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Lines pour capacity into mainline container trades to meet demand

A surge in demand on the major container trade lanes has seen tonnage redeployed from secondary routes, which in turn will see higher freight rates as a result.

Nick Savvides, Europe correspondent

July 16, 2024

2 Min Read
OOCL Pireaus
Photo: OOCL

Xeneta is warning shippers to expect a capacity shortfall in these secondary services where capacity has been redeployed to mainline trades, which will ultimately push up rates.

Global container volumes topped 74 million teu in the first five months of this year, overhauling the 2021 record by 150,000 teu as Chinese exports boomed and shippers front loaded their orders.

This surge in demand has encouraged liner shipping companies to shift capacity from less lucrative services on to the high yield trades, and that will eventually have a knock-on effect on freight rates.

Xeneta figures, sourced from Container Trade Statistics, also show a 5.2 million teu increase compared to volumes seen from January to May 2023, with this year’s May volumes alone topping 15.9 million teu.

Whereas increasing demand on backhaul trades has little significant impact due to the high level of spare capacity in the backhaul market, said a Xeneta market briefing: “Any change in demand on the major deep sea fronthaul trades is quickly felt in the market.”

In the first five months of 2024, fronthaul volumes increased by 10.4% compared to the same period in 2023 while growth on backhaul and intra-regional trades has increased by 4.4% and 5.5% respectively.

Spot rates on the European and US backhaul trades to Asia have softened substantially from their peak earlier this year, which was caused by the Red Sea crisis.

Related:Container freight rates take a breather

In contrast: “Spot rates on the fronthaul from the Far East into North Europe have increased by almost 150% since the end of April. From the Far East into the US East Coast and US West Coast, average spot rates have increased by 132% and 140% respectively.”

As a result, Xeneta believes that carriers who are shifting tonnage from less lucrative trades into the booming major trades could see the secondary markets starved of capacity, which in turn will drive up rates in these trades too.

“The message to shippers who use secondary trades is, ‘enjoy it while it lasts’, because it is likely increasing spot rates will trickle down from the major trades.”

In fact, these increases may have already begun with consultancy Linerlytica reporting today that capacity injections have been seen in the Indian subcontinent, Latin America and US West Coast routes “where freight rates are the most lucrative currently”.

“The Far East to the Indian Subcontinent, Latin America and US West Coast routes have seen a significant increase in new capacity injections in the last month, reported Linerlytica, “with capacity rising by 9.0%, 6.0% and 4.7% respectively with a slew new services and extra loaders added since June.”

Related:South African storms delay cape diverted container ships

Additions to capacity in these trades is expected to continue through August, keeping the charter market tight as carriers are still short of tonnage needed on these routes.

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About the Author

Nick Savvides

Europe correspondent

Experienced journalist working online, in monthly magazines and daily news coverage. Nick Savvides began his journalistic career working as a freelance from his flat in central London, and has since worked in Athens, while also writing for some major publications including The Observer, The European, Daily Express and Thomson Reuters. 

Most recently Nick joined The Loadstar as the publication’s news editor to develop the profile of the publication, increase its readership and to build a team that will market, sell and report on supply chain issues and container shipping news. 

This was a similar brief to his time at ci-online, the online publication for Containerisation International and Container News. During his time at ci-online Nich developed a team of freelancers and full-time employees increasing its readership substantially. He then moved to International Freighting Weekly, a sister publication, IFW also focused on container shipping, rail and trucking and ports. Both publications were published by Informa. 

Following his spell at Informa Nick joined Reed’s chemical reporting team, ICIS, as the chemical tanker reporter. While at ICIS he also reported on the chemical industry and spent some time on the oil & gas desk. 

Nick has also worked for a time at Lloyd’s Register, which has an energy division, and his role was writing their technical magazine, before again becoming a journalist at The Naval Architect for the Royal Institution of Naval Architects. After eight successful years at RINA, he joined Fairplay, which published a fortnightly magazine and daily news on the website.

Nick's time at Fairplay saw him win the Seahorse Club Journalist of the Year and Feature Writer of the Year 2018 awards.

After Fairplay closed, Nick joined an online US start-up called FreightWaves. 

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