Israeli shipping line Zim Integrated Shipping is expanding its services between Asia and the East Coast of South America (ECSA), as Drewry noted a recovery in demand on the lane in the first quarter after a dismal 2014.
Zim said the new service, Asia-East Coast Brazil (AEC), will enable it to offer a second loop on this trade in addition to its established Asia-South America service (ASE). The new sling, a collaboration with the SSA group, provides direct connection to South Korea, as well as expands ECSA port coverage by adding Rio De Janeiro and Navegantes in Brazil.
The AEC began May 9 and its rotation is Busan, Shanghai, Ningbo, Shekou, Singapore, Rio de Janeiro, Santos, Navegantes, Paranagua, Santos, Rio de Janeiro, Singapore, Hong Kong, and back to Busan.
Traffic resumes growth
As this developed, Drewry has observed a return in container growth on the southbound Asia to ECSA lane in the first quarter despite weaker Latin America currencies.
Following a dire 2014 when Asia-ECSA traffic decreased by 1.5%, there were signs of recovery in the first quarter 2015. Statistics show that southbound box volumes were up by 6.3% year-on-year in the first three months, with all of that growth coming from a stellar performance in March, which jumped by 28%.
“Some of the increase in March can be explained by the later Chinese New Year holiday this year, which will have pushed some of February’s cargo into the month, as might a truckers strike at some Brazilian ports, but the pace of growth seen is nonetheless remarkable considering how currency changes will have made goods much more expensive to the Latin American markets,” said Drewry in a new report.
The first quarter growth was evident across the Latin America regions with Asia to Brazil traffic up by 5% to 298,000 TEUs, while volumes to the smaller Plate region (Argentina and Uruguay) grew even quicker at 10% to reach 94,500 TEUs.
“The good start to 2015 has reversed the long-term downwards trend with our rolling 12-month average now working its way back towards neutral. It will take a few more months of growth before we can really call a recovery in the trade,” said Drewry.
It also points to a possible “major shake-up” of Asia-ECSA services in the offing as the current consortium agreements expire at the end of June. This entails the Ocean Three carriers (CMA CGM, CSCL and UASC) joining forces with German lines Hamburg Sud and Hapag-Lloyd. This could result in the possible suspension of one of the six weekly services currently operating in the Asia-ECSA trade, leading to some of the ships with capacity of over 8,000 TEUs being cascaded to other routes.
“Despite the recent uplift in demand the trade remains oversupplied with low freight rates so carriers have been forced into a position where they need to reduce capacity and with it the service and vessel sharing allegiances,” explained Drewry.
The expected reduction in Asia-ECSA supply after the establishment of new carrier groups in July is long overdue and should help lift rates, it added.
Photo: World Bank Photo Collection
