The shipping industry is facing a significant challenge as volumes on some trade routes have fallen in the past few months. The decrease in trade volume has been observed on several key routes, including those connecting Asia to Europe and the United States.The reasons behind the decline in volume were complex and multifaceted, said Xeneta market analyst Emily Stausbøll.Speaking during a recent online conference on the state of ocean freight, she said demand was still poor. “Volumes on the Far East to US West Coast trade, for example, have fallen by almost 25% in the first two months of this year, which is significant. However, the stabilisation of prices on this trade, despite such a steep fall in demand, shows that carriers are managing to remove some capacity to secure their market.”She said it would be interesting, however, to see how long the new improved General Rate Increase (GRI), which came into effect in mid-April, would hold up and whether this would give carriers the confidence for future GRIs after May 1, when long-term contract decisions are announced after months of negotiations. Carriers have been opting for GRIs of 20% to 30%.Stausbøll said essentially carriers were stating to everyone that $1 800 was close to the lowest that they would go. “We have seen this type of message in the past, so we will need to see if it will stick this time. Volumes are still low, so carriers will have to keep a tight grasp on capacity management,” she said.Speaking about specific trade routes, Stausbøll said there had been a significant drop in the number of blank sailings on the transpacific trade, declining from well over 30% two months ago to 7% in mid-April. “This fall in the number of blank sailings can be attributed to carriers re-evaluating their schedules to reduce some services or removing them completely. As a result, total capacity is rebalancing, reaching levels last seen in 2019.”She said despite a weak economy, the operational model seemed to be returning to normalcy, following three tumultuous years marked by instability, rate f luctuations, and a surge in blank sailings.“The Latin American trade route, however, is dancing to a different beat. China Main to Santos has been the first trade to show stability since the Covid pandemic, and also the first where rates have started to increase. This shows that more efficient management of capacity has been achieved,” she said. “Latin American trade in general could be a big winner from the effects of the current and developing geopolitical situation, so it is one to watch carefully. Nearshoring, diversification of supply chains, resilience and the need for carbon emission reductions can also have a far-reaching effect for this region.”Stausbøll said the major transatlantic and transpacific trades had developed quite differently over the past two years. “The transpacific has performed poorly so far this year, but the transatlantic, while also down, has held up significantly better.”Furthermore, she said there was a growing spread in long-term container rates between China to Japan and China to Taiwan trades that had become apparent since the start of the year when the rates were almost equal. “The growing disparity in rates can largely be attributed to the geopolitical risks associated with the China to Taiwan route. Carriers are factoring this risk into their prices for long-term contracts more heavily than for the spot market.”She said going forward, one could expect more disruption from long-term decisions that would have a large inf luence on local markets. “It is worth paying attention to every region, no matter where you are in the world, and watching closely as geopolitical factors will affect long-term decisions that will make an increasingly bigger difference in the years to come.”
