Sea-Intelligence recently cited the contrasting response of ocean liners to the collapse of capacity during the onset of the pandemic in 2020 and the recent decline in demand observed during the latter part of 2022.
"When the Covid-19 pandemic first hit at the start of 2020, the demand for container shipping collapsed, and carriers reacted swiftly, reducing liner capacity at a pace matching the drop in demand," analysts at Sea-Intelligence said in a February 15 report.
It added that this means that the carriers "clearly had both the ability and the willingness to adjust capacity on a tactical level in order to maintain vessel utilisation."
Sea-Intelligence noted, however, the difference and said that in September 2022, demand collapsed once again and kept dropping for the rest of 2022.
The Danish maritime data analysis company said the structural setup in the market at the end of 2022 was relatively unchanged compared to 2022.
"As such, the carriers must be assumed to still have the same ability at the end of 2022 as they did in 2022 to reduce capacity in line with the collapse in demand."
The report noted that the pattern is the same for Asia-Europe as it is for the Transpacific trade.
"Figure 1 shows a cross-plot between Transpacific capacity and demand year/year (Y/Y) contraction for individual months in either the initial pandemic crash in early 2020. For the current demand crash, the carriers seemingly chose not to use their ability to cut capacity in line with the drop in demand," Sea Intelligence said.
It added that there is "no clear link" between changes in demand and changes in capacity at the end of 2022, which is in stark contrast to the situation in 2020.
"Price war," said to be behind overcapacity
"During the early pandemic phase, the capacity was adjusted in a way that matches the demand decline quite well, whereas once we get to the end of 2022, the development in demand contraction diverges sharply from that of capacity contraction," said Alan Murphy, CEO, Sea-Intelligence.
"This can only be seen as a choice on the part of the carriers. A choice to allow overcapacity to persist is also a choice to allow for low utilisation and, thus, to allow for freight rates to continue to drop," he added.
"This is a behaviour we know by a different word: A price war," the Sea-Intellogence chief further said.
