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            july 23, 2019

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Box shipping demand on Asia-Europe trade to remain 'muted' over summer


Shipping analyst Maritime Strategies International (MSI) warns that demand will "remain muted" on both the Asia-Europe and transpacific head-haul container shipping trades in the coming months, with capacity injections likely to outstrip demand.
"Over the next six months we expect growth of around 2.5 per cent on the Asia-Europe head-haul," MSI was cited as saying in a Lloyd's Loading List report.
"Without blanked sailings or major changes to the size of vessels deployed, adjusted Asia-Europe westbound capacity over June-August will total around 5.2 million TEU. June-August volumes last year totalled 4.2 million TEU, so in order to achieve an aggregate load factor of 85 per cent, demand will have to grow by five per cent."
MSI furthermore predicts that the transpacific eastbound trade is "likely to avoid the most apocalyptic scenarios" but it still anticipates the coming quarters will be challenging.
"We expect growth over the next quarter will be slightly negative on the US west coast and slightly positive on the US east coast, and that US west coast ports will bear the brunt of the volume crunch," it said.
The summer peak season is forecast to yield only modest year-on-year growth, however, MSI predicts by the fourth quarter a slowing US economy and the unusual seasonal trade patterns of late 2018 - which were influenced by frontloading due to the US-China trade row - will drag down on year-on-year demand growth rates.
"Carriers will be tempted to reduce service offerings, although, this will raise the difficulty of redeploying idled tonnage," added MSI.
Asia-Europe head-haul volumes rose by ten per cent year-on-year in January, mainly due to the timing of Chinese New Year which fell early in 2019. On the transpacific route, a tariff frontloading hangover was the main driver of volumes.
"In January and February combined, US imports from the Far East shrank by one per cent year on year," added MSI. "Load factors on both trades will remain under pressure in the coming quarters."
Lines were aided by slowing vessel deliveries in the first quarter, however. "February saw slower developments on the industry supply-side," said MSI. "Vessel deliveries totalled only 22,000 TEU, while confirmed demolitions totalled 12,000 TEU, although around 40,000 TEU of vessels were reported as sold for demolition in March."
MSI forecasts 415,000 TEU of new ship deliveries and 160,000 TEU of capacity will be scrapped over the next six months.

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