Market situation – container flows – June '24

Market/Trade Information

Asia

• Port congestion in Asian transshipment ports like Singapore peaked in May but, according to Alphaliner, it should ease off a bit in June.

• Out of Asia volumes moving to Europe and the Americas remain fairly high. The ‘usual’ peak season has not been in evidence, as many major cargo movers have once again resorted to front-loading their cargo, since they are anticipating increasing strain on the global supply chains later in the year. The usual peak season is the summer months: July, August and a little into September. On graphs showing container volumes (and rate evolution), you can see that post-COVID it is more of a plateau rather than a typical steep peak. This is a lesson learned during the COVID disruptions to supply chains, when many products did not make it on time to stores for the holiday season. The shippers want to build up a warehouse buffer for safety to overcome further limitations on equipment and/or available shipping capacity out of Asia.

• The Shanghai Containerized Freight Index (SCFI), published end of May, showed a tenth consecutive week of rising rate levels. The rate index is still well below the historical record on Jan 7, 2022, in the midst of the COVID pandemic, but the spot rates are almost three times higher than a year ago.

• The strong rise in rates attracts short to mid-long initiatives, similar to what we have seen in previous periods, to profit from the high profit margins. Not many have operating vessels to spare, but Ellerman has returned to operate at least two sailings from China to Europe with their two remaining chartered vessels which were previously active on the Trans-Atlantic Trade. (2 other vessels are in control of MSC after a slot charter agreement was signed in Jan ’24 between Ellerman and MSC.).

• To make the price changes visible, Xeneta has made the graph below, showing the pricing per FEU (forty foot equivalent) on the main volume trades out of Asia with the historical data as from the start of 2024.

Europe/ Mediterranean / Black Sea

• MSC is the first main line to re-enter the Ukraine market, with its own tonnage. They will connect from Tekirdag with a regular feeder. Akkon, a Turkish shortsea specialist, is also calling at Ukraine again. (Hapag-Lloyd was already connecting to Ukraine, but with a third-party feeder operated by Iteris.)

• From July 1, if you are moving goods into Great Britain, into Northern Ireland from Great Britain, or into Northern Ireland from outside the EU, you'll need to make an entry summary declaration. This declaration will have safety and security information about your goods (similar to AMS on USA, or Japan, Mexico, Canada, etc. for that matter). It seems very likely that the shipping lines will charge an admin fee to transfer the data. (For more information: Making an entry summary declaration - GOV.UK)

• Unionized port workers from the Verdi trade union launched strikes at the ports of Brake, Bremen, Bremerhaven, Emden, and Hamburg on June 17. The purpose of this labor action is to demand wage increases. The strike of the terminal workers is mainly causing delays for intermodal connections. Trains arriving from Eastern Europe face delays of more than 10 hours before they are being handled.

North and Central America

• On June 10, the International Longshoremen’s Association (ILA) announced that it had suspended negotiations over a new labor contract for workers at the US East Coast and Gulf Coast ports. There has never been a strike on the US East Coast (it is usually the US West Coast where union disagreements are more likely to result in actions), but this time could be different as timing is everything in terms of negotiations.

• According to Xeneta data, the Far East to US East Coast average spot rates have increased 64% since April 30.

• The Port of Charleston is facing delays of 6 days as construction works at the Wanda Welch Terminal have started. The works are set to last up to a year.

• All debris from the Francis Scott Key Bridge has been removed to ensure passage in both directions, from and to the Port of Baltimore. Most of you will recall the images of the MV ‘Dali’ which collided with the bridge, causing it to collapse. The investigation into the incident, which cost the lives of 6 crew members, continues. 2M (the alliance between MSC and Maersk) will reinstate their services gradually to call at Baltimore again. It is expected that the others will follow soon.

• Haiti can be booked again, but carriers who accept bookings will apply an Emergency Risk Surcharge.

Latin America

• The main ports on the East Coast of South America are still faced with port congestion causing a high yard density, lower productivity and thus higher dwell times.

• From Europe & Med, more and more Peak Season Surcharges (PSS) are being announced by the carriers.

Red Sea and Gulf area

• Three new jumbo cranes were shipped from Shanghai to the SGP Dammam terminal. With a reach of 71 meters and a lift height of 52 meters, the cranes can work on the largest container ships. Since 2020, the Saudi Port Authorities have embarked on a large-scale project to modernize Dammam’s King Abdullah Port[A1] .

• The region remains in the doldrums. Some destinations are ‘open for business’, while other countries or ports are struggling with higher operational costs and/or limited cargo flows. CMA as an example has announced a PSS to Dammam of $200 / 20’ and $600 / 40’ for all trades and all cargoes.

General information

• Rates on all trades affected. This is due to the disruption of equipment.

• 400 tons of oil on the beaches of Singapore. A dredging ship collided with a refueling vessel on June 14. The collision breached one of the oil tanks, spilling its content into the ocean. The dredging vessel suffered steering and engine failures when it hit the refueling vessel while operating at the Pasir Panjang Terminal. The oil spill quickly spread to nearby beaches and a nature reserve. 1,500 volunteers are now helping with the cleanup.

• Samsung filed a complaint with the FMC against HMM. Samsung Electronics America (SEA), a subsidiary of Korea’s Samsung group, is claiming compensation from the Korean shipping line Hyundai Merchant Marine (HMM), as it believes that HMM repeatedly and chronically failed to maintain just and reasonable practices in connection with its inland transportation obligations. SEA has similar claims outstanding against Cosco, OOCL, ZIM and SM Line. The bad inland connections resulted in very steep D&D charges invoiced by the same party who should have executed the transport in the first place.

• FMC will collect more than US$2.3M in civil penalty payments. CMA CGM will pay $1.97M of this settlement. The two consolidators, Vanguard and Shipco (SSC), will take $175,000 and $155,000, respectively. These settlements all come from times during the pandemic in which inland logistics in the US was at an ultimate low. It is important to note that all three companies agreed to settle prior to any actual lawsuit. None of them admit to any violations of the law, and because there has been no conviction in court there are no common-law precedents which could trigger a snowball effect for the entire industry. The claim against CMA was built upon the argument that CMA should designate a terminal for the return of empty containers but either there were no appointments available, or there were restrictions on the numbers of containers that could be returned, thus forcing customers to store the containers themselves and incur charges after the business days of free return time. Shipco and Vanguard resolved allegations on accepting cargo from or transporting cargo for ocean transportation intermediates that were not compliant with US law.

• Maersk Group adjusts expected earnings as a consequence of the Red Sea crisis. As Maersk is a listed company they need to make their numbers public. Alphaliner has combined some of their financial data to make the Red Sea crisis visual in Maersk's earnings. (Other shipping lines will have similar evolutions in their earnings, but the analysis has only been done on Maersk, which is the second-biggest shipping line behind MSC. As a privately owned company, MSC does not publish any financial numbers.)

  The first graph shows the earnings of this year with the adjusted forecast. The second graph shows a more historical view on the EBIT earnings since 2019

Market trends