The trans-Pacific maritime landscape has been substantially altered as a result of COVID-driven cargo demand. New Alphaliner data shows how dramatically the Asia-US commerce corridor has altered in the last two years.
There is currently significantly more container shipping capacity in the trade than existed prior to the outbreak. Capacity continues to increase, with more new maritime services focusing on the Asia-East Coast channel rather than the Asia-West Coast lane.
Carrier competition is increasing, with more participants overall and the three major global alliances controlling a smaller proportion. The leaderboard for trans-Pacific liners is changing as COVID-era demand trends drive new deployment methods.
New ranking for trans-Pacific liners
According to Alphaliner, the top five trans-Pacific liners by capacity are Maersk, CMA CGM, MSC, Cosco, and ONE.
Cosco was by far the trans-Pacific leader in mid-2020, as the US was emerging from first COVID lockdowns. At the time, Maersk was a distant fourth, with about 30% less capacity than Cosco. MSC, now the third-largest trans-Pacific carrier, was ranked sixth two years ago.
According to Alphaliner, “MSC and Maersk were by far the fastest-growing carriers in the trade.”
Alliances are still adding trans-Pacific capacity nominally, but at a slower rate than the broader market, resulting in a fall in their market share.
According to Alphaliner, Maersk and MSC are focusing on expanding trans-Pacific capacity that is not covered by their 2M alliance structure, “launching multiple solo loops that stay outside the purview of their 2M agreement.”
Alliances are still adding trans-Pacific capacity nominally, but at a slower rate than the broader market, resulting in a fall in their market share.
According to Alphaliner, Maersk and MSC are focusing on expanding trans-Pacific capacity that is not covered by their 2M alliance structure, “launching multiple solo loops that stay outside the purview of their 2M agreement.”
Meanwhile, non-alliance carriers such as Wan Hai, which entered the Asia-East Coast trade, and Asia-West Coast newcomers such as CU Lines, BAL, and Transfar are expanding their market shares.
2022 freight prices are on course to surpass those of 2021.
The COVID era’s dramatic impact on trans-Pacific freight costs is far from gone. In terms of freight pricing, this year is still on course to surpass 2021.
Maersk’s increased trans-Pacific market share implies an increase in long-term contracts rather than spot sales for larger US cargo shippers. Maersk has been the most ardent advocate of contracts, notably multiyear contracts, over spot business.
Annual contract rates in the United States are usually predicted to be significantly higher in 2022 than in 2021. As of last month, Xeneta’s US import index was up 99 percent year on year. On his most recent quarterly call, Gary Friedman, CEO of Restoration Hardware (NYSE: RH), stated that RH’s contract rates for 2022 increased even greater than they did last year. And his company’s contract rates more than doubled last year.
In the spot market, several indexes show a rate reduction, but only to levels that are still well above where they were last year and far above pre-COVID levels.
Drewry’s Shanghai-Los Angeles assessment was $8,782 per forty-foot equivalent unit (excluding premiums) last week, the lowest since early July 2021 and a 14 percent decrease from rates at the end of last year. That’s great news for shippers. The bad news is that this is up 112 percent year on year and has more than tripled from pre-COVID levels.
For trans-Pacific freight prices to fall in 2022 compared to 2021, spot rates must fall to less than half their current levels immediately and remain severely depressed for the remainder of the year. Spot decreases would have to be severe enough to compensate for the increased contract rates previously agreed by prominent carriers such as Maersk.
