Drewry: More Service Cuts Needed to Revive Asia-Europe Corridor

It has been a tough year for carriers plying their trade on the key Asia to North Europe corridor as demand growth that has been evident elsewhere simply refuses to come, shipping consultancy Drewry said.

After seven months of the year westbound volumes from Asia to North Europe were down by 1% following lacklustre demand in the two key import markets of the UK and Germany.

Namely, carriers have attempted to prop up utilisation with ad-hoc skipped sailings, but heading towards the traditionally slower post-summer season something much more radical was required to prevent rates from slumping in the weeks leading to China’s Golden Week holiday at the start of October, just as they did last year and the year before, the shipping consultancy explained.

2M carriers Maersk Line and MSC have ridden to the rescue of the market by announcing that they will suspend one of their flagship Asia-Europe loops, AE2/Swan, using ultra large container vessels of over 19,000 TEU at the end of this month.

While the AE2/Swan may be going at least three of the ships deployed will remain active in the trade, according to Drewry. That is because Maersk will cascade its three units from the AE2/Swan into the AE1/Shogun service, which currently uses slightly smaller units of about 17,500 TEU. The current AE1/Shogun ships will either be idled or sent to dry dock for maintenance, the shipping consultancy said citing Maersk.

“What would really help the spot market gain traction would be another service cut, but so far there is nothing to suggest that is a likely course of action. The most obvious source would be the Ocean Alliance, which will take over as the largest capacity provider in the Asia-North Europe trade when the AE2/Swan is suspended.

“Whether those lines are prepared to cede market share for the greater good of the market remains to be seen.”