Market situation - container flows - JUNE

Asia

Asia to Europe and Europe to Asia have always been two ‘different’ worlds. The rates out of Asia are traditionally 3 or 4 times those of the rates from Europe into Asia. Today this multiplier is much higher – above 10 – as we see volumes out of Europe (and thus rates) going down more rapidly than the rates out of Asia.

Rates ex Asia have been going down, and keep doing so, but the lockdown in Shanghai and other bottlenecks keep on throwing the schedules upside down, and this is causing the rate levels to remain much higher compared to pre-Covid times. The rates out of Europe to Asia are already coming very close to what they were in the past.

A nationwide truckers’ strike in South Korea has had a severe impact on containers going in and out of the country. Busan, South Korea’s main container port, was only working at 25% of its normal capacity. Incheon, another major port, did 20% less volume than usual. After a few days the truckers returned to work as the transport ministry reached a tentative agreement.

Europe

The congestion in the major European ports lingers on. In an attempt to steer away from the major congested ports, Maersk has sent a message to ask customers to accept alternative ports. Even Hapag Lloyd, with the city of Hamburg as a shareholder, is diverting vessels away from the port of Hamburg to Wilhelmshaven, as all the terminals in Hamburg remain completely used. Also, more reports are mentioning a possible strike in Hamburg.

This seems to be becoming a pan-European problem as dockworkers and other parts of the transport sector are threatening strikes in Germany, Belgium, the Netherlands, France and Spain (following the earlier strike by the haulers). In the UK, the rail unions have initiated the biggest strike in 30 years, which is paralyzing the entire rail network both for goods and persons. Each country has its own reality, but they are all facing similar problems – either wages or work pressure needs to get resolved. The problem with the strikes is that when one country goes on strike, neighbouring countries suffer the consequences. This is only deteriorating the situation which has caused the frustrations to begin with.

The congestion in the European ports remains, and more and more shipping lines are evacuating ‘long-standing’ imports to off-dock facilities in order to reduce yard density. Costs for moving these containers away from the ports are being transferred to the receiving parties.

North America

Hapag-Lloyd and Maersk, including its affiliates Hamburg Sud and Sealand Americas, have extended call suspensions on several of their America services. Norfolk, Charleston and Port Everglades will be suspended on their US East Coast to South America East Coast service. They have made this decision to cope with the continuing congestion issues on the US East Coast.

(Normal rotation New York, Philadelphia, Norfolk, Charleston, Jacksonville, Port Everglades – Santos, Montevideo, Buenos Aires, Rio Grande, Itapoa, Santos, Rio De Janeiro, Salvador, Pecém)

In February both carriers had decided to remove the call at Norfolk and serve Charleston and Port Everglades on a fortnightly basis for a period of twelve weeks. This will now continue until mid-July. Meanwhile Hapag-Lloyd and Maersk will keep serving Baltimore and Charleston fortnightly on their Cartagena-Manzanillo service for another six weeks from the end of May.

Latin America

Please also look at the above segment with the routings of HLL and Maersk, also affecting import & export flows to and from Latam.

In line with the reduction of services, the overall capacity remains a struggle on the East Coast. Unlike at the majority of the ports worldwide, port congestion is not so much of a problem. The issues are more around the overall availability of empty equipment and getting space on the vessels.

Red Sea & Gulf Area

As there are not enough container ships to fully staff all regular liner services, ocean carriers need to choose where to put the vessels they have on hand in rotation. Fourteen deep-sea loops are currently missing half (or more) of the normal number of deployed ships to guarantee a weekly sailing. Five loops are even missing all of their ships and can be considered as ‘suspended’. The trade lane affected the most is the Asia-Red Sea trade with 4 of the 5 services being ghost services until further notice. This is obviously greatly affecting equipment availability in the Middle East region for export and is limiting the number of sailings.

General

• The global container ship orderbook is at an all-time high

In capacity terms today’s orderbook is the largest in history at more than 6.80 MTEU or equal to 27% of the global container fleet. To put this somewhat in perspective, the order book in 2007 was above 64%. So yes, we will see a big capacity increase in the years to come. Although the effect will most likely be less drastic compared to 15 years ago. The graph of Alphaliner makes it visually very comprehensive.

Facts:

• The number of ordered vessels is just under 900 ships.

• The capacity in the orderbook in the pipeline is bigger than #4 Cosco, #5 Hapag-Lloyd and #6 Evergreen 

• Vessel size 5.100-9.999 TEU count for 16% of the order book.

Two years ago, this sector was non-existing in the newbuilding pipeline.

• FMC investigation on lack of competition is a bust.

The final report of the US Federal Maritime Commission (FMC) on the investigation concerning a lack of competition was concluded as unfounded. The investigation started 2-years ago because three major concerns were identified by the stakeholders who suffered supply chain issues being, price increases in ocean shipping, unfair demurrage and detention charges, and the disruption of information concerning blank sailings and this mainly driven by the lack of competition.

The report described competition among ocean carriers as not concentrated on the transpacific and minimally concentrated on the transatlantic. It also says that no evidence was found of collusion or lack of competition that pushed up prices. The high prices have been determined by unprecedented consumer demand which overwhelmed the supply of vessel capacity. Congestion further deteriorated the situation on available capacity.

The only issue that was found was on the demurrage and detention where shipping lines seem not always seem to be fully compliant with the rules set by the FMC.

• Ocean Shipping Reform Act 2022 for US Exports

The house of representatives in the Senate in the US have voted a bill which will increase the authority of the FMC to promote the growth and development of U.S. exports through an ocean transportation system that is competitive, efficient, and economical. At least that is the idea behind it. By giving the FMC the right to investigate demurrage and detention costs as well as possible unreasonable charges and by given them the power to order refunds for these charges, the US government tries to get more visibility on the maritime changes affecting their own economy. The actual effect of this bill is to be seen.

For additional questions or remarks, you can always reach out to your usual MPL-contact.

Best regards,

Manuport Logistics