Market situation – container flows – September '24

Market/Trade Information

Asia

• The Shanghai Containerized Freight Index (SCFI), which is still the most commonly used index for ocean rates out of China to the world, has gone down significantly over the past weeks. Excess capacity due to a slowing demand (and artificially high rates of the past weeks) has resulted in a steep drop of 50% on some export trades out of Asia. To the European main ports, the drop was more mitigated because of the routings via the Cape of Good Hope, which will remain until further notice. (Bear in mind that year on year the SCFI is +206%)

• Transpacific trade remains rather strong as volumes are shifting to prevent being stuck at the U.S. East Coast ports in case strikes happen there.

• Intra-Asia is seeing a downward trend, but rates from Asia to Oceania are on the rise due to longer transit times because of some delays in congested transshipment ports.

• Typhoon Bebinca hit Shanghai on September 16^th. The extent of port closures needs to be assessed in the coming days. The typhoon, the strongest cyclone to hit Shanghai in 75 years, has caused extensive flooding and property damage.

• See the special segment on the new alliances below for the drastic changes in services out of Asia from the beginning of 2025.

Europe/ Mediterranean / Black Sea

• Strikes at multiple terminals in the Port of Hamburg at the beginning of September have caused some congestion in the port itself. The major effect is however outside of the port, with connections via rail being heavily impacted.

• Due to heavy rainfall in central and eastern Europe, some rivers are closed for ships. In Austria the too-high water levels endangers passage under bridges on the Danube and therefore cargo and passenger vessels are not allowed to sail. This will have a major impact on timely deliveries and equipment availability in these areas. Considering the ongoing disruption in Germany, which is mainly hitting the rail connection, inland continuity will be at risk.

• The heavy rainfall has forced residents to evacuate their homes and has led to bridges collapsing. The issues are spread across Hungary, Slovakia, Romania, Poland, Czech Republic and Austria. Even in the southern German states of Bavaria and Saxony, some roads are temporarily closed to traffic due to the looming danger.

• Planned post-Brexit checks on fruit and vegetables brought into Britain from the EU have been delayed for the third time. The checks on fruit and vegetables should start on October 1^st as the next phase of the government’s Border Target Operating Model. The initial start date should have been April 2021. Importers fear higher prices for consumers, and they have convinced the government to delay the implementation yet again.

North and Central America

As no agreement has yet been reached on renewed conditions for the longshoremen, represented by the ILA, a strike or work laydown from Oct 1^st is becoming more and more realistic. The current contract expires Sept 30^th.

Assessing a possible impact remains a guessing game. If a strike happens, it will impact the entire U.S. East Coast and there will inevitably be delays. As things look right now, the shipping lines will have no choice but to wait in line until they get serviced in the port. To give you an idea, a 24-hour strike would generate a backlog of 5-6 days considering all inland disruptions because of a possible harbor blockage.

For the moment, shipping to the U.S. West Coast, Canada or Mexico is not seen as a viable option as the inland transportation means will get overwhelmed and cargo will get locked on the landside either at the departure or arrival terminals. Shifting flows to non-ILA locations and organizing the transport to your destination or from your pick-up location will be on behalf of the shipper/receivers. No carrier haulage options or responsibility for costs and delays will be taken by the shipping lines. Some shipping lines have already sent notification that they will not accept reefer cargo to prevent major issues on quay with foodstuffs. The only thing the shipping lines can do is spread the vessels over different PODs to try and optimize the windows, if any, to load/unload in the ports. Steep surcharges are already being announced, as advance notice is obligatory according to the FMC. All surcharges need to be provided with a 1-month notice prior to application. If a strike does not happen, the surcharge will not come into effect despite being announced. The amount of the surcharge will only go up if the strike endures. For the moment, many carriers are announcing that, if there is a strike, surcharges will be >USD 1000 / ctr. This cost will be to cover waiting times, not providing ‘real’ solutions.

The Biden administration could break the strike for 80-90 days. However, with the elections nearing, it is unlikely that the government will do this as it might cost them a lot of votes. On the other hand, doing nothing as the government might lead to empty shelves in the stores which will also cost them votes. The sword of Damocles is hanging over the administration, it seems…

For your understanding, the main objective for the ILA is a wage increase of 70%. A 40% rise, which was accepted last year by the unions on the West Coast, was also proposed to the ILA, but they replied that 40% was not even enough to get them around the table to negotiate further terms. On top of this, the ILA is demanding commitments from terminal operators to avoid automating operations at their facilities as they believe this will cost jobs. The fact that it could increase efficiency and could even lead to more jobs does not come into their mind. (The last ILA strike dates to 1977 when they were on strike for 44 days!).

U.S. consumer spending data does not show a sudden increase, indicating that the current peak in container volumes, mainly on the Transatlantic route, is purely driven by front-loading or inventory restocking to beat a possible strike.

 Latin America

• CMA CGM has bought 48% of the Brazilian multi-terminal operator Santos Brasil. In the coming months, CMA will also bid for the remainder of the shares. Santos Brasil operates 5 terminals in Brazil, including ‘Tecon Santos’ in Sao Paolo, which is the biggest container terminal in South America, handling 40% of Brazilian volumes. Other terminals owned by Santos Brasil are based in Itaqui, Vila Do Conde, Imbituba and Santos.

Red Sea and Gulf area

• The oil tanker ‘Sounion’, which got attacked on the Red Sea in August by Houthi rebels, has been towed to a safe location according to EUNAVFOR Aspides, the marine mission of the EU which is active in the region. After many pleas from different parties, the rebels allowed the towage in order to prevent a possible environmental crisis if the tanker had started to leak oil.

General information

·         The race for the biggest vessel, when expressed in average vessel size, is won by Hyundai Merchant Marine at 10.983 TEU. HMM of course does not have the biggest operated fleet and is mainly active on high-volume trades like Asia westbound and Transpacific. The bigger vessels are an attempt to lower the operating cost by leveraging economies of scale (at least IF the vessels can be filled).

When looking at the more global carriers (MSC, Maersk, CMA, Cosco and HLL), we can see that Hapag-Lloyd operates the biggest average vessel size at 7,580 TEU and CMACGM the smallest at 5,873 TEU. The gap can be explained by some niche brands within the CMA group like ANL, CNC, and Containerships SSL. Alphaliner did an investigation into capacity increases per trade year on year and came to the same conclusion.

·         DSV buys DB Schenker. The Danish group has confirmed the acquisition of DB Schenker from Deutsche Bahn for 14.3 billion euros. Deutsche Bahn had put Schenker up for sale last year because of high debts which they needed to settle. DB, fully owned by the German government, wants to refocus on the domestic transportation of passengers by rail.

·         ‘Brace for impact’. The air cargo industry is flying into its strongest-ever peak season as booming e-commerce demand will combine with online shopping promotions this fall and rising volumes of more traditional air freight. At the same time, the industry is facing a supply-demand imbalance that will place constraints on available capacity and add pricing pressure to already elevated rate levels. “Brace for impact,” was the blunt warning to shippers and forwarders from one of the freighter operators.

Biggest takeaways:

• MSC will go it alone. However, it is clear that they will allow others to use their vessels in vessel slot sharing agreements (VSAs). To overcome possible capacity constraints, the Premier Alliance carriers have already agreed to take slots on the MSC vessels on the Asia to Europe/Med trade. The big difference with an alliance is that all vessels will be operated by MSC and no operational involvement of any other carrier is possible.

• From 2025, Ocean Alliance (the only alliance to remain stable) will have the biggest market share in operated capacity (29.10%). The other operated capacity is distributed as follows: MSC 19.90%, Gemini 21.60%, Premier 11.60%, and non-alliance carriers 17.80% (Wanhai, PIL, etc.).

• Gemini will emerge as a major player on the Transatlantic trade. However, according to some sources, they will suffer a 25% shortage in terms of their current scope on the Asia westbound trade. This will result in a reshuffling of their service profile. Maersk and Hapag-Lloyd are resolutely opting for a hub-and-spoke approach. With this approach they will target a schedule reliability of above 90%. The downside will be fewer direct services and more transshipment (FYI: the pre- or post-transshipment leg is not considered when evaluating the schedule reliability).

• Premier Alliance will focus on the critical Transpacific and Asia to Middle East trades as they simply lack the capacity to go head-to-head on Asia-Europe trade with the other alliances. This new alliance has been formed for 5 years. Premier Alliance will offer four weekly sailings. Apart from the two loops via MSC, they will operate a Far East – East Med ‘MD1’ service and a West Med – Asia – California ‘MS2’ pendulum service, where MSC’s participation is limited to the Asia – Europe leg (‘Lynx’).

  Ocean Alliance proposes six Asia – Med loops, whereas Gemini will offer three weekly services.

  • Far East–U.S. West Coast

  MSC is to offer four standalone services. Three loops will serve Long Beach and Oakland from Southeast Asia (‘Sentosa’), from South China (‘Pearl’), and from North & China Central and Korea (‘Orient’). The latter will also serve Portland directly. The fourth loop (‘Chinook’) will focus in North America on Prince Rupert, Vancouver, and Seattle. This compares to five loops for Gemini Cooperation. Maersk and Hapag-Lloyd initially announced four loops, but have added an extra Pacific Southwest service as this allows them to further limit the number of calls per loop.

  ZIM will not cooperate with MSC on this Transpacific trade and continue its standalone ZIM E-Commerce services (‘ZEX’ and ‘ZX2’) to/from Los Angeles as well as the China–Korea–Vancouver ‘ZIM North Pacific’ (‘ZNP’), on which MSC is a slot buyer.

  • Far East–U.S. East Coast

  The cooperation between MSC and ZIM involves both slot swap and vessel-sharing agreements. It will allow both partners to offer six weekly services. Three loops will be routed via Panama in both directions, while two others will feature a Panama transit on the Far East–USEC leg and a return via the Cape of Good Hope. The Southeast Asia–USEC ‘America / ZIM North Star’ will be the only service routed both ways via the Cape.

  The Gemini Cooperation will offer four Asia–U.S. East Coast links, which is one less than announced earlier. Two loops which were to be Suez-routed as they featured a way port call in the Med will be merged into one if Maersk and Hapag-Lloyd decide in October to implement the Cape of Good Hope network.

  • Europe–North America

  While the members of Premier Alliance have yet to announce their offering on the Transatlantic route, MSC has already presented the rotations of eleven weekly loops. However, these include Europe–Canada services not covered by the 2M agreement and standalone services such as the Med–U.S. West Coast ‘California Express’ and the East Med–USA ‘EMUSA’ which were never part of 2M and will continue unchanged. The Swiss carrier will continue to offer three North Europe–USEC and Gulf loops (excluding the westbound North Europe–USEC leg of its service to/from Ecuador). While the ‘NEUSEC 1’ and ‘NEUSEC 2’ will be new, the current standalone ‘NWC to Mexico’ service will be extended to Houston, New Orleans, Mobile, and Freeport, which are currently still served via the 2M ‘TA3 / NEUATL3’ loop. MSC will continue the current 2M ‘MEDUSEC’ and ‘MEDGULF’ services on a standalone basis. The rotations are almost identical, with the only difference being that typical Maersk hubs such as Tanger Med and Algeciras will no longer be served.

  Gemini is to offer four North Europe–U.S. East Coast and Gulf loops as well as two services focused on the Med.

   

  • Conclusion

  Gemini will focus on a hub-and-spoke setup which can help to increase reliability and speed up connections, IF the transshipment hubs are smoothly operated and connecting vessels can respect their timeslots to prevent routing hiccups. This will certainly pose some questions for reefer cargo, hazmat, projects and other cargo which is sensitive to damages and/or delays.

  MSC and Premier Alliance have sought refuge with each other. Sealing this slot agreement guarantees MSC some minimum earnings as slots will be paid for regardless of whether they are used for cargo or not. This leaves MSC with less pressure to fill their own vessels. And the Premier carriers can benefit from the capacity deployed by MSC to cover the period until the situation in the Suez Canal is resolved and until they can include some of their bigger vessels which are under construction and will only get delivered in the years to come.

  Ocean Alliance could well be the biggest winner in all this uncertainty as amongst the 3 of them (OOCL is part of Cosco) they remain the most stable and predictable in terms of partners and sailing schedules.

   

These trends give the market changes on the spot market compared to 1 year ago, 3 months ago or 1 month ago.

EC = East Coast

WC = West Coast