China’s factory and retail sector activities surged in the first two months of the year, beating expectations following the recovery from the coronavirus paralysis of early 2020. On the Transpacific-trade shippers remain to struggle to secure new deals with the carriers. Equipment and space remain very tight and, in an effort to push out cargo, the shippers are paying high premiums.
Transshipment ports in the Far East and in South East Asia are again facing more congestion because of delays in the schedules to connect with the rest of Asia and Oceania. This is not only causing issues on the terminals, but this is also creating roll-overs for connecting vessels.
Empty containers have been scarce in India for many weeks already and in an effort to not lose market share to other producing countries, such as China, they are now trucking electronics and other wares 1.000 miles and more to ports where the supply of empty containers is better to push out cargo to protect their own economy.
All carriers have revoked the congestion surcharge for the port of Sydney. The withdrawal was initiated in a timeframe of between March 15th – March 22nd, based on time of booking or sailing, depending on the carrier. However, the normal sailing time cannot be guaranteed due to possible delays at T/S ports.
Luckily, the social uncertainty in the ports of Australia has been resolved for the time being. The demand for better working conditions looks to have been met. Receivers and shippers in Australia are affected by higher local costs. Fees charged to load and unload cargo by stevedores have increased fivefold since 2017. (source ABC)
In the UK the delays and long waits for haulers at the terminals do not look to get resolved in the next few days. Drivers remain stranded in hours-long queues to pick up or drop off boxes.
In the next weeks, we will be greatly impacted on the entire continent by the events in the Suez Canal (more info further in this letter). First, on import, we will be getting no cargo that had departed East of the Suez Canal. Later on, it will have a severe impact on exports with the major supply trade of containers being blocked and thus not providing containers to load export cargo. Vessels that will depart in the next weeks will be postponed or re-routed.
The risk of industrial actions (strikes) in the port of Montreal remains. The indication that this might happen in the port is lingering for several weeks now. It remains uncertain if it will happen but if it does, the operations of the port will be greatly impacted and this will put even more pressure on the alternative ports, also in the north of the US.
On the US market the situation was already very bad on the landside with congested terminals and limited trucking capacity. The forecasts predict that the problem will only worsen in the weeks to come. On the East Coast, the backlog of cargo is forcing shipping lines to think about a hard booking stop and/or to reshuffle their sailing schedules. The delays faced in the US ports are causing a reduced capacity of vessel space and this will only get resolved if containers can get ‘evacuated’ from the saturated terminals. In order to do so, some shipping lines are thinking to initiate a kind of ‘express’ service whereon they will only call 2-3 ports on each side of the Ocean to limit delays and to keep space to take on containers that have been blocked in the ports. This will reduce the number of calls at most ports. The shipping lines hope that this will be a solution for the operational constraints on the US terminals be it that this decision will mean an additional (temporary) capacity reduction.
On the US West Coast, the terminals are putting all efforts in play to reduce the delays in the ports and to reduce the number of ships waiting on the water to enter these ports. They are having limited successes however the backlog remains enormous and normal operations are far from insight.
In Brazil, still the most important economy in Latin America, the Covid contaminations keep on the rise and are on a record high. A full lockdown and social distancing measures will surely impact the local economy, which was already struggling like many other trades, with the overall equipment and capacity shortages. Reefer equipment is still on high demand in Latin America for fruit and meat exports however with the reduced supply of reefers due to the Suez incident, it is also expected that the rates will increase greatly simply due to the limited availability.
Extra topic -Suez Canal blockage-
The Suez Canal is blocked by the Evergreen owned containership ‘Ever Given’ which is stuck sideways in a vital passage segment. The incident occurred due to sudden strong winds. The 400m long and 200.000-tonne heavy ship got grounded and is stuck. Several tugboats have tried to get the ship afloat without any success. Dredgers are underway to try and deepen the fairway to get the ship mobile again. Shipping lines are already cancelling all bookings between Europe and Asia in both directions. Other trades which connect via the Suez Canal such as Oceania / Middle East / Indian Subcontinent & East Africa will also be affected.
The Suez Canal is one of the busiest waterways and normally, about 50 ships transit between the Mediterranean and the Red Sea in both directions every day. Marine traffic has been backed up in both directions of the Suez Canal since it became stuck on Tuesday morning. Experts believe the backlog caused by the blockage could take ‘several days to weeks to clear’. With this blockage it is estimated that between 350.000 and 750.000 containers are currently not passing through on a weekly basis and will get severely delayed. Vessels are prevented from passing and already 30 sailings have been cancelled.
Apart from the operational and commercial losses for cargo on board of these vessels, the European and Asian markets which are in great need of containers to cope with the overall container shortages, will suffer in the next weeks to overcome this unforeseen drop in capacity in vessel space and container availability. Global carriers will get equipment in from other regions such as US and Latin America, but the Far East carriers will be faced with the biggest problems.
As an alternative, ships can be re-routed. If ships will be diverted via Cape of Good Hope remains to be seen. Depending on the expectations of the timing of the operations at the Suez Canal to get the ship afloat again. The decision to re-route will have a great impact on the TT which will be double or more of the normal TT and the costing aspect will be much higher also. It is expected that the shipping lines will introduce new surcharges to cover for the delays and/or re-routing.
That the integrity of shipping schedules is very poor at the moment is clear for everybody who is only even remotely in contact with overseas shipping. The continuous disruptions in our industry are affecting economies globally and the full ripple effect is to be seen. The higher costs will increase the prices of several products for the end-consumers. No type of product will be exempted and of course low value or base products will be impacted the most.
For some extra information on global shipping and its’ challenges, we would like to direct you to the MPL Podcast via the following link. Either via the RSS feed or Spotify (account needed).