05 Aug Unstoppable demand outstrips supply
The strong demand being experienced across Asia’s export trade lanes is utilising a large amount of capacity being provided by shipping companies, which is causing tension in the quest to balance three main factors: high market demand, long transit times due to Red Sea diversions and congestion across key ports.
Even though shipping companies have moved almost 1.6million TEUs of capacity to date this year, this has done little to address the imbalance between supply and demand across Asia-Europe and the trans-Pacific, with capacity shortages anticipated to last through the usual August-October peak season.
However, Sea-Intelligence Maritime Analysis reported that blank sailings data indicated shipping companies were planning to substantially increase capacity on both the trans-Pacific and Asia-Europe trades in the upcoming weeks. This has the potential to alleviate some pressure, however it is reliant upon whether port congestion allows them to operate the envisioned vessels in the sailing schedules.
In addition, the fact that only 0.7% of the total global container shipping fleet is sitting idle (a level not seen since the pandemic), is another sign that shipping companies are deploying whatever capacity they can find.
The Impact: frontloading scramble
Due to factors such as the Red Sea, port congestion, the possibility of industrial action across the US coasts, importers on Asia-Europe routes are moving sooner than they normally would. This is being reflected along the West Coast supply chain.
However at this point in time speculation is divided as to whether this early start to the traditional peak season will result in an early end. Whilst some industry analysts believe demand momentum could sustain during Q3 as operators aim to front load their cargoes ahead of Christmas to avoid further disruptions, potential tariffs and further increases in freight rates, others believe that although container prices and rate levels remain significantly elevated, the volume of boxes being traded has started to show signs of slowing which they attribute to growing caution among buyers.
The Impact: “Highest bidder” environment back
With shipping space in short supply and rates approaching pandemic-level pricing, due to high vessel utilisation, port congestion as well as capacity and equipment shortages, it appears that Asia-Europe is back at “highest bidder time” environment, reflective of the pandemic years as the soaring rates will inevitably lead to a vast improvement in the profit margins of shipping organisations this year.
The Impact: Shippers cutting back on vessel space allotments for NVOs, retailers
Rapidly thinning vessel capacity in the eastbound trans-Pacific is prompting shippers in some cases to not fulfill the space allotments they granted in their 2024-25 service contracts with non-vessel-operating common carriers (NVOs) and retailers who book directly with liners with some not honouring all the space commitments made to NVOs for fixed-rate, or named account, bookings. In addition, it appears that now mid-size and smaller shippers who book directly with carriers are experiencing similar reductions in the capacity commitments agreed to in May in their annual service contracts. Those cuts come as ocean bookings in the eastbound trans-Pacific are climbing sharply because US-based importers who had planned to ship their merchandise during the traditional August-through-October peak season are scrambling to book space early.
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