SeaIntel: Vessel Utilisation, Freight Rates Drop in 4Q 2017

Liner vessel utilisation was down year-on-year on both Transpacific and Asia-Europe trades in the fourth quarter of 2017, while rate levels were at or near the lowest fourth quarter levels in the 2012 to 2017 period.

Excess capacity in the fourth quarter of the year, the difference between the nominal TEU offered and the TEU volumes moved, reached 1.1 million TEU on Transpacific and 1.3 million TEU on Asia-Europe, according to SeaIntel Maritime Analysis.

Nominal vessel utilisation on the Transpacific was 80.9% in the period, down from 87.7%  reported in the same quarter of 2016. Monthly utilisation dropped steadily from 88.4% in August 2017 to 75.9% in November 2017, rebounding to 81.9% in December. Subsequently, SCFI spot rates on Asia to North America West Coast declined from 1,426 USD/FFE in August to 1,240 USD/FFE in December.

Fourth quarter 2017 demand on Asia-Europe dropped by 10.5% quarter-on-quarter, while capacity was only reduced by 4.8%, resulting in excess capacity of 1.2 million TEU, with utilisation dropping quarter-on-quarter throughout 2017, reaching just 74.7% in the fourth quarter of 2017, the second lowest fourth quarter since 2012.

Monthly utilisation dropped steadily from 83.3% in July 2017 to just 68.1% in October 2017, with SCFI spot rates to North Europe dropping from 927 USD/TEU to 658 USD/FFE in October. Nominal utilisation then improved back to 81.7% in December, with spot rates to North Europe rebounding a little to 786 USD/TEU in December 2017.

“Throughout the second half of 2017, we have been raising concerns over the lack of capacity reductions on the Transpacific and Asia-Europe trades, and the detrimental effect it was going to have on the freight rates at the back end of last year. Looking at the demand and freight rate data for 2017-Q4, we can see that those concerns were fully justified,” Alan Murphy, SeaIntel CEO, said.

“Since the launch of the “new” alliances in April 2017, the carriers have been reluctant to blank capacity at the same level as in previous years, which has resulted in a weak freight rate environment, despite healthy demand growth. With considerable amounts of new capacity coming on stream in 2018, carriers will either have to start blanking capacity as in the past years, or risk the current freight rate malaise extends into the upcoming contracting season,” Murphy added.

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