SIMIC

Demand for container transport is declining slightly, while new numbers on the three major tradelanes, Asia-US, Asia-Europe and Europe-US, reveal that utilisation of capacity is also diving, thereby continuing to put downward pressure on spot rates.

Even though demand grew by 0.6 per cent year on year in June, it doesn't change the fact that it has been on a downwards trend ever since it spiked in peak season 2020.

In its latest issue of the Sunday Spotlight, Sea-Intelligence noted that a declining demand trend can be offset by a declining injection of capacity, especially in an environment where port congestion leads to significant vessel delays, and in turn results in capacity removal.

"When we look at capacity deployment on the major East/West trades, we can see that while demand growth is slowing, capacity growth is increasing at the same time," said Alan Murphy, CEO Sea-Intelligence.

For Transpacific, the sharp drop in vessel utilisation in May was sustained in June as well, with vessel utilisation around the 89 per cent mark.

"Basically, once utilisation gets into the 90-95 per cent range for the Transpacific, it effectively means all capacity is fully utilised and spot rates increase dramatically. However, now that we have had 2 consecutive months where utilisation is below 90 per cent, it is clear the market is no longer at a point which can sustain the extremely high spot rates. We also see a similar case on Asia-Europe and Transatlantic as well," Mr Murphy added.

"The bottom line is that the average vessel utilisation on the major head-haul trades continues to be below the threshold which fuelled the record rate peaks over the past one and a half years. As a consequence, spot rates will continue to decline."