[ Supply & Demand in the Europe/Asia Trade during 1998 ]

On 28 November following the recent Principals meeting, the FEFC issue
d a press release reconfirming the Lines’ intention to implement the
previously announced Rate Restoration on 1 January 1998(Westbound USD
100/200 per 20’/40’and Eastbound USD 125/175 per 20//40’).
Over the last few years there has been much speculation by Lines, thei
r customers and also in the press that has suggested there may be subs
tantial overcapacity in the Europe/Asia tades.
Towards the end of 1996, this was again the case when forecasts were m
ade for 1997 and as we now know, history has proved those gloomy forec
asts to be quite wrong. In fact, during 1997 FEFC Lines have achieved
an average utilisation of 93.5% Eastbound and 91% Westbound. Perhaps
more importantly, in second half 1997, Lines’ Westbound utilisations
have risen to 95.4% as demand on this trade lane has increased.
The FEFC has recently undertaken a detailed survey of all Lines’ 1998
Supply & Demand forecasts for the Europe/Asia tade and we believe the
se will be of interest to you and your readers. This study indicates
that in the Westbound direction, capacity within the scope of this Con
ference is forecast to increase by 3.7% against estimated growth in de
mand of 8.9% Eastbound, the figures are 6.8% increased capacity and 7%
for growth. Taking these predictions into account, vessel utilisation
s of 95.5% Westbound and 93.6% Eastbound are expected during 1998 as a
whole.
As was the case in 1996, these are cautious estimates. Additional cons
iderations are the ‘nonscope’ cargo that these services typically ca
rry, repositioning requirements due to the weight dynamics of the East
bound trade and the need to return special equipment from Asia. When t
hese are also taken into account, full utilisations would be expected
for much of the year.
Finally, it can be stated that the FEFC Lines believe that the shift i
n alliance memberships scheduled to take place in early 1998, will not
materially affect these forecasts of otherwise create instability in
the trade.