The Asia-North Europe trade post-alliance restructure is generally well-balanced in terms of geographical coverage with strong competition in the key lanes, shipping consultant Drewry said commenting on the launch of the new carrier mega-alliances in the East-West container trades.
Drewry believes that accusations that the industry is completely homogenised are unfair as a broad range of options has been made available to shippers.
Maersk and MSC’s 2M is in the box seat, controlling 31% of the “effective” weekly capacity, following by the CKYHE and G6, both with 24%, and finally the Ocean Three on 21%.
According to Drewry, the total number of weekly Asia-North Europe services has been reduced from 22 to 21 compared with December 2014. The number of ships required to keep these services in a fixed-day weekly pattern has subsequently come down from 245 last month to 232 with smaller unwanted ships having been cascaded away from the trade.
Despite these changes, the available capacity has largely been maintained with westbound slots of 218,500 teu per week, down just 1% on December. This has been achieved by the introduction of more new Ultra Large Container Vessels (ULCVs) – the average size of ship has increased from 12,400 teu to 12,600 – while the new schedules are more dedicated to North Europe with fewer wayport deductions.
“Many feared that the formation of the mega-alliances would intensify the homogenisation of the industry whereby carriers can only compete with one another on price as they all have the same services. However, closer inspection of the schedules reveals that the alliances are far from uniform and between them they have created a pretty well-balanced network with wide port coverage at both ends of the trade,” Drewry said.
Inevitably, as befitting a country that is origin to around 70% of all the container traffic to North Europe, the main battle ground is China. Collectively, the alliances depart from 10 mainland China ports every week to North Europe, with a total of 74 weekly voyages. The 2M carriers have a clear advantage with 27 China to North Europe departures per week, well ahead of Ocean Three (18), CKYHE (17) and the lagging G6 (12).
The geographical spread of service calls naturally reflects the trade flows out of China as carriers essentially have to follow the cargo. Central China is the best served with a total of 37 weekly departures with Shanghai getting the most calls on 17, followed by Ningbo on 14 and Xiamen on 6. It is from this region that the 2M claims its dominance with 14 departures per week spread between the three ports, five more than its nearest rivals Ocean Three.
Ports in South China are also well served with 24 weekly departures, the majority from Yantian in the Shenzhen port complex, which has 16 loading calls. Again, 2M has the ascendancy with 9 weekly departures, compared with five each for the other alliances.
Perhaps surprisingly, North China ports are not better covered considering their rapid growth of late. Container traffic from the North has been outpacing the other Chinese regions as more manufacturing has moved there to take advantage of lower labour costs. Data from Drewry’s Container Trades Statistics (CTS) shows that demand from North China to North Europe was up by 12% in the 11 months through November 2014, compared with 9% for the two other regions.
“So far, the allure of North China is not reflected in the alliances’ schedules, where there are currently only 13 weekly departures to North Europe. Strikingly, the G6 carriers only make one North China-North Europe call (Qingdao on Loop 7) while the other three groups each make four calls. The region’s present coverage is commensurate with its volumes to North Europe, but carriers will need to find room for more North China calls in the future if they want to take advantage of the region’s potential,” Drewry added.
Japan and South Korea only have 7 and 9 weekly departures to North Europe, respectively. In Japan’s case, the paucity of direct services seems to be a fair a reflection of its declining volumes and contribution to the trade that saw no boost from the yen’s depreciation, Drewry said. CTS had Japan to North Europe box traffic down by 1% after 11 months last year. With around 6% of the total Asia departures to North Europe, but only 5% of the volumes, it seems unlikely that carriers will want to add more Japanese calls in a rush.
While the outlook for more traffic from Japan/South Korea is weaker than other parts of Asia, the benefit of weaker competition does mean that incumbent carriers can charge a freight rate premium. Drewry’s Container Freight Rate Insight reports that 40ft spot rates ex Japan are currently around USD 1,000 above those from South China.
According to Drewry, importers and exporters can have little complaint about the range of options available. For example, there are 14 weekly services from Shanghai to Rotterdam, the two busiest ports in the trade. That means shippers can call upon 16 carriers (not to mention non-alliance slot charterers) to get the most competitive freight rate quotes.
For the more time-sensitive shippers, the alliances also provide a wide array of transit times to suit their needs. Looking at Shanghai to Rotterdam again, transit times range from a quickest of 28 days to a slowest of 36 days.
“Interestingly, the advent of the new alliances looks to have increased the average speeds of ships on the trade, which is probably a consequence of both dramatically lower bunker fuel costs and the desire of carriers to make their new services more attractive to customers,” the shipping consultant said.
Drewry estimates that average westbound service speeds have sped up to 18.5 knots; versus 17.8kts as measured in December. The 2M again leads the way with an average speed of 19.8kts, while the G6 brings up the rear on 17.5kts.