Container lines boost blank voyages as Q1 downturn looms

The downturn in U.S.-China trade is forcing ocean carriers to cancel a growing number of weekly sailings in the trans-Pacific trade lane, according to a container shipping expert. The cancellations point to a longer recovery in trade between the world’s two largest economies and augurs a poor start for U.S. ocean freight demand in 2020.

At least 24 weekly sailings between Asia and the U.S. West Coast have been canceled in the first eight weeks of 2020, as reported by U.K.-based container research firm PR News Service.

Those sailings represent about 198,000 twenty-foot equivalent units (TEUs) in capacity out of commission for the period.

Also known as “void” or “blank” sailings, service cutbacks are a seasonal phenomenon due to China’s Lunar New Year, which starts Jan. 25 and ends Jan. 30. Nine of the canceled sailings are occurring during that week.

The start of the “Year of the Rat” represents “a complete shutdown of China’s manufacturing infrastructure, when virtually all businesses and factories in China close from one to four weeks,” according to Dachser USA Air & Sea Logistics.

During the 2019 Lunar New Year, monthly maritime import shipments from China fell from 609,000 at end of 2018 down to 345,000 by March (SONAR: MCSTM.CHNUSA). Monthly import shipments from China are already starting 2020 about 17% below what they were at the end of 2019.

Monthly U.S. maritime imports from China. Source: SONAR

But the number of reported canceled sailings in the first quarter “does seem to be a little more than in previous first quarters,” said Paul Richardson, editor-in-chief of PR News Service. Thirteen of the canceled sailings are slated for weeks 6 through 8, following the end of the Lunar New Year period.

THE Alliance — comprising Hapag-Lloyd, Ocean Network Express and Yang Ming — is expected to cancel at least 12 sailings over the period. Maersk and MSC’s 2M will cut five sailings. Ocean Alliance, which includes CMA CGM, COSCO Shipping, Orient Overseas Container Line and Evergreen, will cut seven weekly sailings.

Richardson adds that there could be even more canceled sailings that ocean carriers are looking to keep quiet, along with “ships continuing to sail but half-full.”

“Ever since I have been in this job, it doesn’t matter if it’s the afternoon before Christmas or 10 p.m. on New Year’s Eve, if there’s demand, the ships will be there,” Richardson said. “But the China-U.S. trade war is having an effect.”

The early read on West Coast port activity shows a slow start to 2020. Weekly maritime import shipments to Los Angeles are down 4% from the start of October. (SONAR: WCSTM.LAX). Oakland and Seattle imports are down 5% and 33%, respectively. (SONAR: WCSTM.SFO, SEA)

Weekly maritime shipment data for U.S. West Coast ports. Source: SONAR

The fourth quarter of 2019 was also a tough one for ocean freight as 32 sailings were canceled from Asia to all U.S. ports due to the combination of reduced demand and China’s National Holiday at the start of October.

The December “Phase One” deal struck between the U.S. and China was too late to halt an ongoing slide in Chinese imports. The trade deficit with China shrank to $25.6 billion in November, down from $27.8 billion in October, the Commerce Department said.

The downturn in U.S.-China trade continues to be felt most acutely at U.S. West Coast ports. The top four ports saw container import volumes fall 3.7% through the first 11 months of 2019.

East and Gulf Coast ports saw inbound cargo volumes rise 5.3% over the same time, thanks to their exposure to Southeast Asian and European imports. Still they are not being spared in the first-quarter downturn.

Eleven weekly sailings between weeks 4 and 7, with a total capacity of 108,500 TEUs, are being blanked during the time. 2M is expected to cancel five sailings, with Ocean Alliance and THE Alliance expected to account for an additional six. Three further sailings from the Mediterranean to the U.S. East Coast and one from Northwest Europe will be canceled.

Two sailings on the Asia-U.S. Gulf Coast route will also be cancelled during the first quarter, while another one sailing each from Northwest Europe and the Mediterranean to the U.S. Gulf will also be cancelled.