Market Situation – Container flows - October/November

Asia

Rates on all trades out of China have dropped dramatically. Nearing the end of the calendar year, this trend seems to be slowing somewhat. The current spot rates are still high compared to before the pandemic, but they are coming very close to levels that we never expected to return in shipping.

The steep decrease in rate levels is causing carriers to announce capacity reduction plans on the major trades. This will give some of the shipping lines the opportunity to put vessels into the repair dock for maintenance or for a much-needed retrofitting with a scrubber.

The zero-Covid policy in China is affecting trucking activities, as strict quarantine measures put stress on the availability of drivers. Although no reports are showing a delay in quayside operations, the berth congestion has increased from between 1.5 and 2 days up to 3 days, according to track and trace data from the shipping lines. This is also due to a shortage of labor.

In Busan, South Korea, a serious straddle carrier accident happened on Oct 23, and all straddle carriers are now required to run at “safety speed” as a precautionary measure. This has resulted in increased berth congestion with a waiting time of 3+ days.

Also in South Korea, truck drivers have gone on strike. They want the government to step in and agree on a freight rate system that guarantees minimum cargo rates for truck drivers to prevent dangerous driving and overwork.

The nationwide strike has led nearly 100 gas stations across the country to run dry. The strike is also greatly affecting the cargo throughput of the container ports.

Europe

The EU wants to impose the Emission Trading Scheme (ETS) on shipping by January 2023. ‘Polluters’ (= all vessels with a capacity of 5000 tons) sailing within the EU will have to pay for all greenhouse gases (GHG) they emit. The vessels which are sailing between EU and non-EU ports will pay for 50 percent of emissions until 2026. After 2026, the scope of the carbon market will be automatically extended to 100 percent of the emissions of ships entering and leaving European ports.

For the long-term agreements, many of which are currently being negotiated, this comes at a very inconvenient time, as the means to calculate this are very uncertain. Several European shipping lines have already protested against the model proposed by the EU. It remains unclear when and how the ETS will be implemented.

North America

The U.S. East Coast port of Savannah recorded its second busiest month on record in October. This shows a contrast with the most recent developments in the West Coast ports. Whereas Savannah reported a 9.6% increase year-on-year, Long Beach reported a 23.7% drop in handled volumes. For Long Beach this meant the lowest throughput of containers in 2.5 years.

In the past months we have reported several times about a potential railroad strike in the U.S. We have now been informed that such a strike will begin around December 9th. This will cripple the already disrupted supply chains in the U.S. and cost an estimated $2 billion per day according to the local authorities. Most of the sources are still hopeful that the President and Congress will step in to avert the strike, or even halt the strike if it has already started, but this is not a certainty. If a strike does occur, even for one day, it will cause many delays that may take weeks to work through.

The Ports of Los Angeles and Long Beach have again postponed the introduction of a container dwell fee. It will now be brought in on Dec. 16. The fee entails charging ocean carriers $100 for each import container dwelling nine days or more at the terminal. Charges will increase in $100 increments per container, per day, until the container leaves the terminal. The dwell fee was first announced in October 2021 in an attempt to lower container dwell times on the docks and increase the flow of goods. However, the fee has never been implemented. Since last year, the two ports have seen a combined decline of 87% in dwell times, according to port officials.

General

• Inactive fleet up to 5% of global container ship capacity

The percentage of the total global container fleet that is idle rose to 4.6% by the end of October, and further to 5.3% by the end of November. This is still a low proportion, although it is the highest since January 2021. The current trend does not seem to be slowing down, indicating that more vessels are being made idle in an attempt to reduce the overcapacity which is creeping in in several trades. For the moment, the majority going idle are smaller vessels utilized on niche trades. With the steep decline of rates on multiple trades, it is expected that bigger vessels will follow shortly to stop a free fall of rates.

For additional questions or remarks, you can always reach out to your usual MPL-contact.