Europe-MidE-ISC: Container Shipments Bouncing Back

Container shipments from Europe to the Middle East and Indian subcontinent quickly bounced back from a seasonal decline in August, recording monthly growth of 1.8% in September, according to the latest Container Insight by shipping consultant Drewry.

Growth of 17.5% year-on-year is further evidence of the firm outlook for eastbound cargoes on this trade, Drewry believes.

With traffic down 4.1% from the previous month and down 1.4% year-on-year, westbound volumes in September at 187,000 teu were not as encouraging, Drewry added. However, the rolling 12-month average for westbound traffic reveals a growth trend of 8.3% year-on-year, again demonstrating the underlying strength of this trade.

In support of this, containerised imports through India’s 12 major state-owned ports were up almost 17% year-on-year in October, according to figures from port authorities.

“Buoyed by the positive core growth, India’s new government has pledged to boost its container shipping industry, putting investments in ports and transhipment channels. Eight months into its term, Narendra Modi’s government has said that it is minded to renew its exemption on vessel sharing agreements (VSAs) among container shipping lines from the provisions of India’s anti-trust law. The initial one-year exemption is due to expire on 10 December. It is estimated that approximately 90% of container services calling at Indian ports are on VSAs,” Drewry said.

The government has also hinted that it favours a relaxation of cabotage rules to promote short sea shipping and feeder networks. A 25-30% customs duty currently levied on fuels used by Indian ships is a deterrent to coastal shipping and a hurdle to the development of Indian ports as future container hubs.

Nearly half of India’s trade is currently transhipped through Colombo, Salalah and Jebel Ali, rather than through Indian hubs. India is seeking international investment to support developments in Visakhapatnam and Krishnapatnam with the long term aim of creating hubs for the region.

“Playing a waiting game for mooted port capacity improvements, carriers are keeping ship capacity on the trade in check. In November, capacity was down 3% on eastbound services to 384,000 teu, while westbound capacity was down 0.6% to 278,000 teu. News that UASC is to take slots on CMA CGM’s Europe‐Indian Sub Continent (EPIC) service from January will not have a significant impact on capacity as the Middle East operator is effectively filling the gap left by OOCL’s departure from the service in April,” the Container Insight reads.

Utilisation statistics bear out the capacity retraction, with Drewry reporting average eastbound ship utilisation at 74.1% in September, a rise of 1.9 percentage points. However, the smaller reduction in capacity on westbound services led to a drop in utilisation which slipped to 68.2%, down by 2.8 points.

The route to benefit the most from the capacity rebalance was eastbound Rotterdam to Nhava Sheva, where spot rates increased by USD150 per feu in October, Drewry said. Rates on the Rotterdam to Jebel Ali route fell by USD 40 per feu in the same period.

On the westbound trade, freight rates from the Middle East were unchanged at USD 2,450 per feu, while Indian sailings dropped USD 50 per feu in October.

“Fundamental strength in both eastbound and westbound Europe-MEISC trade remains and continued capacity checks should strengthen freight rates,”Drewry said.

Source: Drewry