trade in the spring. “Westbound, and to a lesser extent eastbound, freight rates will continue to rise over the winter season, providing sailing cancellations remain sensibly managed,” Drewry said. “Only fine-tuning is necessary.”
The P3 is sure to destabilize the trade, at least for a time, in large part because its three members control approximately 40 percent of the effective capacity between northern Europe and North America. The ships to be deployed on the new P3 services will be significantly bigger than those of its rivals, giving the P3 carriers economies of scale that the competition could not ignore.
The announcement that the G6 plans to have its trans-Atlantic operation up and running by the second quarter of 2014 to coincide with the launch of the P3 foreshadows a feisty battle for market share through the second half of the year. That Hapag-Lloyd’s dominant 24 percent market share proved no obstacle to expanding the G6 to the trans-Atlantic only underscored the potent threat of the P3 to smaller carriers. The G6 plans to deploy 42 ships on five trans-Atlantic services, including two pendulum services calling at 25 ports in the U.S., Canada, Panama, Mexico, the Netherlands, the U.K., France, Belgium and Germany. The member carriers will continue to market their services individually.
The G6 move will intensify pressure on independent operators on the route and the CKYH Alliance of Cosco, “K” Line, Yang Ming and Hanjin Shipping, which risk between squeezed in a battle for cargo between the P3 and G6 carriers.
“Due to lackluster cargo growth and unexciting prospects ahead, little change to ocean carrier services is likely before the second quarter of 2014,” Drewry said. But all bets are off in the spring when the world’s leading carriers prepare to inject a little long overdue excitement on the Atlantic.
------FM JOC
