For container shipping routes from Asia to Europe and other places, this summer has been a slow paced season, and hopes that the retail industry would place orders for the year-end shopping season have also faded.

Retailers are still trying to digest various types of inventory, from clothing to electronic parts, resulting in low demand for container transportation, which means that some container ships must wait outside the port due to the cancellation of a certain part of their scheduled itinerary, which is known as' blank sailing '.

The liner giant Mediterranean Shipping Company (MSC) cancelled MSC Deila's voyage from Asia to Nordic Europe last week, citing "demand fatigue" on the route. The ship is 366 meters long and can carry 14200 TEUs. The previous week's schedule was also cancelled. At the end of July, MSC also cancelled the scheduled itinerary for MSC Topaz on the same route.

Sanne Manders, Chairman of Shipping and Air Transport at Flexport, a freight broker, said, "Carriers are currently engaged in... 'capacity management', which means putting vessels on hold. If we fly to Singapore, we can see that these vessels are all moored outside the port... many vessels are there, waiting for better benefits to emerge

The flight schedule is blank, echoing the poor financial reports of large airlines. Last month, CMA CGM announced a 73% annual decrease in EBITDA for the second quarter to $2.6 billion, while Hapag Lloyd's EBITDA for the first half of the year decreased by 65% to $3.8 billion.

Maersk also announced that its second quarter EBITDA was only $2.91 billion, far from the groundbreaking profit of $10.3 billion in the same period in 2022.

Freight rates are prone to decline but difficult to rise

Flexport's Manders said that looking forward to the next few months, there is still a lot of production capacity to be added, especially for sea freight, which means that rates will be severely lowered.

Bertein also stated that shipping companies have relied on the large amount of money they earned during the pandemic to order record breaking ships, which means thousands of TEUs of additional capacity will flood in, making it difficult for shipping rates to continue to rise in the short to medium term.

Niels Rasmussen, Chief Shipping Analyst at the Baltic International Chamber of Shipping (BIMCO), said that shipping rates from the Far East to Nordic Europe have been under significant pressure for over a year. For example, during the three month period from March to May, the spot rate of container ships on the Shanghai Shipping Exchange (SSE) decreased by nearly 90% annually.

Excessive inventory at the retail end

Flexport regularly surveys customer inventory. According to the March survey, 62% of customers reported excessive inventory, which dropped to slightly over 40% in May, but remained at a level of over 40% by July. This indicates that inventory levels are still high, making imports relatively constrained.

He added that inventory in the electronics, high-tech, and clothing industries is "far excess," while the furniture industry is one of the few industries with moderate inventory. "We may need to help clear our inventory during the year-end shopping season

Simon Heaney, senior manager of container ship research at Deloitte, a maritime consulting firm, said that 'empty ship sailing' has been in operation for several years, indicating that the container shipping market is in a period of heavy demand decline, thus attempting to maintain market balance. The underlying reasons behind this are weak retail sales and excess inventory.

According to De Lurie's statistics, there were 13 records of "empty ship voyages" from Asia to Europe in July, with estimates for August and September being similar.

Bernstein estimates that the total inventory held by US retailers in May was $778 billion, a new high since 2019.