Golden Week + maintain rates! MSC fires first shot of grounding

MSC fired the first shot of the suspension, 30 MSC said that due to weak demand, it will suspend its independently operated Asian-Nordic Swan Loop line again for six consecutive weeks from the 37th to the 42nd week starting in mid-October. At the same time, three consecutive voyages of the 39th, 40th and 41st week Asia-Mediterranean Dragon service will be cancelled.

Delury recently predicted that given the continued delivery of new ship capacity and the weak peak season, ocean carriers may implement more stringent stoppage strategies to prevent further rate declines, which could lead to temporary cancellation of shippers /BCO voyages.

Just last week, MSC announced a rotation plan for its Swan shipping schedule, which includes an additional call at Felixstowe in northern Europe, but also cancels rotations at some Asian ports. The 36th week of the adjusted Swan service will still sail on September 7 on the 4931TEU MSC Mirella from Ningbo, China.

The Swan Loop was relaunched in June as a standalone service outside the 2M alliance. However, MSC has struggled to justify the additional capacity and has reduced the size of the ships deployed from around 15,000TEU to a maximum of 6,700 TEU.

Consultancy Alphaliner said: "Weak cargo demand in July and August forced MSC to deploy smaller vessels and cancel voyages. For the last three voyages of the month, the 14,036 TEU MSC Deila has all been cancelled and the ship has been redeployed this week on the New Falcon Loop to the Far East-Middle East."

Perhaps more surprisingly, given the industry's resilience to date, MSC has decided to cancel three consecutive voyages on its separate Asia-Mediterranean Dragon Loop due to weak demand.

After weeks of creating stronger booking conditions, and thus higher spot rates, on the Asia-to-Northern Europe route, the investment of extra capacity on the route appears to have had a negative impact.

In fact, comments in the latest Ningbo Container Freight Index (NCFI) said that Northern Europe and the Mediterranean routes "continue to cut prices in order to secure more bookings", leading to a drop in spot freight rates on these two routes.

Meanwhile, consultancy Sea-Intelligence believes shipping lines have been too slow to adjust capacity ahead of China's National Day holiday. Chief executive Alan Murphy said: "Golden Week is only five weeks away and there is not much time left if shipping companies want to announce more stoppages."

Taking Trans-Pacific routes as an example, total capacity cuts on trade routes during Golden Week (plus the following three weeks) are currently only 3%, compared to an average of 10% between 2017 and 2019, according to Sea-Intelligence.

"In addition, with tepid demand during the peak season, it can be argued that the blank voyages needed to keep market rates stable will have to exceed the 2017 to 2019 levels, which will put further pressure on the carriers' shutdown strategies in October," Murphy said.