Container lines slash capacity from Asia-Europe trade lanes

Update: 10-31-08
APL is slashing capacity in Asia-Europe and the Transpacific as well:

APL’s capacity in the Asia/Europe trade would be reduced by nearly 25 percent, with about 20 percent of the company’s transpacific tonnage also to be removed from service, said Ron Widdows, chief executive officer of APL’s parent, Neptune Orient Lines. Key changes are also underway in the intra-Asia trades, he added.

For quite some time carriers have been pinning their hopes for growth and profits on the fast growing Asia-Europe trade lanes. Indeed, carriers were planning on putting much of their new capacity coming online in 2009-2010 into the Asia-Europe trade lanes. Now with Asia-Europe demand collapsing, along with carrier rates, not to mention they are entering their seasonal winter slack period, carriers are pulling out. Maersk is removing nine containerships from Asia-Europe:

The Danish line confirmed this morning that its AE8 service will be temporarily suspended from mid-November, but has made no decision about when it may be reinstated.

The slack period usually lasts from about now to May, when cargo volumes pick up in preparation for the pre-Christmas sales, but that seasonal upturn never occurred this year.

The latest withdrawal of capacity from this route follows the termination of Maersk’s AE5 loop in May.

Maersk is one of a number of carriers to axe Asia-Europe services in the face of depressed demand and plunging freight rates.

Earlier this week, New World Alliance lines APL, Hyundai Merchant Marine and MOL announced plans to reduce capacity on this route by about 20%.

Maersk’s cuts are a little less draconian. Stopping the AE8 and AE5 services will nominally remove around 15% of slots. However when taking into account larger ships introduced on some other Maersk Line Asia-Europe strings, the line will have made a net reduction of about 10% of westbound capacity.

“The current Asia-Europe market is characterised by unsustainable rate levels, said Maersk Line’s group senior vice-president Robert Steen Kledal.

“The changes will support our market position and ensure that our network is sustainable in the long-term.”

As far as Transpacific is concerned we’re expecting capacity to be pulled out of the market as part of carriers’ winter deployment schedules. However, unlike last year, I expect cuts in capacity and service to be deeper and last longer, and some services won’t be coming back at all. So far I’m only aware of two carriers who have announced cuts in their winter services and at first glance they appear to be minor. However we’re expecting more.

Hat tip to World Trade Magazine.