Asia-Europe utilisation tightens in final quarter

Fourth-quarter volume growth was recorded at 3.4% on the Asia-Europe trade, while capacity fell by 1%, according to MDS Transmodal

HEALTHY volume growth in the fourth quarter of 2018 helped lift load factors on the Asia-Europe trade amid limited supply additions.

On the Asia-Europe trade lane, including the Middle East Gulf and Indian subcontinent, volume growth is expected to have risen to 3.4%, while supply fell by circa 1% during the same period. For the overall year we project an annual volume growth rate of 2.4%.

Based on the data available at the beginning of December, we expect 2018 to end with the load factor for the whole Asia- Europe trade lane at a level of approximately 63%, up from the 60% estimated for the same quarter of 2017.

Analysing the load factor for the two directions separately, we project that the westbound direction increased at a higher rate than in the eastbound direction during the fourth quarter of 2018, as shown in the graph below.

Transpacific capacity changes (Fourth quarter of 2018)

Supply additions

•HYUNDAI – AEX: The service began operating in April 2018 offering an express service with shorter transit times, using 10 small panamax vessels of around 4,900 teu

•OCEAN ALLIANCE - FAL2/LL2/AEU3/NE3: The consortia loop has seen an increase in deployed capacity of approximately 50%, following the introduction of vessels with capacity of 20,000 teu replacing 13,500 teu vessels

•OCEAN ALLIANCE - FAL5/LL1/NE1/AEU1: The service has completed the transition to a full fleet of 19,000-21,000 teu ships, with deployed capacity estimated to have increased by more than 20%

•2M ALLIANCE - LION/PEARL/AE6/TP6: has changed its service structure from operating as a pendulum on the Asia- Europe-USWC trade lane in the fourth quarter of 2017 to operating as a separate standalone service in fourth-quarter 2018; currently the service operates with 10 14,900 teu vessels from the 16 vessels averaging 13,200 teu offered last year.

Capacity cuts

•2M ALLIANCE - SWAN/AE2: Briefly suspended from October/November 2018 and re-started in December 2018; it operates with 11 ships of 11,400 teu on the Asia-Europe trade lane, two 17,800 teu vessels were redeployed onto the Transpacific PEARL service

•COSCO/EVERGREEN/OOCL – FEM/EM2: Operating on the Far East – Eastern Mediterranean trade lane, the service saw a capacity reduction of 20%. The average vessel size offered by this service has decreased from 8,300 teu to 6,700 teu

Eastbound

Based on the latest trade data available at the time of this analysis, we estimate that during the fourth quarter of 2018 the principal country pairs on the eastbound direction were Russia to China, Germany to China and India to Thailand.

Together these accounted for more than 14% of the overall traffic moved on this route.

However, growth rates for these country pairs during the fourth quarter of 2018 were quite different with Germany to China anticipated to have seen an annual contraction of circa 2%, Russia to China an increase of approximately 2% and India to Thailand projected to see an annual increase of more than 20%.

Looking at the commodities on a Standard International Trade Classification five-digit level, and comparing the volumes projected for the fourth quarter of 2018 with the corresponding period of 2017, MDST identifies that ’Wood of coniferous species, sawn or chipped lengthwise, sliced or peeled’ was the principal driver behind volume growth from Russia to China, rising by more than 19%.

Meanwhile, ‘Electrical ignition or starting equipment of a kind used for spark-ignition or compression-ignition internal combustion engines’, grew 37% on the India-Thailand trade.

Tempering volume growth was a fall of 9% on ‘Car parts - other parts and accessories’ moved from Germany to China.

Westbound

In the opposite direction, we anticipate demand to have grown at a rate of approximately 5%, while supply growth remained stagnated against the fourth quarter of 2017.

This resulted in an improvement in the utilisation level, up from 72% to 76% in the final three months of 2018.

Based on our latest trade data, we anticipate that China to Germany, China to the Netherlands and China to the UK were the leading country pairs on this trade lane in the fourth quarter of 2018.

The annual growth rates anticipated for the last quarter of 2018 for these country-to-country flows are in the region of 12% for the first two, while for China to the UK we project a 1% drop in trade.

On an SITC five-digit level, MDST projects that the main commodity driver on the China-Germany trade was ‘Electric lamps and lighting fittings, not else specified’, up by circa 13% in the fourth quarter of 2018.

From China to the Netherlands, the major commodity driver we forecast was ‘Static converters (eg rectifiers)’, climbing 15%, while to the UK from China we expected a 24% rise in ‘Tyres, pneumatic, new, of a kind used on motor cars (including station wagons and racing cars)’.