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More ships please
Carriers add a number of extra loaders for the booming Asia-ECNA trade, appear content with spot rates levels despite a downwards trend.
The container trade from Asia to East Coast North America continues to motor along, outpacing growth to the West Coast and prompting carriers to introduce additional voyages. After seven months, total Asia-ECNA (including US, Canada and Mexico) shipments increased by 8.3% to 3.1 million teu, faster than the still very respectable 5.7% gain to the WCNA.
A significant influence on the overall growth rate has been the extra loads moving in the US Gulf, up 31% year-to-date after seven months to 296,000 teu, the Canadian East Coast, up 20% to 175,000 teu, and Mexico East Coast, up 10% to 32,000 teu. Traffic from Asia to the primary US East Coast gateway ports was up by 5% year-to-date, according to more recent Piers statistics for August.
The Asia-ECNA eastbound trade is on course to match and potentially surpass last year’s annual growth of 5%, which was something of a disappointment following two years with double-digit gains. The rolling 12-month average stood at 452,000 teu in July, some 9.3% above the same month last year. However, that figure will very likely shrink as the year ends due to much tougher monthly comparisons – 4Q16 soared by nearly 14% as the full benefit of the expanded Panama Canal kicked in.
Looking ahead, there are personal tax cuts and infrastructure spending which Donald Trump has pledged to introduce even if he has not done so yet, which should underpin further import growth. Even with the dollar trading some 14% lower against a basket of currencies compared to where it stood at the start of the year, the eastbound growth juggernaut has found little in its way to stop its progress.
There is one blockade looming, however, in the shape of factory closures in China, where authorities are clamping down on the worst polluting sites. To date, it has not been on a nationwide basis, but enforcement teams have been selecting certain regions to audit. This could very well adversely affect the supply chain of goods moving across the Transpacific and may even already have given some impetus to importers to have moved stock earlier into North America. For the moment, it does not appear to have unduly hit this trade with factories engaged in heavy industry probably hit more than those producing Fast-Moving-Consumer-Goods bound for the US.
Given the current pace of the trade it is little wonder that carriers were so keen to lay on extra sailings in both August and September. CMA CGM alone organised eight extra loaders in those months to the US East Coast market, mostly chartered on one way or round trip voyage basis.
The focus on East Coast sailings is unlikely to be diluted with more big ships joining the trade – the 14,400 teu CMA CGM Theodore Roosevelt last month became the biggest ship to pass through the Panama Canal from Asia to the US – and carriers laying on faster transit times to connect to an increasing number of East Coast distribution centres.
Historically, carriers have tended to suspend one or two loops in the winter season (November/December) due to lower cargo flows, but as of yet there have been no such announcements. Based on the forward schedules Drewry estimates that there will be little change in available capacity from September through November, although on a year-on-year basis the difference is an increase of around 15%.
Despite pretty sound supply and demand fundamentals, eastbound Asia-ECNA spot rates are trending down (see Figures 4 and 5). The inference is that while rates remain profitable the ethos of carriers has been more about banking as much revenue as possible from the cargo bonanza than to exert energy trying to wring more rate increases out of customers.
The current lack of any slack-season capacity adjustment program suggests that the gentle erosion in eastbound spot rates will continue.
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