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A demand growth recovery in the Asia-West Africa trade inspired two new fortnightly services, but freight rates have responded poorly.
Container volumes during the second quarter 2017 in the southbound Asia to West Africa registered their first positive year-on-year comparison since the final three months of 2014. Shipments in 2Q17 reached 330,500 teu according to Container Trades Statistics Ltd. (CTS), worth a 3% gain on the same period last year. This follows a minor decline of 0.3% in an upwardly revised first quarter (previously -14%), putting the first-half growth rate at 1.4% as volumes landed just shy of 600,000 teu.
CTS’ revision to earlier year data means that the start of the upwards inflection in the long-term trend can be traced back to the start of this year. Our rolling 12-month monthly average bottomed out in February and has since shown steady improvement, enough to reduce the annual comparison from -12% to nearer -8%. It will take longer for the average monthly teu count to reach anything like the recent high of 125,000 teu (February 2015) but as the comparisons get easier the growth change will inevitably move towards the neutral line and beyond.
Carriers have reacted to the upturn in demand by introducing two fortnightly services. The first, the joint WAX2/FEW5 from Maersk Line and CMA CGM was resurrected after being suspended in February when it was a weekly operation. The WAX2/FEW5 brings back six 4,200 teu units to the trade (instead of 10 x 4,700 teu previously) on a rotation of Nansha, Singapore, Tin Can, Apapa, Cotonou, Singapore and back to Nansha.
The second new service comes from Cosco and Gold Star Line (owned by Zim) in the form of the WAX5/FA3 loop. It will use the same number and size ships as the WAX2/FEW5 and will serve Ningbo, Nansha, Hong Kong, Singapore, Port Kelang, Durban, Tin Can, Tema, and Ningbo. The net impact from these two new operations is that the total number of available southbound Asia to West Africa slots will be approximately 5% greater in October than in the same month one year ago, according to Drewry estimates.
The early indications suggest that these new services have had a destabilising effect on spot rates, which had risen steadily alongside improving ship utilisation in the first half of the year. Drewry estimates that average Asia to West Africa freight rates hit a 26-month high of $2,900 per 40ft container in July, before losing about $700 of their value in August.
To avoid further spot rate collapses lines must be careful not to overload this trade with too much capacity as it continues its fragile recovery.
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