With the outlook for the Europe/Asia trade starting to look grim in the face of the downturn in the global economy, member lines of the Far Eastern Freight Conference have agreed to rationalize capacity that could result in laying up of vessels now deployed in the trade or delay in the injection of new vessels.
 

Up to about 20 per cent of the capacity now deployed in the trade has been estimated as surplus to the prevailing requirement and shipping lines, which are already hit by declining freight rates in the sector, may have to take off some of the capacity in the trade.
 
The move by the world’s largest shipping conference comes close on heels of a report by Drewry Shipping Consultants which revises downward its earlier forecast on the performance of the Asia/Europe trade.
 

According to Drewry, the speed with which the downturn has taken place which is particularly worrying carriers in the trades and the “considerable” amount of post-panamax tonnage due to be deployed before the end of the year.
 
Slot utilisation on the trades has been estimated to fall to 75. 8 per cent in the first half of this year from 80.6 per cent in the first half of last year on the westbound trades and 78.3 per cent in the second half of the year compared with 82.1 per cent in the last six months of 2000.
 
As with trade to Europe, falls in slot utilisation are expected on the eastbound leg of the trades.
 
The supply of slots is expected to be made worse as a number of lines are awaiting delivery of vessels, including super post-panamaxes throughout the rest of this year and next year.
 
The utilization of the slots in the second half is expected to worsen to about 60 per cent eastbound and 70 per cent westbound.
 
The FEFC, in a meeting two weeks ago agreed to meet again and further discuss the details of the proposed capacity rationalization agreement that will see a significant number of vessels laid-up.
 
Members of the FEFC, including Malaysia’s flag carrier, Malaysia International Shipping Corporation Bhd, control about 70 per cent of the tonnage on the Asia-Europe trades.
 
Major independents in the trade include the United Alliance, Hanjin, Senator and UASC, MSC and Evergreen the main non-conference lines.