Market Situation - Container flows - update X

Asia

Following weeks of lower productivity, caused by a Covid-19 outbreak in the Shenzhen area, the Yantian International Container Terminal (YICT) has returned to normal operations. Nonetheless, the massive backlog of containers stranded at the port will still take weeks to clear. 

Due to the lower productivity in Yantian, and increased congestion consequently, hundreds of vessels missed their calls through the first half of June. This has caused, in its turn, a growing backlog of loaded containers in the Yantian area that will also take many weeks to get resolved. 298 container ships with a combined capacity of over 3 million TEU skipped Yantian between June 1 and June 15 (source: joc.com). These containers will now get slowly positioned from local transhipment hubs.

The congestion in the traditional transhipment ports (Singapore, Port Kelang,…) is not easing either. Several shipping lines stopped offering port pairs that are routed via these transhipment ports because they are temporarily not calling these ports to prevent additional delays and because of the massive container stack awaiting further transport, it is of no use to keep on piling the cargo up.

With the yearly summer peak volumes ahead of us, the shipping lines are curtailing allocation agreements where they can. The ongoing pressure on the capacity out of China is pushing rates to never seen levels out of the entire Asian region. Every time the market thinks the maximum level is reached, the next week the rates go up again.

North Africa

Important Notification - Egypt

As per the communication received from the Egypt Ministry of Finance reference to Decision No. 328 of 2021 amending some provisions of Resolution No. 38 of 2021, there is an extension to the Advance Cargo Information Declaration (ACID) Implementation by three months. The regulations are now scheduled to go live from 1st October 2021 instead of the earlier announced date of 1st July 2021.

Europe

As mentioned in an earlier blogpost, the port of Hamburg is heavily affected by congested terminals, causing shipping lines to divert their vessels to other ports. The congestion is however expanding to the other European ports due to poor schedule reliability with delays in vessel handling.

This is forcing carriers to temporarily cut certain key ports out of their Europe rotations in an attempt to uphold weekly schedules.

Affected ports are Rotterdam, Hamburg, and Le Havre. Whereas not only the Northern French port will suffer a lot due to multiple shipping lines who have decided to cancel services for the next months to/from Le Havre. Also, Rotterdam will be skipped on several Far East slings from different alliances. THE alliance has taken the most far stretched action with skipping Rotterdam on one of their major services for 7 weeks in a row. (THE Alliance consists of Hapag Lloyd, ONE, Yang Ming, and Hyundai).

The effect of no vessel calls means no import volumes in the port, and thus fewer empty containers to use for export. Containers destined for export will need to be delivered to other ports. Most of the volumes will go over the port of Antwerp. The local terminals and shipping lines are concerned that this increase in cargo will create a similar gridlock in Antwerp.

North America

If you have read the past blogposts or if you have consulted other information sources, you are aware that in the US ports the massive backlog of containers in the ports is not getting resolved soon. Where we saw a slight decrease in volumes on the west coast, the summer months traditionally are the peak period for volumes moving ex Asia to the USA. During the summer months, products linked to the Holiday-season (Christmas decorations, …) are getting imported. This is already resulting in even higher rates on the spot market. To benefit from these high rates, MSC and Maersk have both announced a stand-alone service (so apart from the 2M alliance) on the transpacific to accommodate for these volumes. The fact that a lack of containers in Asia is actually the main driver for the rate increases seems to be forgotten.

To aggravate the situation, even more, the heatwave which is hitting Canada and the Northern part of the US has caused several terminals to close due to record-breaking heat to ensure the worker's safety and health.

On the East Coast, the discussions are ongoing to re-accept the return of the empty containers to the port of New York/New Jersey. The fact that empties are no longer allowed to be dropped at the port is causing even fewer truckers to be available in the port area to pick up loaded containers, only adding to the problem of full quays which the port authorities hoped to ease by not allowing the return of empty containers.

With the situation on the inland logistics not getting resolved any time soon, the major shipping lines are withdrawing their agreements for CY-DOOR movements that were in place. Either they simply stop offering it or they ask for an additional charge to give them the possibility to procure inland transportation at higher rates than agreed. Either way, the shipping lines are more and more refraining from assisting on the inland logistics and do not want to be involved with or blamed for high costs that occurred in the ports for having idle containers on the quay awaiting a transport connection by truck or rail.

General

Without any clear signs that the current situation in container logistics will improve, Drewry has estimated that the container carriers will be able to report a profit close to 100 billion dollars in 2021 alone. In contradiction to the record-breaking rates today, the service level given by the shipping lines is at an all-time low. Schedule reliability has never been so poor and the ongoing equipment shortages keep on proving to be a massive hurdle to take in order to manage any reasonable/predictable supply chain.

The delays on terminals and ports, like the container shortages in certain areas, are not solely caused by the shipping lines. The fact however that only little actions are taken to evacuate containers from/to suffering areas or only a few attempts are taken to stabilize sailing schedules is surely in the control of the shipping lines. But in the words of Winston Churchill, ‘never waste a good crisis, the shipping lines are benefiting from the ongoing chaos, and they have little to no sense of urgency to get this situation resolved. To take away any doubt, the stock price of Asian-based carriers Yang Ming and Evergreen sky-rocketed the past 12 months with respectively 2732% and 1716%.

The below image from Drewry also gives a very clear comparison of the premiums that are being paid today ex, in Asia. The graph compares the premiums paid on average of the past 5 years to cover peak seasons. (These values are based on 40’ containers and are in USD). These amounts only represent the premiums, not even considering the already higher basic ocean freight of today ex Asia.