Despite being in the throws of peak shipping season, ships are being largely underutilized.
Part of the reason for the idle container ships is that peak season in the transpacific is week, and as such, carrier alliances have started suspending routes and leaving the ships idle.
The G6 Alliance (which includes APL, Hapag-Lloyd, Hyundai Merchant Marine, MOL, NYK Line and Orient Overseas Container Line) stopped its CCI transpacific service, leaving five of its six 6,600-TEU (20-foot equivalent unit) vessels idle, Global Trade magazine reported. The Ocean Three alliance (CMA CGM, China Shipping, UASC) held off its Manhattan Bridge service, rendering nine 4,000 TEU ships idle.
“A combination of low freight rates and muted demand must have played a part in the unusual decision of carriers to lay up ships in July,” a Drewry Shipping Consultants report noted. “We also speculate that carriers are trying not only to park unused capacity but also to bring spot rates back up by increasing load factors on remaining active ships.”
The spot rate to ship a TEU from Asia to Northern Europe fell 23.5% since last week, and just more than 2 percent year-over-year to $861, according to the Shanghai Containerized Freight Index. Volume for the route was flat in June.
Shipping lines are trying to raise rates to survive the low costs. Hapag-Lloyd raised rates $1,250 per TEU, effective Aug. 15 for the Asia to North Europe and the Mediterranean routes, according to the Journal of Commerce. Maersk Line will also put a general rate increase in effect on Aug. 15, taking the price per TEU up $1,250.
In all, about 4 percent of the global fleet is idle this peak season.
“Growing over-capacity means that the increase in the idle fleet now happens across all ship sizes and apparently in all seasons,” the Drewry report noted. “It is likely that some of the newly idled ships will be sold for demolition, particularly the older panamax vessels.”
A National Retail Federation (NRF) report out last month said import cargo volume at the major U.S. ports would be essentially flat to last year in the early months of back-to-school season, but that a larger wave would come in the fall and for holiday.
In June, volume was down 2 percent year over year at Los Angeles and Long Beach ports, and not much of an uptick is expected for the remainder of peak season.
NRF’s monthly Global Port Tracker said container volumes would fall 2 percent in August and dip a further 2.6% in September before picking up 4.4% in October.
“Even though volume will be lower than the same month last year, August is expected to be the peak shipping month of the year,” according to NRF.
Ben Hackett, founder of consultancy firm for the international maritime industry, Hackett Associates, said, “The good news is that retail sales have remained positive as the consumer continues to cautiously spend. The hope is that this spending will continue.”