Sobering thoughts about the so-called "capacity injection" by the 2M liner alliance, Maersk and MSC, have poured cold water on the headline-grabbing notion that it's about to unleash a domino-toppling depreciation of freight rates.
The news that the 2M behemoths will be adding nine vessels to their Asia-Europe trade "illustrates quite well how the capacity injection due to the large order book will, to some degree, be curbed," said Lars Jensen, CEO and partner of strategic maritime consultants Vespucci Maritime.
"It also illustrates that it is critically important to be clear on what is meant by 'capacity injection'," he said.
Although it's not mentioned which vessels will be added to the service, Jensen pointed out that they are likely to be larger than 20 000 TEU each, and hence this represents an injection of nominal capacity of some 200 000 TEU.
More importantly, this does not increase the offered capacity in the Asia-Europe trade at all, and therefore also will not, from a supply/demand perspective, add any downward pressure on freight rates, Jensen said.
"The vessels are injected into the existing services simply because the services will be going slower. Going slower means, you need to use more vessels to maintain a weekly service.
“In this case, most of these services will see an increase in transit times of three days for both head haul and backhaul.”
Jensen contends that the 2M development is neutral in relation to the weekly capacity offered on the Asia-Europe trade.
"From a global perspective, this move reduces global capacity due to the added slow steaming."
In short, vessels will be able to carry fewer boxes per year, Jensen said.
To interpret the addition of nine new vessels into the service as a race-to-the-bottom of freight rates, "is very misleading in terms of the impact on the market,” he said.
