A global economic slowdown, trade wars and Brexit uncertainty are slowing demand and increasing the surplus capacity on the Asia-Europe trade, leading some shipping lines to make deep capacity cuts ahead of the peak season.

THE Alliance of Hapag-Lloyd, Ocean Network Express (ONE), and Yang Ming alone are expected to impose blanked sailings on their FE2 and FE5 sailings, that will remove 67,700 TEU from service during July, just ahead of the peak season. Proof, if it were needed, that carriers are not confident demand will be able to overcome surplus capacity from Asia.

The 2M alliance has not announced any void sailings and may look to gain some market share at the expense of their rivals.

In a similar development, Maersk and MSC withdrew their AE2/Swan loop between September and December last year, only to see the Ocean and THE alliances benefit from the temporary cancellation.

Volume data on Asia-Europe is not yet available for May, but the economic signs coming out of Europe are not encouraging for a container shipping industry wanting to balance capacity with demand.

Economists are forecasting weak demand growth for the next few quarters and expect the container shipping industry to return to negative margins this year, largely as a result of the excess capacity on the Asia-Europe trade, which reached 1.03 million TEU in the first quarter, despite solid year-on-year demand growth of 6%.

The rest of the year remains uncertain, but given that fuel prices are rising, the shipping lines will attempt increases in freight rates to compensate for these rising expenses.