Supply/demand: Med-North America
Ocean carriers’ failure to better match supply and demand between the Mediterranean and North America has cost them dearly, and there is little light at the end of the tunnel either.Westbound: As in the transatlantic tradelane between North Europe and North America, ocean carriers struggled to make
any money out of the smaller Mediterranean route between December and February. Trading conditions remained wretched at both ends. The proposal
in the middle of March to raid private bank accounts in Cyprus in exchange for a $13 billion EU-IMF bailout, and its subsequent rejection by the Cypriot Government, underlines the continuing financial difficulties faced by several countries in the Mediterranean.
The US Government also seems incapable of reaching agreement on how best to cut its chronic budget deficit – but on a much grander scale. The US’ so called austerity ‘sequester’, which came into effect at the beginning of March, is hardly a long term solution in many people’s opinion, with the Republicans still fiercely opposed to raising more taxes to pay for such state benefits as free healthcare, preferring instead to impose more cuts
in Government spending.
In summary, no other tradelane has been hit with so much economic uncertainty, so it is hardly surprising that ocean carriers appear shell-shocked.
What is surprising is the little done by them to resolve the situation. Whilst westbound cargo between October and February is estimated by Drewry
to have fallen by 11%, down to 98,000 teu, and the drop to January was an even higher 19%, virtually no service changes were made. October’s vessel capacity of 146,000 teu was actually increased slightly to 147,000 teu in
January, and then onto 150,000 teu at the beginning of February, despite three sailings being cancelled in December, followed by another six in
January and five in February. Perhaps the lines were deceived by much talk in the US of a housing market recovery, an important driver of cargo growth out of the Mediterranean.
Products likely to benefit from this rose by 10% in value last year, so it may be that more was expected. If so, everyone will have been disappointed
with the 4% fall between 3Q12 and 4Q12, down to $4.1 billion, as recorded by US Customs, even though some of it will have been seasonal.
The consequence is that the only service changes to have been made were Hanjin’s withdrawal from its joint MCA/MCI service with Hapag Lloyd in
November, leaving Hapag-Lloyd to run the schedule alone, and Zim Line adding Ashdod to its ZCA service, also in November, apparently in
retaliation to MSC’s new call in Haifa with its Golden Gate service.
The tradelane is difficult to read, however, with many vessels also being used for transhipment of wayport cargo, so it may be that all the action
took place in this sector.
Maersk’s MECL2 loop and the MINA/IMU string operated by UASC, Hanjin, APL,Cosco and Yang Ming, also serve the Indian Subcontinent and Middle East, for example. And the Grand Alliance’s AEX service, like the NWA’s SCX service, and MSC’s Golden Gate string, just pass through the Mediterranean between Asia and the ECNA. How much of their space is allocated to cargo between the Mediterranean and ECNA is difficult to assess.
The average vessel utilisations shown here need to be treated with care, therefore. They are only estimates used to determine likely future freight
With average westbound vessel utilisation from the Mediterranean to North America ranging between only 78% in October and a very poor 70% at the
beginning of February, there is no apparent demand for more capacity, yet the GA and NWA intend joining forces between the Far East and ECNA in May, and plan to run three loops instead of two with bigger ships through Suez.
It will be interesting to see how much more space is allocated to Mediterranean cargo, therefore. Only two out of the three are scheduled to stop off in the Mediterranean, with the SVS loop being used to tranship cargo in Algeciras – probably to/from Africa – and the AZX loop being used to hub cargo in Cagliari and Damietta – probably to/from the Western and Eastern Mediterranean regions.
Cargo from North America to the Mediterranean grew by an impressive 18% between November’s low of only 71,000 teu and December’s high of 84,000 teu, but then fell by 4% in January, down to 81,000 teu, and by another 1% in February, down to an estimated 79,000 teu.
These are small numbers, however, so just minor variations in the way a country’s traffic is routed could explain the difference. Much of France’s
cargo can be imported via Northern Europe or the Mediterranean, for example, and the same applies to Portugal and Northern Spain.
With Spain, Portugal, Greece and Cyprus remaining heavily in recession, and Italy still on the verge of it, the lack of cargo growth was to be
expected. The worst of it is that there is little light yet at the end of the tunnel, even in Eastern Europe.
Eastbound North America-Mediterranean Container Traffic (’000 teu)
In brief, there was nothing for ocean carriers to get excited about, making their apparent inactivity on schedule changes difficult to comprehend. The
consequence is that, unless far more space was allocated to wayport cargo than estimated, eastbound vessels sadly remained just over half full,ending up at just 58% in February.