Market Situation - Container flows - update VIII

Asia

Currently the industry is facing 5-11 days delay at ports throughout Asia concerning the availability of containers. This situation will even worsen as a delayed effect of the Suez blockage. (more on this in the segment further in this letter). The container availability will remain tight for at least another 4-6 weeks. Delays in booking acceptance are expected from carriers as well as delays in the release of empty equipment to put the release date as close to the actual sailing date as possible. Although it is suggested that bookings need to be made as far in advance as possible to minimise any potential disruption, we also notice more and more shipping lines to either restrict advanced bookings to a maximum of 6 weeks and we also see shipping lines invoking rate increases even on confirmed bookings.

The graph below as shown in the Alphaliner Newsletter is very clear on the current market.

The Shanghai Containerized Freight Index (SCFI) has reached a record high of 3,100.74 points this week with average freight rates on the spot market nearly breaching a new historical benchmark of USD 5,000 per feu between Shanghai and the US West Coast. Meanwhile, spot rates in the Shanghai – North Europe trade increased to an average of USD 9,260 per feu. This is a new record, breaking the previous one which was only set in early January. (feu = forty-foot equivalent unit or 1 x 40’ container)

Singapore, one of the busiest transhipment ports is facing slow vessel turnaround times and cargo rollovers due to the intensified vessel calls following the Suez Canal blockage. This is impacting deliveries to other Asian countries and to Oceania.

Indian Subcontinent

The Covid-19 situation in India has taken a turn for the worse with the country reporting over 300K+ cases of coronavirus infections daily for almost a week now. In an attempt to limit the spread of the second severe wave of coronavirus infections, strict regulations like curfew and partial/complete lockdowns are back in full force in all states in India. The transport sector (such as ports, customs,…) is deemed as an essential sector and business continuity is ensured although all white-collar employees are restricted to home office and factories will have a full or partial closure to prevent contaminations. This will indefinitely influence outgoing and incoming cargo flows in the next weeks to come.

Oceania

Although the congestion surcharges to Sydney are no longer in play, the port keeps on struggling with an imbalance of containers. The imports outpace the export volumes, causing shipping lines to repatriate empties from Australia to China.

As an example, Maersk has recently deployed a sweeper vessel specifically to pick up empties. This sweeper vessel is expected to further relieve port congestion at Brisbane, Sydney and Melbourne as well as increasing the integrity of vessel schedules again because they reduce time losses when calling the Australian ports.

Europe

Due to the blockage of the Suez Canal and the additional rate increases consequently, the European Shippers’ Council (ESC) will most likely repeat their request for the European Commission to act as the ESC feels that the shipping lines are given a free pass without any regulators in place. Herewith they are greatly impacting the competitiveness and reliability of European shippers towards their own customers. Of course, this is not different for other regions in the world so it is doubtful if this will result in any solution.

North America

Following a long rumour, ‘finally’ the actual strike notice was given in the port of Montreal. As from Monday April 26th, the longshoremen will go on a strike for 72h. The strike will shut down the port of Montreal.

So, for both containers arriving over the weekend which are not picked up and for empty containers needed for export cargo it will not be possible to execute any pick up inside the terminals.

The shipping lines might slow down vessels for delayed arrival or entirely divert cargo to alternative ports. The Canadian railways have already decided to no longer accept export containers destined to the Port of Montreal until the labour situation is resolved.

To speed things up, the Minister of Labour, Filomena Tassi, has sponsored Bill C-29, an Act to provide for the resumption and continuation of operations at the Port of Montreal. (Bill C-29 Port of Montreal Operations Act, 2021) 

The strike in Montreal will greatly affect the further connection with the US East Coast. Especially for the Northern Ports which might be used as alternative ports to get cargo discharged by both cargo owners and shipping lines.

On the US West Coast, the terminals have managed to handle a massive amount of volume. Los Angeles handled 957,599 TEU in March, which is +113% compared to March last year. To give you an idea, if you would place these containers end to end, they would stretch from Los Angeles to New York and halfway back across the country.

In general, the US market is booming. The US economy growth will be the fastest since 1984. Economists have raised the forecast of US real GDP growth to 6.2% (from 5.7%) in 2021.

Latin America

Although Brazil remains reporting bad COVID-figures, the local economy does not seem to suffer all that much. Volumes stay at a fairly high level and with strong return cargo, the pricing also keeps on the rise. Especially the northern part of South America is heavily impacted with delays on the rotation of vessels because of delays in the US and Mexico for connecting vessels. This has reduced the overall capacity which again puts additional pressure on the rate levels.

Connecting via the Panama Canal to South America east coast has become a real challenge. Pricing has gone up drastically due to temporary draft restrictions in the Panama Canal, which have caused delays in T/S ports and on capacity reductions on passing vessels. In many cases, even with premium rates you simply cannot find space on the vessels to get your cargo shipped nowadays.

Extra topic -Suez Canal blockage - update

The ripple effect of the incident at the Suez Canal is having an expected impact on the container equipment at China’s export hubs. As the equipment, which was already short, has declined sharply in the second half of April. Reports say the effect will last well into May and might even linger on till end of June. This additional pressure on the container availability raises the prospect of another rate surge out of China, where short-term prices are already at highly elevated levels on the Trans-Pacific/Asia-North Europe trades.

This blockade delayed many ships by one or two weeks, forcing carriers to blank sailings in both directions which reduced their possibilities to reposition badly needed empty containers.

This also means that in Europe they are facing issues on the equipment availability with expectations that week 18-19-20 will be affected the most.

General

Due to the ongoing global equipment shortage and the issues concerning sailing integrity, the shipping lines are more and more breaking open contract agreements both on pricing and on other conditions (free times, shipment guarantees,…). In the current situation, the turnaround of equipment for the shipping lines is crucial and this is today their main parameter to set pricing. If on a certain trade the turnaround is too long, they will move the little available equipment they have to another trade. Unless the agents of the shipping lines can convince customers to accept premiums on the agreed conditions. This is for them the only way to ‘accommodate’ for pending shipments.

For some extra information on global shipping and its’ challenges, we would like to direct you to the MPL Podcast via the RSS feed or Spotify.