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Market Situation - Container flows - APR

Apr 2022
9 minutes
Update April ‘22 In order to maintain a clear overview, we have broken this update down into several segments covering different areas worldwide. Although not all trades are in this report, similar trends apply. If you require more detailed info on a specific trade, you can always reach out to your Manuport contact.

Asia

China retains its policy of zero tolerance of the coronavirus. Lockdowns earlier in Shenzhen and now in Shanghai are severely affecting public life and supply chains. While most Chinese ports are open and operating, productivity is impacted by port workers quarantining and required testing for truck drivers to get access to the terminals. All public transportation is closed causing long traffic jams in the cities and port areas. This situation is preventing smooth operation to and from the terminals. As a result of the lockdowns, many manufacturers are lowering production, as they are also being confronted with shortages of raw materials due to the supply chain being crippled. The most recent reports show that Chinese production is at its lowest point since October last year.

The most recent outbreak in Shanghai is also leading to some additional measures being taken by local governments. Each city has its own rules. Some cities simply reject people/vehicles coming from Shanghai, while others require drivers coming from Shanghai to drop the cargo outside of the city and somebody else will pick it up to prevent contaminated people mixing with the city's population.

In other regions, like Tianjin, most factories were already shut down and Qingdao has reported a 30% decrease in trucking power. The Shenzhen area reported that all ports (Yantian, Shekou, Chiwan) are open and also most of the surrounding factories have resumed work following the 7-day lockdown.

All the price indexes, like the Shanghai Freight index, show a drop in rates from Asia to USWC and from Asia to Europe. But when you compare the data for the current drop within 2022 with the drops of the past years, the percentage drop is actually a bit less than what you would normally see in the period following Chinese New Year.

However, some Southeast Asian exporting countries are still struggling to get equipment. This may sound contradictory to the above, but strong demand in China and the preference of shipping companies for direct services, in order to avoid possible delays at transshipment ports due to port congestion, still keep the majority of containers from being transferred to these "out-ports."

Asia and Oceania are linked, and this still makes it difficult to equip transshipment ports for the same reason. The delays at the transshipment ports in Asia continue and this also affects the overall availability of services that still call at Australia and New Zealand.

 

 

Europe

On March 15, the EU introduced further sectoral measures targeting the Russian economy. The restrictions concern:

  • transactions with state-owned enterprises;
  • provision of credit rating services;
  • new investment in the Russian energy sector;
  • export of equipment, technology and services for the energy industry;
  • import of iron and steel, and export of luxury goods.

In addition, the EU decided to impose sanctions against key oligarchs, people considered to be “lobbyists and propagandists” of the Russian government, as well as key companies in the aviation, military and dual-use, shipbuilding and machine-building sectors.

The four biggest European mainline operators (MSC, Maersk Group, CMA CGM and Hapag-Lloyd), as well as the major common feeder operators in northern Europe, have suspended Baltic services or significantly reduced capacity to and from Russia.

Record inflation in Spain has angered many Spanish workers, and the energy and fuel prices going through the roof resulted in a strike in the transport sector which started mid-March.

After 15 days of uninterrupted transport stoppages in Spain, which caused shortages of fuel, building materials, food and even drinking water in northern Spain, the Spanish government offered a subsidy on the fuel prices. After being rejected at the first stage, the proposal was accepted, and the country's main transport association has confirmed that activities have returned to normal as of March 28.

 

North America

The Canadian Pacific Railway shut down operations on March 20 due to a strike, which had been called because the workers want new contract agreements. Commodities such as grain, lumber and oil are piling up quickly. The pressure is very high as grain farmers are extremely concerned that they cannot get their cargo out in time. Furthermore, 75% of all Canadian fertilizers are moved by rail. As the yard utilizations in the sea harbors are at 100%, this potentially will also impact scheduled sailings. The Minister of Labor is even thinking about introducing a ‘back to work legislation’ to force workers to resume their activities, in order to prevent further economic consequences.

The congestion at the East Coast container ports of North America is worsening as more ships are diverted to avoid the West Coast gridlock. In theory this might extend delivery times, but in practice consumers will get their cargo quicker. Of course, this re-routing is driving up costs. Additionally, the already congested terminals are not keen on getting extra volumes.

The port of Savannah is outperforming all other ports. This is in part thanks to it getting rid of ships queued at anchor, by deploying five pop-up container yards out of the port. The reduced waiting times are not only a result of the pop-up-yards, however, but also due to shipping lines alternating calls at Savannah and Charleston.

With the Safety and Air Quality Area which was established in November, to reduce air pollution by keeping waiting ships 150 miles off the California coastline, many shipping lines have simply diverted their ships to other areas as the operational costs of keeping drifting at sea awaiting a berthing window are far too high.

Market participants will closely watch developments with the International Longshore and Warehouse Union representing West Coast port workers, whose multi-year contract with shipping lines and marine terminals expires July 1. West Coast port operations were disrupted for months when contract talks hit an impasse in 2014-2015. At that time, many shippers also diverted to the East Coast as they are already doing today to evade the congestion.

 

Latin America

We notice a slight cooling in demand on the Latam East Coast. As the two major economies in Brazil and Argentina are affected by high inflation, like many countries worldwide. Combined with a somewhat unstable local currency, more space is projected to be freed up in April as import volumes decline.

We must not forget that space is one thing, but congestion in the ports must be resolved before the container industry can return to normal, including on the Latam route. To reduce port congestion more quickly, shipping companies are reducing free time at the destination to speed up container turnaround time.

For the west coast of South America, lower volumes from Asia may relieve some of the pressure. On the contrary, for the East Coast, it will take additional time for congestion at the ports and in the hinterland to return to normal levels.

 

Middle East

In order to reduce the backlog at Saudi Arabia's main port, Jeddah, shipping companies are completely ignoring the port. As a result, today it is very difficult to get space with anyone. Many hope that the situation will improve after the Ramadan vacation.

Jebel Ali in the UAE is a different story, as this port is often called upon for connections to Asia.

For the shipping lines, the entire region remains somewhat uninteresting as the return volumes are either moving to regions where the shipping lines do not want more containers (e.g. US East Coast) or the equipment types coming in, do not match the equipment types needed for export cargo.

 

Africa

For East Africa, the situation remains the same and is closely related to the situation in the Middle East as many services have connections from Middle Eastern ports. Because the service calls are reduced, less vessels call the ports to connect waiting for cargo to its final destination.

West Africa is still very tight. Again, capacity has been reduced and volumes remain very strong. The high price of oil traditionally stimulates several local economies that pump and sell oil. This always increases local consumption because workers have a guaranteed income. However, local congestion in most ports is still delaying any renewal of shipping capacity, despite strong volumes.

 

General

  • Global schedule reliability remains very low

Sea-Intelligence (= a neutral research & analysis company) has published figures on the schedule reliability worldwide. In February 2022, the schedule reliability shows an increase of 4%, which can be interpreted as the first signs that the congestion in the container ports globally is easing off a bit.

This needs to be put in the right perspective, however. The overall figure is still at a very low 34.4% (including the +4% of Feb ’22). The positive effect can also be linked to the re-routing of vessels and the skipping of the most congested ports, so it does not necessarily mean that the congestion in the ports is improving.

  • Energy cost surges worldwide

The current environment with, amongst others, the situation in Ukraine is pushing up prices for oil and gas to very high levels. This high pricing is ramping up the costs for all transport modes. For the maritime industry fuel is still one of the main cost drivers, and shipping lines are pushing more and more to make fuel surcharges ‘vatos’ or revisable every month. The price for very low sulphur fuel oil (needed for IMO emissions restrictions and thus in many cases the reference fuel for the shipping lines) has close to double in a year.

In an attempt to cool the energy prices, the U.S. will release up to 1 million barrels of oil per day from the Unites States’ strategic petroleum reserve. This will probably have the biggest effect on the U.S. market itself.

  • Hapag-Lloyd expands with takeover of niche carrier DAL

HLL continues its expansion into the African market with the takeover of Deutsche Afrika-Linien (DAL). The Africa trade expert DAL is represented with own offices in Germany and South Africa and employs more than 150 staff.

 

Annex: Market trends

 

How to read:

  • Applicable trade always mentioned per individual graph.
  • The percentages shown give the difference per trade on 3 levels:
    • Year on Year = Rates agreed now compared to the same period 1 year ago
    • Past 3 Months = Rates agreed within the past 3 months
    • Past 1 Month = Rates agreed within the past month. This can be considered as the reflection of the spot market.
  • ‘Main’ means ports that are normally called at on a direct basis.
    • Far East Main = Ningbo, Shanghai, Qingdao, etc.
    • Mediterranean Main = Istanbul, Alexandria, Piraeus, etc.
    • South America East Coast = Santos, Buenos Aires, etc.
    • North Europe Main = Antwerp, Rotterdam, Hamburg etc.

 

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