Last week, the Shanghai Containerized Freight Index (SCFI) showed a slight rise in spot pricing for the first time in several weeks. You can especially see this when you zoom in on the Asia-Europe trade, where the rates went up slightly. On other trades out of Asia, rates were still decreasing. The slight increase in rates is linked to the traditional rush of volumes prior to the Chinese New Year Holidays. The peak however is very low and short compared to other years. Following widespread protests, China began dismantling its "zero-COVID" regime of lockdowns and testing that had largely kept the virus away for three years. The change of policy has caught the country's fragile health system unprepared, and the healthcare sector is struggling with high hospitalization and a lack of medicines. Currently, the government is reporting a very low death rate linked to COVID, but several sources doubt the accuracy of these numbers. The impact on the productivity of producing companies and ports is difficult to assess.
Due to poor cargo demand and low spot freight rates, as well as expected overcapacity, some shipping lines are rerouting the ‘backhaul’ from Europe to the Far East via the Cape of Good Hope. This has a negative impact on the transit time of the vessels, but by rerouting, the shipping lines can avoid the high fees for passing through the Suez Canal. Most of the diversions are being done by THE Alliance (HLL/HMM/ONE/YM). The additional transit time is estimated to be between 9 and 16 days. Financially it makes sense for the shipping lines to do this, even with the relatively high oil costs today. The Suez Canal fee for a megamax ship is USD 1,000,000. The cost at a sailing speed of between 10-16 knots (for the entire voyage) for the same vessel is estimated around USD 400,000. Some of you might raise an eyebrow at the environmental impact, but according to an investigation done by Alphaliner, these detours are CO2-neutral since the extra CO2 emitted is offset by the longer sailing distances (cruising speed between 10-16 knots for the entire voyage).
The Georgia Ports Authorities reported a drop in volume in November of 6.2%, which was a welcome relief for the ongoing pressure on the ports’ infrastructure. The lower volumes allowed the Port of Savannah to reduce the queued vessels by 43% from November 1, to 17 container ships. The port authorities expect to clear the backlog entirely by early 2023.
The reports after closing the month of November show that the volumes at the west coast ports (Los Angeles and Long Beach) fell even further in November, with no rebound expected until the second quarter of 2023 — possibly even the second half. The Port of Los Angeles had 13 “blanked” (canceled) sailings in November, following 20 in October. Carriers will blank 11 more sailings this month.
Soren Skou, CEO of Maersk group, will step down and be replaced by Vincent Clerc. Skou has enjoyed a 40-year career at the Maersk group. The official reason for him stepping down is so he can spend more time with his family. It is however very likely that the negative predictions for the global economy had something to do with it. It seems that Soren Skou will close the door behind him, as he has already utilized the option to sell his Maersk shares, worth USD 2.4 million.
On December 5, 5.3% of the total fleet was idle. This figure therefore remains unchanged. It is no surprise that most of these idle vessels are situated in dry docks for repairs, maintenance, or retrofitting.
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