Ocean carriers up blank sailings to brace for softening October demand

Date: Monday, October 3rd, 2022
Source: Supply Chain Dive

  • Volatile market conditions in ocean shipping are leading ocean carriers to increase the number of blank sailings next month compared to previous years, according to Sea-Intelligence.
  • This year, carriers are planning to reduce capacity for the Asia to North America West Coast trade lanes by at least 24% and up to 29% in the weeks following China’s Golden Week. In 2021, the reduction range was 18% to 28%, up from 4% to 8% in 2020.
  • The research and analysis agency said stalled demand, not fully utilized vessels and dropping freight rates are giving carriers the opportunity to blank more sailings than usual in 2022.

Blank sailings after Golden Week have increased since 2019

Percent of blank sailings in Asia to North America West Coast trade lanes in the weeks surrounding China’s Golden Week

Dive Insight:

Ocean carriers have used blank sailings —  the practice of skipping a port or voyage — for different purposes over the years.

“Blank sailings have for long been the carriers’ preferred way of matching supply with demand; this is what we would call tactical blank sailings,” said Alan Murphy, CEO of Sea-Intelligence. “However, for much of 2020 and 2021, carriers have struggled to maintain capacity in line with the stresses of demand.”

Murphy added the supply-and-demand mismatch meant vessels were “chock full,” terminals and ports were increasingly congested, and ships stuck outside ports could not fulfill their weekly voyage obligations, leading to even more blanked sailings. Recently, stalled demand and falling freight rates, however, have pushed carriers to use blank sailings to help manage capacity and “stem the bleeding” in freight rates.

“With Golden Week coming up [starting October 1st], it presents carriers with the golden opportunity to blank more sailings than they historically would, and likely come under less pressure from cargo owners, for artificially managing freight rates by cutting capacity short,” Murphy said.

Factories in China typically close for Golden Week celebrations, leading to lower freight transport demand. Industry analysts say the market is already seeing some of the holiday’s effects.

“The soft pre-Golden Week demand indicates a lack of traditional peak season,” Flexport said in a Sept. 27 Freight Market Update.

“Weaker demand for Asian exports is now anticipated due to rising inflation and the consumer shift from goods to services in major Western economies, while China, the world factory, is also scaling back production. As a result, the world’s leading ocean carriers are swiftly increasing blank sailings to realign capacity with weakening demand,” Drewry said in a weekly analysis.

Niels Madsen, vice president of product and operations at Sea-Intelligence, said in an email shippers may feel the effects of an increase in blank sailings in several ways.

Although contract rates are unlikely to be affected, a surge in spot rates could “leave carriers more interested in spot biz than contractual volume,” Madsen said. Furthermore, shippers may feel the effect of capacity constraints for some time to come.

“We are seeing an increase in blanked sailings right now, but I am not sure that we have seen the end of it,” he said.

[Read from the original source.]

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