CHINESE shipping giant Cosco Container Lines (COSCON) has cut its capacity on Asia-US trade sharply because of a fall in consumer demand caused by the American subprime mortgage crisis and high fuel costs, Logistics Week reported.

Cosco has suspended its CLX service from Shanghai to Long Beach using four 2,750-TEU ships but will add Shanghai as a port of call to another of its two Far East-US routes.

The four ships on CLX will be redeployed on the AWE2 service from the Far East to US east coast operating with the CKYH Alliance, formed by Cosco, "K" Line, Yang Ming and Hanjin, to replace the existing four 4,000-TEU ships.

The New World Alliance, formed by APL, Hyundai Merchant Marine and MOL, earlier announced progressive reductions of capacity on an Asia-US east line from mid-December last year to March. MOL estimated that the reduction will represent 13 per cent of the total capacity on lines to US east coast.

Before the reduction, the New World Alliance had decided to cut 15 per cent capacity on the lines to US west coast due to high operating costs caused by fuel price increases.

Separately, OOCL, Evergreen, ZIM, Emirates Shipping and Shipping Corporation of India, have announced a January suspension of their joint service from India to the US west coast.

That loop was initiated in 2005 and deployed eight ships. Its rate has fallen to US$1,100 per TEU from the high of $2,600 during peak season.

According to the latest figures from the Shanghai Shipping Exchange, the average utilisation of lines to US west coast has been 70 to 80 per cent while utilisation of lines to US east coast is lower.

Market reports suggest carriers have withdrawn 20 per cent of the capacity deployed on the US routes to keep supply and demand in balance.

Analysts expect a further capacity reduction in 2008 if the subprime mortgage financial crisis continues to cast a shadow on consumer demand.