What are the driving factors for price wars?
Changes in vessel usage are the main determinant of freight rates, which means that when shipping lines deploy “too much” capacity, they effectively contribute to falling rates, and in times of endemic oversupply, such as those we are currently experiencing, over-capacity becomes “fuel” for a price war. While there is no objective measure for “too much” capacity, comparing capacity growth to demand growth is a good place to start.
When the difference in percentage points between demand growth and capacity growth for the three carrier alliances (including alliance carriers’ standalone services) and non-alliance carriers was calculated. A positive number indicates that a carrier alliance’s capacity has grown more (or contracted less) than market demand, and thus how much they have “contributed” to the market’s structural overcapacity.
The 2M alliance has contributed slightly to overcapacity at times, while other times it has either not contributed at all or has reduced capacity more than the market demand decline. Furthermore, MSC appears to contribute more to capacity reductions than Maersk. In contrast, we see that THE Alliance carriers, as well as non-alliance carriers, have contributed the most to the Transpacific market’s structural overcapacity although this does not necessarily mean they are directly driving rates down.
Source of information – Sea Intelligence
