Shipping
SEA-INTEL: UTILISATION DRIVES RATES DOWN – EXCEPT ATLANTIC
February 24, 2023

Sea-Intelligence alleged that "some other mechanism" must be at play in the Transatlantic shipping route aside from utilisation levels as the lull in demand have so far "failed" to impact rates in the trade.

 

In a statement, the Danish maritime data analysis company said during the pandemic period, a combination of high demand coupled with an unprecedented loss of capacity from vessel congestion led to vessel utilisation rates spiking to record levels, which in turn led to spike in spot rates, with both reaching a peak in February 2022.

 

Since then, however, it noted that vessel utilisation had dropped sharply; in the case of Transpacific, it is now back to the pre-pandemic levels, whereas in the case of Asia-Europe, it dropped below the pre-pandemic levels at first but is now back to pre-pandemic levels.

 

"Interestingly, the dynamic between utilisation and spot rates varies depending on whether utilisation is increasing or decreasing," the analysis said, explaining that when utilisation was increasing on the Transpacific, spot rates remained relatively unchanged at a low level until a trigger point of around 90% nominal vessel utilisation triggered a sharp increase in spot rates.

 

It added that when utilisation levels started to decrease since the peak in February 2022, we saw a much more linear relationship between utilisation and spot rates (as illustrated in Figure 1 for the Transpacific trade).

 Self Photos / Files - 750d3c07d3304f4a8c465cdc8c00d2fa.png

 Source: Sea-Intelligence

"We see the same general pattern for Asia-Europe, although with a bit more noise," it added.

 

Sea-Intelligence further said that overall, the rate developments in the Transpacific and Asia-Europe trades "match expectations very well" if the assumption is a market operating with a close link between supply, demand, and pricing.

 

"However, in the Transatlantic trade, there is seemingly no clear correlation between utilisation and spot rate levels," commented Alan Murphy, CEO, Sea-Intelligence.
 
"Unlike the Transpacific and Asia-Europe trades, declining utilisation levels have thus far failed to have an impact on pricing in the trade, indicating that some other mechanism must also be at play in determining rate levels on this specific trade," Murphy added.