Capacity increasing even as carriers step up blank sailing

In the weeks following Golden Week (weeks 41-43), carriers are taking out significant levels of capacity per week (as shown in figure 1 for Asia-North America West Coast), according to the latest update from Sea-Intelligence.

"This level of blanked capacity is not only higher than in 2019 but has also increased from what was scheduled three weeks ago in the outlook from week 37. However, even with an average (over weeks 41-43) 26-31 percent capacity reduction on the Transpacific and 19-27 percent capacity reduction on Asia-Europe, freight rates on these trades continue to fall considerably."

Simple answer, says Alan Murphy, CEO, Sea-Intelligence. "Carriers added so much capacity during last year that even with these levels of capacity reductions, the underlying capacity has still only been brought in line with 2019."

For weeks 41-43, Asia-North America West Coast is scheduled to see capacity grow by 1.9 percent when annualised over 2019 while Asia-North America East Coast and Asia-North Europe are slated to see even larger capacity increases of 3.1 percent and 5.1 percent, respectively. Only Asia-Mediterranean is contracting by -1.3 percent.

So, here's a more pertinent question: can carriers really blank more capacity to try and control the freight rate drop? "The peak reductions during the initial Covid impact were 35-53 percent but that lasted for only 1-2 weeks before capacity reductions dropped to 10-30 percent for a few more weeks."

Carriers are already within the latter range now, and a 50 percent reduction in deployed capacity will not only create significantly more supply chain problems but will also likely have cargo owners up in arms, says the update.

"There is a very delicate balancing act for the carriers to follow from here on."