more goods. And they have limited ability to reduce vessel capacity.
On longer, busier Asia-Europe and trans-Pacific routes, carriers have trimmed capacity by eliminating vessel service loops, or strings, or by reducing vessel speeds to stretch out voyages. That doesn’t work as well in the smaller, shorter Atlantic trade.
“It’s not as if the Atlantic carriers have multiple strings and can remove one and still have a presence in the trade,” Dekker said. A carrier with a single string of trans-Atlantic vessels can’t eliminate that string without leaving the market, something few carriers have been willing to do. And the comparatively short distances of trans-Atlantic voyages provide few possibilities for slow-steaming, the tactic to keep capacity on the water but to stretch out service and reduce its availability.
Carriers have nibbled at the edges of trans-Atlantic capacity by making changes where they can. Earlier this year, Hamburg Sud suspended a standalone service and chartered space on vessels operated by the multicarrier Grand Alliance. The carrier said it was an effort to hold down capacity in a weak market.
Another problem is there is no market where ships can be shifted to operate profitably. During most recent shipping downturns, some trade lanes remained healthy. This economy has battered all regions just as container carriers are coming off a record binge of shipbuilding orders.
Dekker said Drewry forecasts that trans-Atlantic vessel utilization during this year’s third quarter will be 72 percent westbound and 73.6 percent eastbound, a relatively low rate given the many actions carriers have taken to reduce capacity. Fourth-quarter utilization is forecast at 61.1 percent eastbound and 71.8 percent westbound. For the year, Drewry forecasts utilization of 68.9 percent eastbound and 68.9 percent westbound.
Drewry forecasts that overall shipments between North America and North Europe will be down 17. 7 percent westbound and 25. 4 percent eastbound. These numbers include Canada and Mexico.
PIERS forecasts TEU exports from U. S.
CARRIERS ALL-IN ON RATES
OVER THE YEARS, regulatory disputes in the trans-Atlantic container trade have been as prominent at times as commercial activity.
For decades, trans-Atlantic rate-setting was driven by carrier conferences that allowed ship lines to collude on rates under antitrust immunity. The Ocean Shipping Reform Act of 1998 killed conferences in most U.S. trades by permitting shippers and carriers to sign contracts without sharing details with competitors.
On most U.S. trade lanes, carriers responded to OSRA by forming discussion agreements that allowed members to discuss rates and agree on voluntary guidelines without running afoul of antitrust laws.
Europe was an exception. The Trans-Atlantic Conference Agreement survived because the European Union did not allow discussion agreements. If carriers wanted to discuss rates with each other, a conference was the only way they could do it.
TACA faded into history last fall when the EU ended carriers’ block exemption from European competition law, but the impact on rates was minimal — TACA’s few remaining members were already moving most of their containers under negotiated, confidential contracts instead of conference tariffs.
The biggest change since TACA has come in setting surcharges. Carriers that used to follow the conference’s lead on bunker fuel surcharges now set their charges independently. “Without that TACA anchor,
they’re all over the map,” said Joe Saggese, managing director of the North Atlantic Alliance Association.
All-in rates, however, tend to fall within a narrow range. Saggese said carriers tend to combine base rates and surcharges to come up with all-in rates that are fairly uniform and reflect market competition.
U.S. IMPORT/EXPORT SHARE
Imports Exports
■ Northern European countries’ estimated share of 2009 U.S. trans-Atlantic container trade.
Other
19.4%
Other
16.2%
Sweden
4.1%
Germany
29.3%
Russia
3.6%
Belgium
22.4%
North France 5.8%
North France 8.1%
UK
11.4%
Netherlands 15.2%
Netherlands 15.3%
Germany 20%
Belgium
12.5%
UK
16.7%
Source: PIERS Global Intelligence Solutions, a sister company of The Journal of Commerce, www.piers.com
ports to North Europe will drop 26. 6 percent and that imports will fall 21. 5 percent this year from 2008 levels. That will leave the import market down 28. 5 percent from the 2006 level.
The relative balance of the market, however, offers some relief to carriers as they try to align capacity and reposition empty containers. PIERS said that last year, trans-Atlantic imports totaled 1,621,214 TEUs and exports were 1,622,619 TEUs.
Trans-Atlantic shipments are primarily port-to-port. That’s rooted in geography — stacktrains are ideal for long-distance inland movement of Asian imports via West Coast
ports, but inland markets on the East Coast cover much smaller distances.
“It’s a very vanilla trade, by that I mean it’s primarily port-to-port, with not a lot of complexity,” Saggese said. “A rate’s a rate and a box is a box and everybody knows the rates.”
The roster of trans-Atlantic carriers includes most major global operators, most of which serve the trade through vessel-sharing alliances, which have figured prominently in the U. S.-Europe trade for more than 20 years.
The trans-Atlantic “has never been a hugely profitable trade for carriers, at least in the last couple of decades,” Giovanetti said, with many carriers there looking only to complete a round-the-world service or to serve customers whose business is important in higher-volume markets.
For trans-Atlantic carriers, “it’s still a bloodbath.” JOC
References:
Archives