Middle East and Indian Subcontinent Oversupplied

Strong westbound growth for both Middle East and Indian Subcontinent regions is helping to offset oversupply, UK shipping consultant Drewry said.

Container shipments from Asia to the Middle East and Indian Subcontinent started the fourth-quarter in brisk fashion with year-on-year growth of 4.8%, according to data supplied by Drewry’s Container Trades Statistics (CTS).

This latest monthly westbound growth rate is slightly down on the 6.0% pace set over the first nine months of the year.

October’s demand growth was equally shared on a regional basis, with traffic from Asia to the Middle East up by 4.5% and by 5.2% to the Indian Subcontinent (India, Pakistan, Bangladesh and Sri Lanka).

Taking a longer view, the rolling 12-month average of westbound volumes to each region shows that Asia to the Indian Subcontinent is one of container shipping’s boom trades at 6.2%, with the Middle East lagging behind at a still respectable 3.7%.

“Despite the strength of westbound volumes both trades remain oversupplied with ships; a side-effect of the upgrading of ship sizes on trunk services between Asia and Europe that make wayport calls to the Middle East and Indian Subcontinent. Subsequently, carriers struggle to force through big rate increases in these forwarder-dominated trades, although they have had some success recently,” Drewry explained.

Ship utilisation was estimated at 73% in the westbound Asia-Middle East route in October, up 3 points on the previous month and this was sufficient to lift spot rates from Shanghai to Jebel Ali by USD 290 to 1,420 per 40ft container, according to Drewry’s Container Freight Rate Insight.

November GRIs successfully added a further USD 400 on to that figure in November so that rates are nearly back to where they were in June.

Ships are less full on the Asia-Indian Subcontinent trade – estimated average load factor of just 57% in October – and this has caused spot rates to fare less well.

Container Freight Rate Insight reports that Shanghai to Nhava Sheva rates shed USD 150 in October to USD 1,460/40ft where they stayed in November.

“Carriers are looking for rate increases of around USD 100 per container in the Asia-Indian Subcontinent trade in mid-December and between USD 200-300/teu in the Asia-Middle East at the same time. Expected slack season capacity reductions on the Asia-Europe trade should feed into these “wayport” trades and support some mild rate increases,” the consultant went on to say.

According to Drewry, short-term capacity reductions should at the very least maintain spot rates on these routes.

Source: Drewry; Image: WSC

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