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Ocean cargo capacity exceeds demand

In the past several weeks, shippers had told LM that the demand for ocean transportation services had been declining, leading them to believe that a “peak season” might not even arrive
By Patrick Burnson, Executive Editor
August 03, 2011

Shipper demand for ocean carrier capacity has failed to match the rise in supply during a slack peak season, said industry analysts.

According the Paris-based consultancy, Alphaliner, the active (non-idle) containership capacity has risen by 10 percent over the last twelve months, but the main trade lane’s modest second-quarter capacity utilization levels of below 90 percent are expected to rise only moderately in August. This comes in spite of the recent capacity withdrawals undertaken by some carriers.

In the past several weeks, shippers had told LM that the demand for ocean transportation services had been declining, leading them to believe that a “peak season” might not even arrive.

“The freight rate trends do not suggest that anyone really feels that there will be more container shortages or capacity constraints,” said Peter A. Friedmann, executive director of Agriculture Ocean Transportation Coalition (AgTC).

According to Alphaliner’s market survey, the capacity deployed has increased on all routes over the past twelve months. The recent capacity withdrawals on the Far East-Europe and Far East-North America routes have mostly led to the redeployment of tonnage to secondary trade routes.

“African routes have seen the largest capacity increase (+20 percent) during the twelve-month period, followed by the Transatlantic and Latin American related routes which registered capacity increases of 14 percent and 13 percent, respectively,” said Alphaliner analysts.

The added that despite some capacity withdrawals, the Far East-Europe route is still under pressure from a 12 percent year-on-year increase in supply, with 430,000 twenty-foot equivalent units (TEUs) of vessel capacity added to the trade. The influx of new ships has increased the route capacity by 32,000 TEU per week to now 400,000 TEU per week.

The additional capacity introduced to this trade accounts for one-third of the total increase in active capacity over the period. All container vessels delivered over the last twelve months were deployed to the Far East-Europe trade, despite average utilization levels of only 84 percent in the first half of 2011, based on Alphaliner estimates.

About the Author

Patrick Burnson
Executive Editor

Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at .(JavaScript must be enabled to view this email address).

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