Asociación Española de Marina Civil - MARITIME TRANSPORT.- N/S Supply/demand: Asia-West Africa

Cargo growth from Asia to West Africa is still falling short of expectations, forcing ocean carriers to explore new ways of servicing trade requirements.

Southbound:

Cargo shipped from Asia to Sub-Saharan West Africa (between Nouakchott and Lobito) fell significantly in October and November, reaching an average of just 108,611 teu/month, 8% below the third quarter’s monthly average of 117,500 teu (see Figure 1). There are no clear reasons for this, other than escalation of political conflicts in countries such as Mali, the Ivory Coast and Nigeria. Developed countries have also been cutting back on overseas investments due to their own markets becoming more favourable, which explains why the US has started tapering Quantative Easing.

Despite the downturn, year-to-date cargo growth still reached 8%, taking the total up to 1,214,800 teu. Ocean carriers clearly expected more, however, as Maersk/Safmarine/CMA CGM’s new FEW5/FW5/WAX2 service in March, and PIL’s third loop in June (SW3), currently add around 16% of extra capacity. Figure 1a shows the approximate market shares of effective vessel capacity provided by direct service providers in January 2014.

Moreover, indirect service providers, which currently have a market share of around 20%, have introduced a wide range of extra shuttles from Mediterranean hubs, which process of expansion is still ongoing. These also cater for Mediterranean cargo, as well as traffic from the Middle East and Indian Subcontinent. Whereas they focussed before on West African ports north of Dakar, they now carry cargo right down to Lobito for carriers such as MSC, which no longer relays via South Africa.

Figure 1 Southbound Asia-West Africa Container Traffic (’000 teu)

Source: Drewry Maritime Research, derived from CTS (www.containerstatistics.com)

As in other tradelanes, ocean carriers took little action to deal with the downturn in cargo between October and November, presumably in the expectation that there would be a late surge of cargo by the middle of December due to shippers wanting to avoid the Chinese New Year at the end of January. Just six sailings were cancelled in November and December, and only one in January, but 15 have already been announced for the corresponding lull in February. In the past, whole services have been withdrawn during unfavourable market conditions.

Other than that, only a few port rotations were modified. The average size of vessel deployed between November and January (3,200 teu) remained unchanged, driven partly by draught restrictions in many West African ports.

The consequence is that the capacity of all vessels sailing directly from Asia to West Africa only fell by 1.5% between October and November, and then by another 1% in December (see Figure 2).

Figure 1a Market Shares of Effective Direct SB Vessel Capacity in January 14

Source: Drewry Maritime Research Figure 2 Southbound Asia-West Africa Capacity (’000 teu)

Source: Drewry Maritime Research

This meant that average vessel utilisation of direct services reached 89% in November, assuming that 20% of all southbound cargo was routed indirectly via the Mediterranean (see Figure 3). It should be noted that due to the heavy weight of southbound cargo, including fish and rice from China, southbound vessels are usually fully loaded well before their maximum container capacity is reached. On average, approximately 3,100 teu of reefer cargo per month was loaded last year, or just under 3% of the total.

Sources: Drewry Maritime Research; Drewry Container Freight Rate Insight (www.drewry.co.uk/cfri)

The proportion of cargo transhipped via the Mediterranean is only estimated, so also needs to be treated with care. Whilst direct services are normally preferred by shippers, freight rate levels, transit times and seasonality also enter the equation, and they are very variable. Indirect services are longer, but their vessel speeds are faster. For example, Maersk’s FEW3 direct service offers a transit time of 43 days from Shanghai to Abidjan at 14k, whereas MOL’s indirect service offers 39 days, but with transhipment in Hong Kong and Algeciras, which means that everything has to work well to achieve it.

Northbound To some extent, northbound services from West Africa back to Asia remain of minor importance in this tradelane due to the chronic shortage of cargo. Whilst much is written about Africa becoming a new source of raw materials for China, this has yet to manifest itself in the container industry, with bulk vessels being the main beneficiaries so far. In the container sector, the container imbalance remains a horrifying 4:1.

As shown in Figure 4, there were only seasonal variations in traffic between January and November, with overall shipments totalling 289,400 teu actually declining by 4% compared to the same period of 2012. The figure is disputed by some carriers who claim a standstill. Figure 4 Northbound Asia-West Africa Container Traffic (’000 teu)

Source: Drewry Maritime Research, derived from CTS (www.containerstatistics.com)

Due to the southbound schedule changes mentioned earlier, direct northbound vessel capacity remained unchanged in November, and then decreased by 3% in December (see Figure 5). Figure 5 Northbound Asia-West Africa Capacity (’000 teu)

Source: Drewry Maritime Research

This meant that average vessel utilisation only reached 22% in November, assuming that 20% of all northbound cargo is also transhipped via the Mediterranean, keeping ocean carriers in a hopeless freight rate negotiating position (see Figure 6).

Figure 6 Northbound Asia-West Africa Utilisation v Rates

Sources: Drewry Maritime Research; Drewry Container Freight Rate Insight (www.drewry.co.uk/cfri)

Table 1 Asia-West Africa – Estimated Monthly Supply/Demand Position

Notes: * After deductions of 27.8% both south and northbound for unusable slots because of deadweight limitations Source: Drewry Maritime Research

Our View Competition between direct and indirect services from Asia to West Africa will intensify, and eventually force direct services to become faster.

Source: Drewry Maritime Research-HSN