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Spot rates to remain weak on Asia-Med trade until mid-June: Drewry

Apr.17--WEAKENING demand growth, rising supply of containership slots and market changes will hold spot rates down on the Asia-Mediterranean trade lane until the mid-June peak season, predicts London-based analyst Drewry.

According to the Shanghai Containerised Freight Index, spot rates on the Asia-Med trade fell to a two-year low of US$600 per TEU last week, despite efforts to implement a general rate increase (GRI) on April 1.

Westbound demand growth in the fourth quarter softened to 2.4 per cent and throughput for the whole of 2014 was up 5.7 per cent to almost five million TEU.

But Drewry found that by the end of January, the 12-month rolling growth average had declined to 4.2 per cent, whereas back in the middle of last year the headhaul trade was racing away at twice that pace, reported Newark's Journal of Commerce.

Worryingly, areas that fuelled demand growth in the last three to four years while much of the Eurozone was plunged into recession - most notably the Black Sea economies and Turkey - were now faltering, Drewry said.

"Turkish imports climbed in 2014 by only 6.3 per cent, with fourth quarter loads scarcely growing at all. Strife-torn Ukraine and the problems besetting the Russian economy meant that Asian exports landed in the Black Sea region declined by five per cent last year," Drewry reported.

But Egypt is emerging as a rising star in the east Mediterranean region, with the nation's Asian imports up 11 per cent in 2014 year on year.

Capacity, however, is outpacing demand primarily due to the formation of the new 2M and Ocean Three vessel sharing agreements.

"Previously, the three main carriers in those alliances - Maersk, MSC and CMA CGM - in their former set-ups provided seven dedicated strings connecting Asia and the Mediterranean. Today, that number has increased to nine," Drewry noted.

After having only recently upgraded its Black Sea service tonnage by replacing 6,500-TEU vessels with newbuildings of 9,300 TEU, CMA CGM has now slotted in three 10,600-TEUers.

The CKYHE alliance will also add 13-14 per cent to its overall capacity on the Asia-Mediterranean route.

Drewry found that at the start of the second quarter, the increase of supply on the headhaul leg stood at 13 per cent compared to 12 months before.

"Today, 27 services offer 475,000 TEU per month with ships averaging 9,800 TEU. Back in August last year, 24 loops existed providing a monthly supply of 433,000 TEU with vessel size at 9,600 TEU."

In the run-up to Chinese New Year, westbound spot rates rose to $2,800 per FEU, but by the start of March, ship utilisation levels had sunk to 80-85 per cent, causing rates to plummet $1,N400 by the end of the first quarter.

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