As contract season approaches, Trans-Pacific Ships will be in the driver's seat! Capacity cuts will continue

Shipping companies have been very smart in their capacity management strategies around the Chinese New Year, responding effectively to market changes by cancelling voyages and allowing other voyages to be "deferred". "This is certainly a success story for shipping companies," said Simon Heaney, senior manager of container research at Delury. He further noted that with the annual contract negotiation season approaching, now is the best time for shipping companies to achieve a market recovery.

In fact, shipping companies are expected to dominate the upcoming JOC TPM meeting in early March, which marks the official opening of the annual Trans-Pacific contract negotiations. Meanwhile, WCI Asian-U.S. East Coast spot prices fell 2 percent this week to an average price of $6,170 per 40 feet, but are still double the average price before the Red Sea disruption.

Other routes, affected by the weakening demand after the Spring Festival, the Asia-Europe container spot freight rate has declined this week. Xeneta's XSI Asian-Nordic Spot Index edged back 1% this week to an average price of $4,536 per 40 feet, which is 260% higher than the average in early December.

For Mediterranean routes, the average Asian-Mediterranean spot rate on the Baltic Freight Index (FBX) fell 7 per cent to $5,758 per TEU.

Given that the market is entering the traditional low season and consumer demand has been affected by the recession, it is uncertain whether the increase in freight rates in the European market can be sustained.

Shippers have been warned that carriers are expected to step up capacity reduction plans on Northern European and Mediterranean routes in the coming weeks to maintain rate levels.

It is worth mentioning that carriers managed to absorb about 300,000 TEUs of new capacity in January due to the diversion of the Suez Canal to the African coast. However, another 120,000 TEUs were delivered this month, which could make it challenging for shipping companies to deploy new capacity.

Meanwhile, on transatlantic trade routes, Maersk reported stronger demand on its Europe-to-North America route, noting that this was related to a shift in purchasing patterns due to disruptions to shipping in the Red Sea.

Meanwhile, shipping companies have been cutting capacity on routes from Northern Europe to the east coast of the United States. Oocl, for example, is replacing a 13,000TEU vessel with an 8,000TEU vessel on its ATE1 route, which is jointly operated with parent Cosco and CMA CGM within the Ocean Alliance.

Improved demand and reduced capacity led to another spike in spot rates from Northern Europe to the U.S. East Coast this week, with WCI up a further 10% to an average of $2,173 per 40 feet.