Market Situation - Container flows - update XII

Asia

The power crisis in China might ease some pressure on incoming and outgoing flows. Due to the government-imposed energy output caps, some major manufacturing regions had to reduce their production. There are several reasons behind the restrictions which are imposed. First, coal and gas account for 75% of the country’s energy usage and for this China also relies on imports from countries like Russia. The prices however have surged in recent weeks. This has caused energy firms (often government-owned) to lose huge amounts of money every day. Another reason for the energy shortage is China’s emission targets. Since the country had used most of the quota set by the government in the first nine months of the year, there was the need to slow down as the winter months are ahead and energy consumption will only rise. Thirdly, with the covid outbreaks in Southeast Asia (Vietnam,…) much labor-intensive manufacturing has moved back to China. This is something which the Chinese government does not want so they try to slow this effect by implementing these energy caps. This effect, in combination with the Golden Week in China, might give a serious downfall both on the output of volumes as on incoming volumes for raw materials and semi-finished products. For countries in Southeast Asia such as Thailand, the Philippines, Malaysia, and Vietnam, COVID remains to disrupt normal life as every day many new cases are added to the total. With Malaysia being the exception, the other countries have a vaccination grade of 35% or less making it very difficult to get the figures under control. As long as the cases per 24h are not drastically reduced the restrictions with regards to social distancing will remain with the typical delays in the ports, depots, factories, and other cargo handling sites.

Europe

Because of the corona pandemic and the Brexit, the UK is faced with a shortage of an estimated 100.000 truck drivers. The shortage is causing serious issues to deliver and pick up cargo from and to the seaports. It has come to a point that supermarkets and gas stations cannot service their customers anymore as they have no product to sell. As a temporary action, the British government has decided to allow cabotage. This new decision has provoked a lot of protest from the federation of British road haulers (RHA) and they do not exclude actions from their side. Apart from the issue on landside, the cargo in the UK ports is stacking up and it doesn’t end there. Hub ports like Rotterdam, Zeebrugge, and Antwerp have blocked UK imports on their already congested terminals awaiting delivery. The cargo stuck in the UK ports is because many shipping lines are simply skipping UK port calls due to berthing delays on their behalf caused by the bottlenecks on the haulers’ side. The UK cargo stuck in the hubs however is because the feeder operators, who are connecting the European mainland with the UK, are constantly in need to reshuffle their berthing windows in the EU ports as ocean vessels get priority. The ocean vessels however are still sailing ‘off-schedule' making it close to impossible for the feeder operators to have some kind of predictability and reliability in their own services. This situation is actually a paradox if you know that the shipping lines are demanding the port for a berth window and insist that other (smaller) vessels are being held off to accommodate their own vessel. On the other hand, it is that same shipping line that fixed the feeder movement with the operator and refuses to pay demurrage.

North America

The port of Savannah is struggling with congestion as 30 vessels are awaiting a berthing window. The average waiting time is around 9 days. Because of this delay, the Ocean Alliance and THE alliance (*) have decided to skip the port entirely. MSC, who will keep on calling Savannah, has for that same reason increased their PSS with $1000 / container! The services of THE Alliance and Ocean Alliance will not return to Savannah before the end of November. Although the services remain to exist, they will be diverted to Charleston.

(* THE Alliance = HLL, YM, ONE and HMM // Ocean Alliance = CMA, COSCO, OOCL, and EMC)

In an attempt to reduce the congestion on the West coast it was decided to open the container terminals 24/7 of Los Angeles and Long Beach. With working on the weekend and during the night the local port authorities hope to relieve some stress on the terminals. Local corporations are therefore requested to organize their logistics during the nighttime. (40% of US Inbound containers move through LA and LB) Israelian shipping line ZIM has returned to the Trans-Atlantic service after an absence of more than 5 years. They will launch a monthly service from Antwerp, Rotterdam, and Bremerhaven to call New York, Norfolk, and Charleston. ZIM is attracted to return by the lack of capacity on this trade linked to the strong demand and spiked freight rates. Freight rates from Europe to the USA have leaped by 225% since March 2021.

Latin America

While most of the equipment is moving between Asia - North America and Asia - Europe, South America remain to struggle with equipment availability both on the east and west coasts. Especially rates on the Northbound (from Latin America to North America and Europe) are on a steep increase. The limited equipment which is available is being sold at high premium rates. On top, due to the reduced equipment flows, the overall market capacity on these trades has been reduced by taking out services and in combination with the delays in place due to congestion, the market is very ‘tight’. Several shipping lines have simply declared a booking stop up to the end of December.

General

Chinese rate index back on record levels

Beginning of October, the Shanghai Containerized Freight Index (SCFI) had a small dip for the first time in twenty consecutive weeks of increases. In the second week of October, when all thought the tip of the peak was reached, a new record was set at 15.425 $ / 40’ between Shanghai and the Northern-European ports. Also, in the Mediterranean region, a new record was set. Keep in mind that the levels which are reported in these indexes give the tendencies however in reality shippers are still paying high premiums for guaranteed space ànd equipment.

Global Port Congestion remains the main driver for high rates

Between the Far East and Europe, the average delay remains 18 days for a full roundtrip according to the database of Alphaliner. The Ocean Alliance can show the best scorecard as they had the slightest delay on their roundtrip. They lost on average 7 days. Sounds nice until you consider that these delays were kept to a minimum by simply skipping some port calls in the UK and in the Netherlands. THE Alliance has the highest delays with an average of 35 days. They face the most delays in Rotterdam, Hamburg, and Antwerp however they choose to maintain calling these ports. (FYI, their last vessel on the FE4-service took 138 days to complete its roundtrip compared to a normal 84 days) 2M as the third alliance has an average of 19 days delay. To compensate for the delays, only on the connection between the Far East and Europe, Alphaliner has calculated that at least 44 extra ships of 14.000 to 24.000 TEU will be needed to guarantee a weekly sailing. On the transpacific (mainly on the USA-side) the delays are very visible on the vessel trackers online whereas in California sixty vessels have waited for 10 days or more to berth. The average transit time from major Chinese ports to the US West Coast has increased from +/- 16 days to 36 days.

Container shipping return to normality not till end of 2022

Sea-Intelligence said that in August this year 3.1m TEU, or 12.5% of shipping capacity was out of service due to delays. This compares to a previous high of 11.3% in February, which dropped to 8.8% in April. Looking ahead the current surge in new building orders will make little difference for two to three years until deliveries start to filter into the fleet on a large scale. Based on congestion, which has become a global issue, Sea-Intelligence estimated it could take up to the full stretch of 2022 to resume normal operations. For additional questions or remarks, you can always reach out to your normal MPL-contact.