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Overcapacity Growth Is Not Offset by Growth in Trade

Published: 20 May 2015 01:05:40 PST
The Journal of Commerce’s recent cover story points to market uncertainty and a reversion back to difficult Great Recession business decisions when it comes to the future of capacity utilization.

Some conflicting points of view within the industry seem to center around the so-called overcapacity environment. Industry insiders like Sheila Hewitt, vice president, international of Transplace, a logistics provider and NVOCC, tell JOC writer Peter T. Leach they are just short of a crisis with the rolling and bumping of containers, especially in China, which would point to the exact opposite of an overcapacity environment.While it remains to be seen if this contradiction occurs more widely, the article alludes to predicted severe cut-backs on global capacity that are sending freight rates to new lows only seen in 2009 during the Recession. Industry executives interviewed for the article predicted many ships would be parked until demand picked up and they are forced to have difficult conversations with customers they didn’t expect to have since the economic recovery began. On the bright side, capacity reductions are “unavoidable” because of economics, said one insider, but not yet to the extent of 2009 reductions.

According to PIERS capacity utilization report, load factors have tumbled between 2010 and 2011. In the JOC article, Leach pointed to key findings showing that during the first two quarters of 2011, total U.S. inbound liner shipping volume shipped abroad pure container vessels increased 11% from the same period in 2010. But the growth capacity deployed rose 21%--depressing the average load factor by a full 7%.


“The imbalance between supply and demand in the second quarter of 2011 fell 4.3 percentage points below the Q4 moving average, which suggests further weakness moving forward,” the report stated. The article also went on to use PIERS comparative data to determine predictions for trans-Pacific load factors.

Curious to learn more about the numbers associated with these important industry forecasts? Download your complimentary copy of the PIERS Capacity Utilization Report  today for full details of capacity utilization.
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