New Drewry website highlights impact of sailing cancelations

Port of Rotterdam

Nearly 150 sailings were blanked on the transpacific and Asia-Europe routes between October and February according to Drewry's new online product Container Insight Weekly.

The cancelations have had demonstrable effects on freight rates and regularity of service provided to shippers.

The next issue of Container Insight Weekly, due for release on March 11th, demonstrates how the ocean carrier strategy has boosted average ship utilization and spot market freight rates in the two tradelanes by as much as 7%.

Canceled sailings in February are estimated by Drewry to have reduced available capacity in the headhaul Asia-West Coast North America route by about 100,000 TEU, for example, meaning that the trade was then operating at only 90% strength.

The capacity reduction increased average eastbound ship utilization from the 72% it would have reached at full strength to a more respectable 79%.

The practice of blanking sailings is not new, particularly around Chinese New Year, only the duration since October has changed. Matthew Beddow, manager of Drewry’s Container Insight Weekly remarked, “Although the strategy achieves the same result as the withdrawal of services at the end of the peak season ? namely stopping average vessel utilization from falling to keep freight rates up ? the effect on shippers is completely different.

“Shippers know where they stand with well managed service withdrawals, whereas sailing cancelations sometimes confront them with unexpected space shortages, roll-overs and shut outs, as surrounding vessels quickly fill up.”

The freight rate changes caused by sailing cancelations also appear more volatile for shippers than those achieved through service withdrawals, with any increases being quickly lost once normal service resumes, according to Drewry’s research.

On this basis, it is logical to conclude that headhaul freight rates from Asia to Europe and North America will continue falling in March unless further capacity management action is taken, or serious cargo growth outside of normal seasonal trends reappears ? which is unlikely.

Although no sailing cancelations have yet been announced for March and April, these are usually peak months for cargo growth, so ocean carriers will probably just be in ‘watch and wait’ mode.

“Uncertain cargo growth to Europe and the US will encourage ocean carriers to continue with short-term vessel capacity planning, which means more sailing cancelations to come. The problem will be exacerbated as service upgrades enforced by newbuild deliveries and cascading gain momentum,” concluded Beddow. < Korea Shipping Gazette >