Ocean carriers are still paying a heavy price for not withdrawing vessel capacity between Asia and the Mediterranean since January.

Westbound:

Cargo shipped from Asia to the Mediterranean in March reached 362,000 teu, taking the monthly average for the first quarter up to 366,000 teu, which was only just above the previous quarter’s 356,000 teu, and 3Q12’s 355,000 teu. At this time of year it is more meaningful to compare quarterly cargo flows than monthly volumes due the disruption caused by the Chinese New Year in February.

The small cargo growth was shared equally between the Western and Eastern Mediterranean, although the Eastern Mediterranean unusually remained the dominant player for the second quarter running.

France officially slipped into recession in 1Q13, joining Italy, Spain, Greece, Cyprus and Portugal, whereas some Eastern European countries, including Turkey, still managed to keep their heads above water. The Slovenian port of Koper, in the Adriatic, which acts as a small gateway into much of central and eastern Europe, saw its traffic grow by 4% between 4Q12 and 1Q13, up to 147,000 teu, for example, whilst Fos-Marseilles experienced a 2% drop, down to 265,000 teu.

Unsustainable sovereign debt remains the central problem of many countries in the Mediterranean, which requires severe austerity measures, for which there is no quick fix.

Despite this, ocean carriers appeared to continue in ‘wait and watch’ mode, as few changes were made to their schedules in 1Q13. Only port rotations were tweaked, vessels upgraded, and sailings cancelled. March’s effective westbound vessel capacity of 449,126 teu was slightly less than that available in October, but then climbed to 461,995 teu in April. While carriers cancelled seven sailings in March, only one was cancelled in April.

Pulling loops is not easy in this tradelane, as MSC, the biggest player only operates two, as does the G6 alliance and Zim Line. Maersk/CMA CGM and the CKYH alliance have three, however, so could more easily rationalise them, but would then expect the others to also reduce capacity.

Be that as it may, the consequence of not doing anything is that average utilisation of all vessels sailing from Asia to the Mediterranean only rose from a poor 71.2% in February to a less poor 80.5% in March, but purely due to the recovery of cargo after the Chinese New Year.

Failure to take enough corrective action on vessel capacity meant that westbound freight rates dropped sharply, as shown in the following graph, although other forces appear to have been present .

Eastbound

As in the westbound trade lane, there was little cargo cheer for ocean carriers from the Mediterranean to Asia. March’s 174,000 teu took the monthly average for the first three months of the year up to 162,000 teu, which was slightly less than 4Q12’s 166,000 teu, but 5% more than that shipped in 3Q12. Being less than half of what was imported, ocean carriers continued to be stuck with a major container equipment problem, compounded by the fact that exports and imports seldom use the same ports, or equipment.

Eastbound cargo was evenly split between the Eastern and Western Mediterranean, as was their rate of change. Hopes that China would start using its new found wealth to buy more from the Mediterranean were again dashed in 1Q13, with the value of China’s imports stagnating compared to 4Q12, so still remaining 20% less than in 3Q12. Commodity wise, there were no big ‘movers and shakers’, apart from wool and animal hair products (including yarn and woven fabric), the third largest export, which continued to spiral downwards.

Eastbound Asia-Mediterranean Container Traffic (’000 teu)

Eastbound vessel capacity evolved in much the same way as from Asia, with ocean carriers only tweaking port pairs, sailing cancellations and vessel upgrades. The end result is that March’s effective eastbound capacity rose 3% above that of February, up to 356,913 teu, rising to 356,913 teu in April.

The average utilisation of all eastbound vessels sailing from the Mediterranean back to Asia in March reached a poor 50.2%. Although much better than January’s 46.9% and February’s 45.6%, this was only due to the improvement in cargo flow after the Chinese New Year.