Due to the crashing of freight rates, it is no longer profitable for shipping lines to operate along the Asia-West Africa routes.
As a result of the unprofitability of the route which includes Nigeria as its major destination, no fewer than three major shipping lines have withdrawn their vessels and diverted same to other routes in the last four months.
The crashing freight rates had forced a major shipping line, Nippon Yusen Kaisha popularly known as NYK Lines to withdraw from the West African route due to growing losses as a result of the twin jeopardy of low freight rates and declining volumes.
The top Japanese shipping line had operated the Asia-West Africa Service which it dubbed WAX, together with Hapag-Lloyd and Gold Star Line, GSL. The service featured two calls in Nigeria, Lagos-Apapa and Lagos-Tincan.
Another major shipping line, Taiwan’s Evergreen Line has also announced the withdrawal of its vessels from the Asia-West Africa route which had regular calls at the Lagos Port Complex, Apapa.
Hull Blyth Nigeria Limited, which acts as shipping agent to Evergreen Line confirmed the withdrawal of the service.
“After three years of serving the market, Evergreen decided to discontinue their service due to losses sustained from widening disparity between rate levels and costs. Rate levels especially from Asia have fallen over 50 percent in the period with the cost levels remaining disproportionate,” Managing Director of Hull Blyth, Christian Holm, said
Messina Line has withdrawn from the Nigeria route for the same reasons of widening operating losses.
UK-based Independent maritime analyst, Drewry Shipping Consultants Limited, believes that more lines will quit the Asia-West Africa route as container volumes continue to fall, resulting in reduced vessel load factors and declining freight rates.
Data from Container Trades Statistics showed that south bound volumes from Asia to West Africa decreased in nine of the first ten months of 2015 compared with the previous year, with the most recent year-on-year declines reaching 10 percent.
“The lacklustre demand in the trade has forced carriers to curb any growth to capacity with the monthly count of available southbound slots generally static in the last few months,” Drewry said.
It noted that southbound utilisation levels on vessels fell to 64 percent in October, versus the low-70 percent range of a year ago.
Spot freight rates have subsequently plunged to around half of their average value of last year and stood at around $1,800 per 40ft towards the end of 2015.
Drewry said the situation on the trade had gone from ‘bad to worse’, ‘showing no signs of recovery’.
Cargo volumes, which have dropped by more than 30 percent in a year and together with the fast-depreciating naira, which has lost more than 100 percent of its value in less than two years, has exacerbated pressures on shipping lines and terminal operators some of whom were forced to cut their workforce in 2015.
“The West Africa route is no longer profitable for any line today because of the poor condition of trade. It has been so for more than two years. Only the big lines are able to absorb the losses for now but I really don’t know for how long they will be able to do so,” Mike Stevens, a shipping analyst, said.