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Carriers cut 10pc capacity on Asia-South America lane to curb rate plunge

MAERSK, CMA CGM, Hamburg Sud, CSAV, China Shipping Container Line and Hanjin have ended their joint Asia-South America SEAS 3/ASAX 3/ASAS 3/NGX 3 service, cutting capacity 10 per cent to curb plunging freight rates.

CMA CGM said the service had been cut to "adapt to market conditions and rationalise the supply in the trade". Hamburg Sud said it "reflected reduced volumes between November and April" while CSAV said it had reacted to "current conditions".

The suspension withdrew ten 6,500 TEU-8,5000 TEU ships from the trade lane, according to Lloyds List Intelligence.

Showing big declines this year, the Shanghai Containerised Freight Index showed that spot rates from Shanghai to Santos stood at US$2,223 per TEU in January, which has since plunged 68 per cent to $710 per TEU.

Shipbroker Braemar Seascope analysts blame the decline in freight rates on carriers adding larger ships to the trade lane as a result of cascading from larger trade routes.

Total weekly capacity on the trade lane at the end of October had increased 23.7 per cent year on year to 96,289 TEU.

While capacity has grown 20 per cent this year, demand has weakened, according to analyst MDS Transmodal, which forecasts volumes from Asia, excluding the Indian subcontinent, to east coast South America will increase 8.4 per cent year on year in 2013 to reach 1.9 million TEU.

The impact of the addition of larger vessels has also been compounded by slower than expected economic growth in Brazil.

Alphaliner said the carriers had made a range of adjustments to ensure they are able to maintain frequencies and port coverage that were covered by the SEAS 3/ASAX 3/ASAS 3/NGX 3 service.


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