By Paul Richardson, AJOT Market conditions on the Asia/North Europe and Asia/Mediterranean trades are rapidly deteriorating, according to most of the lines involved in the trade. Volumes are down on the westbound trade, and recently planned rate increases on the same leg are fading into oblivion with limited acceptance only by shippers. On the Asia/North Europe westbound trade, June 2012 saw volumes fall 6% compared with same month last year, but the biggest fall off in demand has shown up on the westbound Asia/Mediterranean trade, where volumes have fallen an alarming 11% comparing June 2012 with June 2011. So with market demand falling at alarming levels, shipping lines have little hope in achieving anywhere near full acceptance of the recently announced spate of GRI (General Rate Increases) for these trades. The two factors added together are already painting a very bleak picture for those lines with major commitment to the Asia/Europe trades, and their continued effort to show improved bottom line financials when the 2012 results are announced. The problem of rate increase acceptance has become particularly apparent since May, as planned increases in March and April, averaging out at around US$750/teu and US$400/teu respectively, experienced a retention level of over 85%, and according to most lines, this acceptance was going to plan. But in May, shipping line concerns started to stack up, with average the retention level on both the Asia/North Europe and Asia/Mediterranean trades coming out at around US$250/teu on average GRIs of around US$500/teu Late May, saw the problems really start as the dramatic fall in westbound Asia/Europe kicked in, and the achievement level in rate ended up some US$50/teu lower at the end of May, than at the beginning of the month. June saw the problems of rate acceptance dramatically increase, as lines regularly delayed announcing and implementing what should have been retrieved in the previous two months plus what should have come in June. Lines planned average rate increases of around US$400/teu for the westbound route, but regularly put back announcing these GRIs as the market continued to plummet, and the end product was simple – no increases were announced. In July, average rate increases were announced and implemented at around US$350/teu, but again the slump in the market meant that by the third week of the month, any increases were completely eroded with the bottom line being, another month of no increase. By August, there was an added problem, which is fair to say, should not ever be seen as a problem, but when lines are struggling to make a profit, who knows what financial equations come into play. The continuing fall in fuel prices meant that by August, the Bunker Adjustment Factor, normally known as a BAF, was some 20% lower than they were back in May. Thus, from the shipping line aspect, any planned increase in freight rates, which for August are around US$300/teu, have already disappeared from the bottom line financials, as they are mostly eroded by the fall in the chargeable BAF levels. The oil industry and the fluctuation in fuel prices have been well documented, but when fuel prices fall, it is a relatively easy product for a line to drop surcharge levels and for the customer to accept that decrease. It is not so easy in the opposite direction when the volatile oil price graph starts to increase again. Naturally, one of the major problems facing lines attempting to make the most of planned increased freight rates on any trade is market demand, but on the Asia/Europe routes, there is an added complication – overcapacity and the ongoing question of vessel layups. During Q4/2012, at least 16 vessels of over 10,000-teu capacity will be delivered, and all of them will head for the Asia/Europe trade unless the shipping lines delay delivery programs. Effectively, they will replace vessels in the 7,000/10,000 teu capacity league, but even as replacements, their deployment will push up average weekly capacity by