Grand Alliance Reduce Capacity on the Asia-Europe Trades

As a result of continuing weak market conditions in the Asia-Europe trades, the members of the Grand Alliance (the 'GA', comprising Hapag Lloyd, MISC, NYK, OOCL and P&O Nedlloyd) have decided to reduce further the capacity operated in the trade. Following Chinese New Year 2002, the GA will withdraw two out of eight ships presently deployed on each of Loops B and C on an ongoing basis; i.e. one sailing in every four on both loops will not be operated.

This structured capacity reduction will replace the previous programme of 'ad hoc' vessel withdrawals which has been in operation since early October 2001 and will continue until it is replaced by the new programme. In addition, the GA has taken the decision to postpone indefinitely its plans to introduce a seventh weekly loop on the Asia-Europe trades, which had been planned to commence in 2002.

Taken together, these changes mean that in the trades between Asia and both North Europe and the Mediterranean, the GA has cut back on the capacity that it intends to operate during 2002 by more than 15% compared with what had originally been planned. The GA lines have decided to formalise this capacity reduction in the light of the tail off in demand growth in the trade overall that has been a feature of 2001. Only modest increases in demand are expected for 2002.

By removing a substantial tranche of excess capacity in this way, the GA expect to match supply and demand more closely and reduce overall costs whilst still providing sufficient capacity to carry anticipated cargo requirements. A structured approach is favoured over the ad hoc vessel withdrawals in order that a more consistent service can be offered to customers. Vessels withdrawn as a result of this latest initiative will be laid up until demand increases to the point that they are needed again.