Economic slowdown creates worries over Asia-Europe peak season

Carriers are taking a pessimistic view of the Asia-Europe peak season this year amid a slowdown in the major European economies and weakening factory output in China. Just look at the blank sailings that have been announced — more than 130,000 TEU in canceled sailings over July and August.

The Ocean Alliance will blank four sailings during the period, taking 66,900 TEU out of the trade over a four-week period, according to Alphaliner. THE Alliance will have four blanked sailings of its own that will remove 67,000 TEU in July.

Cancelled sailings extremely disruptive

While canceling sailings is not nearly as disruptive as rolled cargo, which happens with no advance notice, it is still a practice disliked by shippers. The supply chain director for a Europe retailer shipping 5,000 TEU a year said he needed sailing information 3-4 months out because that was when orders were placed and everything flowed from that.

He said blank sailings were hard to manage, but the way his group’s supply chain was set up, he had no alternative but to ship by ocean. However, blank sailings and poor ocean reliability are making him look very closely at China-Europe rail and how to make more use of it.

A Europe-based manufacturer with annual tenders for 25,000 TEU told us blank sailings were not easy for shippers to control and extremely disruptive.

“Often we find out a sailing has been canceled too late and that puts the shipment back a week. Having a multi-carrier strategy used to be a way to cope with blanked sailings, but with only three alliances that is now more difficult,” he said.

Interestingly,  the 2M Alliance of Maersk Line and Mediterranean Shipping Co. has announced no such blanked sailings on the trade. Maersk and MSC are facing a shortage of mega-ship tonnage with five of the giant vessels in dry dock, and Alphaliner reports that four of the vessels will remain on blocks as scrubbers are fitted.

Oversupply of capacity

With the oversupply of capacity, much of that mega-ships, blank sailings are not going away anytime soon as carriers struggle to manage capacity and balance supply with demand that is slowing.

The IHS Markit/Caixin China General Manufacturing Purchasing Managers’ Index (PMI) in June slid to its second-lowest since June 2016, indicating a clear contraction in the manufacturing sector. It was equally uncertain at the other end of the Asia-Europe trade where the IHS Markit Eurozone Manufacturing PMI revealed that operating conditions in Europe deteriorated for a fifth successive month during June.

A session at the JOC’s Container Trade Europe conference in Hamburg from 16-18 will focus on the Asia-Europe trade, with the high-level panel comprising Peter Nielsen, manager of global transport and contracting at Danish fashion brand retailer Bestseller, Thorsten Meincke, senior vice president of global sea freight at DB Schenker, Patrik Berglund, CEO of Xeneta, and an executive from Maersk Line.