Reports
Carriers slash over 1.3 million TEUs from Asia in Q1
Ocean carriers have announced the withdrawal of 1,320,104 TEUs of capacity from Asia in the first quarter of 2020. Impact of the capacity withdrawn will spill over into the second quarter.
By Hailey Desormeaux on Jan 30, 2020 15:01

Update: Since this report was released, carriers are now expected to withdrawal 1,408,646 TEUs of capacity in Q1 2020 on the Asia to Europe and Asia to North America trades combined as a result of blanked sailings, based on current data as of Feb. 6. However, this number is only likely to further increase as the Coronavirus sparks more blanked sailings on trades out of China.

   Container shipping carriers are expected to collectively withdrawal over 1.3 million TEUs of capacity through blanked sailings on trades out of Asia to North America and Europe in Q1 2020.
   Although blanked sailings announced thus far for the quarter generally appear to be related to the slowdown in business from Chinese New Year and do not appear to reflect a slowdown in business in China related to the Coronavirus, further blanked sailings may surface because of the planned extension of the New Year holiday due to the virus.
   Being that carriers have been extra aggressive this year in blanking sailings on the Asia-Europe trade, spot container rates from Shanghai to North Europe and the Mediterranean are up year-over-year. However, spot container rates from Shanghai to North America are still substantially lower year-over-year.
   As of Jan. 23, compared to a year prior, Drewry’s World Container Index shows spot container rates from Shanghai to Rotterdam stood at $2,072 per FEU, up 7%; rates from Shanghai to Genoa totaled $2,672 per FEU, up 44%; rates from Shanghai to Los Angeles were $1,588 per FEU, down 28%; and rates from Shanghai to New York clocked in at $2,841 per FEU, down 16%.
   This report provides a comparison of withdrawn TEU capacity from blanked sailings on trades from Asia to/from North America and Asia to/from Europe for Q1 2020 versus Q1 2019. The report also shows how much capacity will be withdrawn from blanked sailings each week during this quarter on both the headhaul and backhaul legs, as well as a comparison of how much capacity each alliance will withdrawal.
   For this report, North America refers to the U.S. and Canada only, while Europe refers to North Europe and the Mediterranean Sea region. Data was gathered from the BlueWater Reporting database, press releases issued by container shipping lines, and container shipping line schedules.

Q1 2019 Versus Q1 2020. The tables below show that from Asia to North America, 58 container shipping voyages are expected to be blanked in Q1 2020, compared to just 43 in Q1 2019, which will result in a 26% year-over-year increase in withdrawn TEU capacity from blanked sailings. From North America back to Asia, 59 container shipping voyages are expected to be blanked in Q1 2020, up from 39 in Q1 2019.

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   The tables below show that on the Asia to Europe trade, 58 voyages are expected to be blanked in Q1 2020, up from 25 in Q1 2019, which will result in a 123% year-over-year increase in withdrawn TEU capacity from blanked sailings. On the Europe to Asia trade, 49 voyages are expected to be blanked, up from 25 in Q1 2019.
   The large variation in the eastbound and westbound withdrawn TEU capacity and blanked sailings on the Asia-Europe trade for Q1 2020 is due to many voyages from Asia to Europe being blanked later in the quarter. These effects will be felt on the Europe to Asia trade into Q2 2020.

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From Week to Week. On the Asia-ECNA trade, blanked sailings from Asia in Q1 2020 are primarily occurring in early February, while blanked sailings from ECNA back to Asia are occurring in early-to-mid March, as illustrated in the chart below.
   This trend suggests these blanked sailings are largely due to Chinese New Year, which falls on Jan. 25 this year. Factories and businesses across China tend to shut down in order to celebrate Chinese New Year, which leads to blanked sailings and fewer goods being shipped from Asia in the weeks following the start of the holiday. The impact is always felt on the return leg back to Asia a few weeks later.

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   Meanwhile, on the Asia-WCNA trade, blanked sailings from Asia are primarily occurring in early February, while blanked sailings from WCNA back to Asia are occurring in late February and early March, as illustrated in the chart below. The effects are being felt on the return leg slightly earlier on the WCNA route than the ECNA route back to Asia due to shorter transits from WCNA back to Asia.

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   On the Asia-Europe trade, blanked sailings from Asia are primarily occurring in late January through the middle of February, while blanked sailings from Europe back to Asia are mainly occurring in early-to-mid March, although blanked sailings on both the eastbound and westbound routes are expected to remain in effect throughout Q1 2020. For the chart below, data for the week that precedes April 5 only includes information for March 29-March 31 to include the whole first quarter, and no information that goes into Q1 2020.

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Alliance breakdown. Although carriers could potentially announce more blanked sailings for Q1 2020, based off current data, the 2M Alliance is expected to withdraw the most capacity from blanked sailings on the Asia-ECNA trade, followed by the OCEAN Alliance and THE Alliance, as illustrated in the chart below. However, the figure for the 2M Alliance includes two voyages (eastbound and westbound) in which the service is jointly operated with ZIM.

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   On the Asia-WCNA trade, the chart below shows how the OCEAN Alliance and THE Alliance are expected to withdraw the most capacity from blanked sailings during the quarter. The figure for the 2M Alliance includes one voyage (eastbound and westbound) in which the service is jointly operated with ZIM.

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   The OCEAN Alliance and THE Alliance are also expected to withdrawal the most capacity on the Asia-Europe trade during the quarter, as shown in the chart below.

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BlueWater Reporting Outlook: BlueWater Reporting believes carriers will need to take stronger measures to cut capacity on the Asia-North America trade to boost their profitability, particularly between Asia and WCNA. Sluggish port volumes at major U.S. West Coast ports, which are heavily reliant on Asia, are a direct representation on how carriers need to scale back capacity on the Asia-WCNA trade.
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