Market situation – containers flows – April

Market/Trade information

Asia – N.Europe/Mediterranean:

• In recent weeks, we have seen rates going up. This is of course a consequence of the situation in the Red Sea area and the re-routings as a result. The most recent trigger for the increase in rate levels, however, has been the blanking of services by the carriers to cut the available capacity on this trade. Although only 8% of the operated capacity has been announced as blanked, which means 11 blank sailings, rates have increased in the past weeks by up to 100% on some spot corridors.

• Zooming in on the numbers, the operated capacity in April is 1.6 mln TEU, which is an increase of 8% year on year and an increase of 11% month on month. How do you then explain a capacity reduction on the market, I hear you ask? For this you need to look at the average transit time from Asia to Europe/Med. In 2019, as a comparison (pre-COVID in a ‘normal’ market), the average TT was 20 days. In 2023 this was 21 days, and in 2024 the average transit time is a whopping 33 days!! This explains the capacity crunch even with a higher available space operated on the container vessels.

Mediterranean:

• As carriers are avoiding the Red Sea, the rerouting of ships has dramatically reduced traffic in the Mediterranean. Several Asia to North Europe services previously made stops in the East Mediterranean, most notably Piraeus in Greece (OCEAN Alliance), before heading to ports in North-West Europe. It has been decided that the ports of Algeciras and Tangiers will be used for onward connections to Northern Europe and feeder services for Mediterranean ports. While this decision may compensate for the capacity loss due to extra transit times between Asia and Europe, the transshipment of cargo may lead to operational difficulties for customers in the Mediterranean Sea.

• Overall, intra-European service capacity grew by 17.8%, or more than 170,000 TEU, compared to February 2023. Maersk is the only one of the four largest mainline operators (MLOs) who managed to increase both market share and capacity on the intra-European service over the past year. The MLOs still dominate the intra-European short sea segment, with a combined market share of 71%. MSC is number one with its deployed capacity giving it a market share of 29.7% (32.6% a year ago). CMA CGM claims second spot and recorded a relatively stable market share of 15.8% (16.2% last year). COSCO is the only MLO in the intra-Europe service segment who recorded negative growth in capacity and market share. The Chinese carrier accounts for 5.6% of operated capacity (in 2023 it was 6.7%). Unifeeder has lost its top position as largest independent carrier operating in Europe to Turkish carrier Arkas Line. Arkas achieved a market share of 4.8%.

North and Central America:

• Strong transatlantic demand has pushed volumes up to just shy of 900,000 TEUs shipped to the U.S. from Europe and the Mediterranean in the first three months of 2024, according to PIERS (a sister product of the Journal of Commerce within S&P Global). After sliding 4.4% in January, westbound shipments recovered rapidly, spiking 19.6% in February, and 8.4% in March.

• Most of you will have seen the images of the crash of ‘MV Dali’ in Baltimore. The vessel, operated on behalf of Maersk, hit one of the posts of the Francis Scott Key Bridge, causing the bridge to collapse. According to S&P Global Market Intelligence, MSC, Maersk, and ZIM have the most sailings impacted due to this incident. The three shipping lines account for almost 75% of all import flows to Baltimore (MSC 31.5%, Maersk 21.8%, and ZIM 19.8% in February 2024). If the debris is not cleared in time, many seasonal products like toys, leisure articles, clothes, and other similar items may not get to the region and will need to be diverted via Philadelphia, Norfolk, and New York.

Latin America:

• The Panama Canal can accept more draft again as the weather phenomenon ‘El Niño’ is finally showing signs of weakening. The Canal authorities are easing off on the restrictions on the number of passages on a daily basis and on the maximum allowed draft. During normal times, 36 ships can pass through the canal per day, and the maximum allowed draft is 50ft. During these past weeks, the number of ships allowed per day was restricted to 27 (it even went down to 24 at a certain moment), and the maximum draft has been 44ft.

  Because of these restrictions, several shipping lines have implemented peak season surcharges or low water surcharges to cover the more expensive slot costs. This is not the nicest of practices, as the shipping lines have, for liner services, fixed agreed slots to prevent waiting times, and the unforeseen higher costs have (only) happened with ‘tramp shipping’. It is expected that these temporary surcharges will disappear quickly, however.

Red Sea and Gulf area:

• There is a special update specific to the Red Sea situation below.

• Due to heavy rainfall in the area (some 2 years’ worth of rain in 24 hours), some parts of Dubai and the UAE were flooded. Roads, seaports and airports suffered delays as a result. In neighboring Oman at least 19 people died in severe flooding, including 10 school children who got swept away in a vehicle.

General information

• Vessel idling is down, as continued threats to marine traffic in parts of the Red Sea and the subsequent diversions to the much longer Cape route have had a significant impact on the idle container ship fleet. A substantial number of big mainline ships, delayed due to the detour around Africa, have arrived late in Asia where they were initially scheduled to load cargo for the anticipated ‘export rush’ ahead of the Chinese New Year Holidays (February 10-17). This has prompted carriers to start reshuffling tonnage deployment in the Far East to cover their scheduled export sailing slots with their own vessels but also with vessels which were available on the market.

• No HMM sale just yet as the South Korean government has ruled out a fresh attempt to sell the country’s largest container line. The first deal with the Harim group earlier this year collapsed, and before attempting a new sale the government will wait for calmer waters to allow bids. HMM will remain under creditor management, with the state-run Korea Development Bank (KDB) and the Korean Ocean Business Corporation (KOBC) retaining 57.9% of HMM shares. The state involvement proved to be a deal breaker for the Harim group as they requested more freedom from state control. The government, however, wants to retain control to prevent HMM’s KRW 11 trillion reserves being used for non-shipping purposes. In the current shipping market with these turbulent waters (Red Sea, etc.), a sale has become more complicated. Underlying profits have fallen steeply, making possible contenders less hungry to make an acceptable bid for the South Korean government.

• OCEAN Alliance extends partnership until at least 2032. The CEOs of CMA CGM Group, COSCO SHIPPING, Evergreen and OOCL have signed an agreement to extend the operational cooperation of their shipping lines within the OCEAN Alliance for at least another five years. This means that CMA CGM, COSCO SHIPPING, Evergreen and OOCL are to remain alliance partners until at least March 31, 2032. The signing ceremony in Shanghai was clearly intended to send a message of stability and planning security to clients of all OCEAN members. It underlines that none of the four carriers intends to change its allegiance and trigger an alliance reshuffle. Rumors about a possible alliance revamp started circulating in the wake of Hapag-Lloyd’s recent announcement that it would be leaving THE Alliance in January 2025. As of next February, the German carrier will be part of the new East-West ‘Gemini Cooperation’ with Maersk. Some industry observers predicted that the remaining members of THE Alliance would not be able to continue without finding a replacement for Hapag-Lloyd, but an Alphaliner report published in October showed that ONE, HMM, and Yang Ming could have the scale to continue without the German liner. This was a surprise, as contrary to popular belief, Hapag-Lloyd is not the biggest tonnage contributor in THEA: the Hamburg-based carrier brings in 26.2% of all alliance capacity, compared to 38.7% from ONE, 17.6% from Yang Ming and 17.5% from HMM. A big re-shuffling of alliances is unlikely to happen; only Taiwanese carrier Wan Hai is mentioned as a potential new member of THEA with its fleet of (soon-to-be) eighteen modern Neopanamax ships.

• Carbon emissions rocket as ships reroute from the Red Sea to the Cape. It is no surprise that with the longer sea routes via the Cape of Good Hope, the emissions per tonnage or per TEU are going through the roof. The Far East-Mediterranean trade is most impacted. The average extra nautical miles to transport cargo on this route is calculated at 5,800 miles.
  Next to a steep increase in emissions, this rerouting has a significant impact on the actual ocean freight cost, as ships bound for port in the European Economic Area will be even more impacted by the EU Emissions Trading System.

SPECIAL UPDATE: RED SEA SITUATION

The situation in the Red Sea area remains tense. Multiple attacks, or attempted attacks, keep carriers on high alert when coming in the vicinity of the region. Most carriers stay clear of the entire region, but some still venture into the area.

On April 13, the MSC Aries (15,000 TEU) was seized by the Iranian Revolutionary Guard Corps in the Strait of Hormuz. This vessel was most likely targeted as it is owned by Gortal Shipping, an affiliate of Zodiac Maritime, chaired by Eyal Ofer, an Israeli national. The MSC Aries was underway from UAE to Nhava Sheva, India.

Ongoing discussions focus on getting the crew of 25 people released. The reports say they are safe and healthy, but there has been no release just yet. Next to that MSC wants to have the cargo discharged (total worth of 90 mln USD) to possibly evacuate it with a different vessel.

Iran’s actions in the Strait of Hormuz come as tensions between the Islamic nation and Israel are on the rise. On the same day as the seizure, Iran, certain forces in Iraq, the Lebanese Hezbollah, and the Houthis of Yemen launched missile and drone strikes on Israel. With this increase of aggression in the Middle East Gulf area it seems the ‘maritime danger zone’ has expanded significantly.

MSC continues to offer a regular service in the area.