Gap grows between Asian head-haul and back haul

Head-haul vs Back-haul – Selected Trades from Asia

For all container trade lanes, the head- haul route remains the dominant leg and this is the part of the rotation that the shipping line will plan both ship size and TEU capacity required – at least as best as it is possible to do.

This is because the head-haul is the fee-paying component of the activity and this is where the shipping line will be seeing high utilisation (often as high as 95%, where demand is sufficient).

This is a difficult balancing process for shipping lines who have to keep vessel utilisation high by having to deploy the appropriate size of ship to meet projected demand, but while ensuring that there is future TEU capacity available to meet shipper and BCO. After all, lower utilisation simply means a lack of TEU slots filled and empty TEU space is not earning revenues.

Back-haul cargo is always wanted and always marketed for but is not always attracted or available. Depending on the trade lane, if there is insufficient back-haul loaded containers, then the vessel space is often filled with empty units (especially back to Asia where export demand from China, for example, is dominant). Los Angeles and Long Beach, for example, load a high proportion of empties for westbound transpacific trades, whereas Vancouver (BC) handles more loaded export traffic and fewer empty units.

We consider the head-haul and back-haul trends for several major container trade routes involving Asia, considering the common theme of the Chinese New Year/factory shut-down that impacts trade demand in Q1 of each year.

Asia-North Europe

On this major trade route, the gap between head-haul and back-haul demand is largely constant over time, with the usual (seasonal) lower values seen in February each year. With an average decrease of 54% to mark the Chinese New Year, this trade lane appears to be the most sensitive to this event, which is to be expected taking into account its major dependence on share of demand from Asia. The graph below uses monthly data points between 2013 and present to demonstrate these seasonal shifts.

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Using the same dataset, we build a more comprehensive assessment. The scatter plot again shows monthly variance with a linear trend line added, and red marks to denote Chinese New Year periods. Over time a slight downward trend in variance is seen, although there is no major change overall.

Asia-USEC

For trade moving from Asia to the USEC, the head-haul – backhaul gap is steadily increasing over time, as more clearly seen in the scatter chart. The usual (seasonal) lows during February remain (a 53% decrease on average), with very similar seasonal trends observed like in the Asia – North Europe trade, with the average variance down 53% compared with other times of year.

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Asia-USWC

We notice a similar behavior in the Asia to USWC routing as also highlighted for the other major routes included in this analysis. To the USWC there is an increased variance of 3,267 units each month, on average, for the past 5 years. The Chinese New Year is marked by an average 47% decrease in the gap due to large decrease in head-hauls compared to variation in back-haul demand gained.

Overall, the general trend for major trade lanes involving Asia is of an increasing gap between loaded head-hauls and back-haul container volumes.

This is not surprising because of continued growing demand for Asian goods in key economies throughout North Europe, Mediterranean and North America, with a more limited set of containerised goods returning to Asia, mainly comprising a high proportion of commodities shipped to Asia in basic raw material form that is moving as bulk commodities.

These same trends look set to continue for the short-term, at least, as long as demand from Asia remains a large component of demand on major container shipping routes.