Market situation – Container flows – Update III

Asia

The rates on the spot market for container transport between China and Europe keep on increasing. Week after week, record highs are being reached on the Shanghai Containerized Freight Index (SCFI*).The ocean freight ex China to Europe has increased by approx. 45% in two weeks. Just one week after this mega increase, an additional 24% was recorded, setting an all-time record reported by the SCFI. The current average spot rate is around USD 6000 / 40’. (In May the average rate reported on this index was USD 1500 / 40’). In practice, even higher rates than those reported are being paid by shippers/receivers to get priority on the vessels.

The increased rate levels are not only limited to the trade route to Europe. In China, there is currently a shortage of between 8,000 and 10,000 40’ containers every week for placed bookings. As a result, all rates ex Asia are increasing tremendously. On the connection from Asia to South America, the rate between Shanghai and Santos is around USD 12,000 per 40’ container. From Shanghai to Lagos, current average rates are at approx. USD 10,000 / 40’ on the spot market. The Transpacific trade, which is going very strongly, as discussed in earlier customer updates, remains at a stable level. This traditionally very volatile trade is remaining at a steady level where normally rates swing up and down. It seems however that this market is getting saturated, hence the steep increases have flattened out. With the start of the Chinese New Year on February 12, it is expected that the overall rate levels will only keep on rising further. Usually, in the weeks following Chinese New Year, business normalizes, and rate levels go down due to the decreased supply of cargo. However, with the current high rates, several shippers, at least the ones who have the luxury of decent stock levels, are simply holding bookings until after Chinese New Year in the hope they will not have to ship at the current rates. This means a lot of cargo is being blocked, to ship after Chinese New Year, possibly causing the high levels to remain in place longer than normal.

Suspension of feeder operations in South China

Feeder operators in South China announced a full-service suspension from weeks 3 through 7 (Jan 17–Feb 21). This is due to COVID-19 quarantine requirements for ship crews moving between South China and Hong Kong upon their return from the Chinese New Year 2021 holidays. Considering this situation, shipping lines will temporarily suspend cargo acceptance with the final destination of the Pearl River Delta Area and Fuzhou until further notice. Cargo to the main ports (i.e., Hong Kong, Yantian, Shekou) will be accepted. Please note that the suspension period for booking acceptance to South China is based on ETA at the main ports. (i.e., Hong Kong, Yantian, Shekou) will be accepted. Given the current environment, shipping lines will be very unlikely to bear any additional costs and liabilities related to detention charges, terminal storage, or terminal charges incurred at transhipment ports (Hong Kong, Shekou, Yantian) after containers have been discharged. All costs during the feeder operator suspension period will be invoiced to the cargo owners. Shipping lines can also invoke the Bill of Lading clause to declare ‘end of voyage’, meaning the shipment will be considered as completed at the main port, and the feeder service will not be executed on behalf of the shipping lines.

United States

The U.S. agricultural sector was able to mobilize the Federal Maritime Commission (FMC) to write to the World Shipping Council to express its concern about reports that ocean carriers are refusing to carry U.S. exports. “We want to stress the point that, in responding to import cargo challenges, ocean carriers should not lose sight of their common carriage obligations to provide service to U.S. exporters,” said the letter from commissioners Carl Bentzel and Daniel Maffei. U.S. exporters have already welcomed an FMC investigation into “potentially unreasonable” policies and practices relating to detention and demurrage, export container return, and availability. Peter Freidman, executive director of the Agricultural Transportation Coalition, suggested that more uniformity in the relationship between carriers and U.S. importers could put more empty equipment back into the supply chain. He claims that shippers with limited free time have more incentive to expedite unloading and returning containers. Meanwhile, some of the largest-volume importers, which enjoy far more generous free time allowances, are able to use the containers for storage, without penalty.

Europe

With the majority of the containers going back and forth on the Transpacific trade, Europe is not getting sufficient containers on the import side to re-use for exports. This is putting even more pressure on the overall equipment availability, particularly special equipment such as reefers. In many cases, the equipment that is available in Europe is simply being repositioned empty back to Asia. Pressured by the enormous export volumes out of China, the Chinese carrier COSCO decided not to call at North Europe as had been scheduled with the CSCL Jupiter. COSCO decided to drop the cargo destined for North Europe in Piraeus, Greece. The vessel turned around, to call at the Port of Xiamen only 3 days later than sister vessel CSCL Mercury. The cargo destined for North Europe will be loaded on a connecting vessel.

Zooming in on the U.K., the situation is even worse. The current market, with booming e-commerce volumes and seasonal end-of-year products that were shipped in the past weeks, mainly ex Asia, are flooding the seaports in the U.K. This, combined with a rush in volumes to move prior to the pending Brexit, is creating massive congestion in the U.K. ports. Shipping lines are omitting U.K. ports or are only partly loading/unloading because the operation on the quays is so heavily delayed.

Apart from affecting container transports from and to the U.K., FTL and LTL are being included in the misery with very long wait times to get in or out of the country. More and more reports are being published that some products will become scarce on the U.K. markets, considering that import flows cannot be guaranteed. As an alternative, the shipping lines are dropping U.K. cargo in Zeebrugge for delivery on later, or smaller, vessels. The Port of Zeebrugge is rapidly expanding the available space with an additional 20,000m², as the foreseen space was already at maximum capacity.

The delays generated in the U.K. ports have a snowball effect on other European ports. Vessels cannot reach appointed berthing windows, causing them to wait until another berthing spot is opened. For exports, this is causing massive delays, putting pressure on the actual space on the quays. This jeopardizes normal operational activities, in turn causing even more delays. Today, export loads are waiting several weeks on quay, ready to be shipped. Hapag-Lloyd has already informed its customers that export cargo for the Port of Hamburg can only be delivered 48 hours prior to the arrival of the booked vessel in the port.

An obvious solution to get the cargo moving away from congested quays would seem to be to simply increase the capacity by chartering additional space. Unfortunately, the charter market is almost saturated. Currently, idle ships account for just 1.2% of the cellular fleet. It is difficult to predict when the market will come back to acceptable levels. We will keep a close eye on future developments. Your designated contact with Manuport will be able to guide you to minimize any possible impact on your logistic processes.