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Market Situation - Container flows - update III

Dec 2020
7 minutes
Update 3 – following earlier blog posts on September 22nd and from November 12th. In order to keep some overview, we tried to break it down into several segments covering areas worldwide. Although not all trades are in the report, similar tendencies apply. Asia The rates on the spot market for container transportation between China and Europe keep on increasing. A week after week record-highs is being reached on the Shanghai Containerized Freight Index (SCFI*).

 

Asia

The rates on the spot market for container transportation between China and Europe keep on increasing. A 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 +/-45% in two weeks’ time. Only one week next to 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 what is 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 – 10.000 x 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 / 40’ container. From Shanghai to Lagos current average rates are at +/- USD 10.000 / 40’ on the spot market.

The transpacific trade, which is going very strong, as informed in the earlier customer letters, keeps on 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 12th, it is expected that the overall rate levels will only keep on rising further. In the next weeks after Chinese New Year normally the business normalizes, and rate levels go down due to the decreased supply of cargo. With the current high rates however 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. Meaning 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 feeder operations South China

Feeder operators in South China announced a full-service suspension from Week 3 to Week 7 (17/01 – 21/02). This due to COVID-19 quarantine requirements for ship crews plying between South China and Hong Kong upon their return from the Chinese New Year 2021 holidays. Taking into consideration of this situation, the shipping lines will temporarily suspend cargo acceptance with final destination to the Pearl River Delta Area and Fuzhou until further notice. Cargo to the main ports will be accepted. (ie, Hong Kong, Yantian, Shekou). Kindly take note that the suspension period for booking acceptance to South China is based on ETA at main ports. (ie, Hong Kong, Yantian, Shekou). Given the current environment, the shipping lines will not be very likely to bear any additional costs and liabilities related to Detention charges, Terminal storage or Terminal charge incurred at transhipment ports (Hong Kong, Shekou, Yantian) after containers have been discharged. All costs during the feeder operator suspension time will be for the account of the cargo owner. The 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 line.

USA

The agricultural sector in the USA 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 US 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 US exporters,” said the letter from commissioners Carl Bentzel and Daniel Maffei.

The agricultural sector in the USA 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 US 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 US exporters,” said the letter from commissioners Carl Bentzel and Daniel Maffei.

US 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 US 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 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 will put even more pressure on the overall equipment availability and even more on special equipment such as reefers.

The equipment that is available in Europe is in many cases simply being repositioned empty back to Asia. Pressured by the enormous export volumes out of China, the Chinese Carrier, Cosco, decided not call North-Europe as scheduled with the CSCL Jupiter. Cosco decided to drop the cargo destined for North Europe in Piraeus, Greece. The vessel has turned around to call 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 UK, the situation is even worse. The current market with booming e-commerce volumes and seasonal end-year-products that were shipped in the past weeks ex Asia mainly are flooding the seaports in the UK. This in combination with a rush in volumes to move prior to the pending BREXIT is creating massive congestions in the UK ports. The shipping lines are omitting UK 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 UK, also FTL loads and LTL are being included in the misery with very long waiting times to get in or out of the country. More and more reports are being published that some products will become scarce on the UK markets considering the import flows cannot be guaranteed.

As an alternative, the S/L’s are dropping UK-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 hence the foreseen space was already at max capacity.

The delays generated in the UK 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 and this jeopardizes the normal operational activities causing even more delays. Today export loads are awaiting several weeks on quay ready to be shipped. Hapag Lloyd has already informed their customers for port of Hamburg that export cargo can only be delivered 48h prior to the arrival of the booked vessel in the port.

A simple solution to get the cargo moving away from congested quays would seem to be to simply increase the capacity by chartering additional space. The charter market unfortunately is nearly depleted. The current idle ships account for 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 track of further developments. Your designated contact with Manuport will be able to guide you to minimize any possible impact on your logistic processes.

 

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