Sea-Intelligence: Capacity Volatility from Asia to North American West Coast

Sea-Intelligence analyses volatility in the capacity offered in the Asia to the North American West Coast (NAWC) trade. This volatility is caused by blank sailings, vessels sailing off-schedule, and vessels of varying size on the same service.

To get a better understanding of the severity, takes an absolute value of the week-on-week change, so that any change is recorded as a positive value, irrespective of whether the change is positive or negative. Furthermore, to look deeper into whether there is any systemic change, Sea-Intelligence calculates capacity volatility as a 52-week moving average.

Figure 1 shows the capacity volatility for Asia-NAWC when compared to 2012. For the past 3 years, capacity volatility has been ranging around 250% higher than in 2012 with variability often reaching up to 300% higher. Compared to 2012, capacity volatility on Asia-NAWC has almost quadrupled. Even when Sea-Intelligence adjusts the data to show capacity volatility as a percentage of overall capacity, the pattern remains quite similar.

Source: Sea-Intelligence.com, Sunday Spotlight, issue 721

Another element to consider is whether this increase is driven by a few but extreme events. However, looking at the 25% and 75% quartiles, the former shows the change across 25% of the weeks with the least volatility, and the latter shows the change for 25% of the weeks with the highest volatility, the trend is increasing for both. It means that volatility is increasing not only in the weeks with high changes, but also in the more stable and “calm” weeks.

This shows an increased volatility in the overall supply/demand balance on Asia-NAWC. To the degree that spot rates are driven by the actual weekly supply/demand balance, this capacity volatility means that the underlying driver for spot rate formation on Asia-NAWC has become progressively more unstable over the past 13 years, creating a much more volatile and unpredictable spot rate in itself.