Market situation – container flows – Update V

In order to provide a clear overview, we have broken down the market into several segments covering different areas worldwide. Although not all trades are in the report, similar trends apply.

Asia

We are nearing the Chinese New Year Holidays which will be February 11–17. During this period, almost all factories and offices will be closed. Traditionally, this causes many truckers to depart from the port areas to go homewards, greatly reducing the availability of truckers’ capacity. We are noticing this already, and it is impacting both operations and pricing.

For the period following the public holiday, it is not entirely sure if the Chinese government will apply any quarantine rules for returning workers. As no reports have been received, we are unlikely to see a similar situation as in the Pearl River Delta as reported a few weeks ago following Golden Week.

Due to the Chinese New Year, and the expected drop in volume flows, the shipping lines traditionally invoke void sailings. Although the volume demand remains very strong in China, during the holiday period this will temporarily freeze. That is why the shipping lines will apply these void sailings, albeit less aggressively than what we have seen in previous years. Due to the high demand that remains ex Asia, volume shortage also remains. The weeks following Chinese New Year will be critical to assess if the reduced export volumes during the Chinese New Year holidays will have a stabilizing effect on the equipment flows.

Oceania

The Australian Coastal Trade is facing major issues. This is mainly caused by a disruption of the normal network creating reduced access to space and equipment to move from Asia and South East Asia to Australia and New Zealand. Due to heavy congestion in the South East Asian ports (e.g., Singapore, Port Kelang, Tanjung Pelepas), vessels are arriving in the first AU port (Brisbane) with a delay of around 7 days. The delays worsen as the vessel transits the coast due to congestion in Sydney, Melbourne, and Fremantle. Discussions are ongoing to relaunch some coastal services to give Oceania a better connection to Asia and South East Asia again.

In the Australian ports, the congestion remains. According to local reports, there are more than 75,000 empty boxes crowding the facilities in Sydney alone. On top of the structural trade imbalance, which means Australia needs different container types for supplies and outgoing cargo (such as food or special equipment), China has imposed a ban on timber and wood, wine, and other cargo that can be moved in 40’ containers. This is worsening the situation in the AU ports even further.

United States

The U.S. is far ahead of most European countries in vaccinating its population. However, among the port workers, we are seeing a growing number of COVID-19 cases, and this is adding to the bottlenecks to get cargo moving. In combination with the increased trucker shortage because of the surging Asia volumes going to the U.S, the delays to get cargo discharged to the customers are only increasing.

On top of the issues for the inland transportation, please note that severe snowstorms on the U.S. East Coast are adding to the delays. Storms are expected to continue until the end of this week. The states of PA, NJ, and NY have declared a State of Emergency. With the increased pressure, ports across the U.S. are struggling to run normal operations, which is again resulting in congestion at all major terminals.

Europe

Chain disruptions for road transport from the U.K. to mainland Europe are pushing more and more volumes to container transport instead of trucks. Very strict COVID-19 restrictions both in the U.K., and for people coming from European countries to the U.K., are causing trucking companies to stop sending their employees to the U.K. They are tired of all the uncertainties. Truckers are being blocked by customs, there are extra delays in the ports and at loading and unloading sites, truck stops and parking spaces are closed, and more. Truckers simply do not want to get stuck in the U.K. Yesterday a national strike was initiated in France. Although it was not extensively executed, it has only added to the chaos. Many EU countries have banned flights from the U.K., so if a trucker is stuck in the U.K. they have almost no possibility to get back home.

This rush from cargo to container logistics is adding to the congestion in the U.K. ports. This might eventually prove to be interesting for the shipping lines, considering this is a way for them to get empty containers out of the U.K. ports. So hopefully this can relieve the congested ports and increase the equipment availability in the EU mainland.

General

Due to all the uncertainties in global shipping today, shipping lines have reported dramatic schedule reliability data. In December, fewer than half of the vessels worldwide arrived on time. This has been going on for five consecutive months and is at the lowest point since Sea-Intelligence introduced this benchmark in 2011.

The global equipment imbalance is pushing shipping lines to invoke all kinds of surcharges to allow them to re-position containers from overflow areas to areas with container deficits. These increases are being applied in unstructured and unclear ways, only affecting certain areas. This situation of a global container shortage is unprecedented, and it seems that the shipping lines do not know how to behave or how to resolve it. These increases are being pushed not only onto the market rates but also onto long-term agreements. It is normal market practice to move rates up and down because of supply and demand, but it is another thing to break open contract agreements.

It is difficult to predict when the market will come back to acceptable levels in terms of both pricing and service.

We will keep a close eye on future developments.