Increased Trans-Pacific Blank Sailings As Carriers Respond to Declining U.S. Imports

Posted on: Mar 28, 2019

US importers and exporters have seen increased blank sailings as carriers responded to declining imports from Asia and weeks of spot-rate declines by attempting to match capacity with demand in the eastbound Pacific.
 
US imports from Asia in January-February totaled 2.73 million TEU, down slightly less than 1 percent from 2.75 million TEU in January-February 2018, according to PIERS. The decline points to a weak first quarter, which is not surprising given that retailers and manufacturers front-loaded spring season imports in late 2018 to avoid paying the Trump administration's threatened 25 percent tariffs on imports from China.
 
Most of the projections for the eastbound trans-Pacific call for low single-digit growth in imports from Asia and about the same total capacity as last year. In the first two months of 2019, imports declined about 1 percent compared with January-February 2018, according to PIERS.
 
Liner capacity in the trans-Pacific will remain flat in 2019, according to Alphaliner. "This year, the carriers' cautious approach marks the first time since 2009 that no new trans-Pacific services are to be introduced on the route for the summer's peak shipping season," the ocean carrier research firm stated. The number of weekly services from Asia to the West Coast beginning in April will actually be reduced to 36 from 37, and the three vessel-sharing alliances will keep their existing services to the East Coast intact, said Alphaliner.
 
Drewry forecasts global liner capacity increasing 2.5 percent this year and global demand increasing 4 percent, Damas said. Carriers historically have added several percentage points of capacity on the trade each year, exceeding demand growth in an already oversaturated market.
 
Carriers last summer and autumn managed capacity on an almost month-by-month basis, cancelling sailings when bookings were weak and deploying extra-loader vessels when demand spiked.
 
Carriers and their customers have both said they want to avoid the volatility and uncertainty that dominated pricing for much of 2018. Disappointed by the low rates they negotiated in their annual 2018-2019 contracts, carriers last summer suspended three weekly strings to the West Coast, reducing total capacity about 6 percent, and one weekly service to the East Coast, reducing capacity 1.3 percent.
 
When imports surged later in the summer before 10 percent tariffs on imports from China took effect in September, hundreds of shipments were unable to be loaded onto the vessels for which they were booked. Spot rates at the time soared to five-year highs of $3,739 per FEU to the East Coast and $2,606 per FEU to the West Coast.
 
A second spike in imports occurred in November-December as importers rushed to get ahead of the threatened 25 percent tariffs on Jan. 1. US and Chinese negotiators delayed the tariffs and counter tariffs until March 2 and have delayed them again as the two sides attempt to put an end to the trade war.