Yantian Port. Credit Gigel.atat.

By Gavin van Marle, Loadstar 05/07/2024

Since the 1 July implementation of a series of peak season surcharges (PSS) and new FAK (freight all kinds) levels, the largest east-west container trades have seen a week of double-digit spot freight rate increases.

After several weeks in which most of the focus was on soaring spot rates on the Asia-Europe trades, this week it was the turn of the Asia-North America trades to post the largest increases.

Drewry’s World Container Index reading for its Shanghai-Los Angeles leg grew 12%, to finish at $7,472 per 40ft, while Xeneta’s XSI’s Asia-US west coast leg recorded a rate of $7,648 per 40ft.

Meanwhile, the WCI’s Shanghai-New York leg grew 17%, to end the week at $9,158 per 40ft, and the XSI tracked a similar trend to $1,146 per 40ft.

The WCI’s Shanghai-Rotterdam leg also saw double-digit growth, rising 10% to reach $8,056 per 40ft, with the XSI’s Far East-North Europe growing a similar amount, recording a rate of $7,897 per 40ft yesterday.

However, it is also clear that many forwarders and shippers are paying well above the quoted indexed rates in order to secure space in an increasingly strong demand environment, a situation that – on Asia-Europe trades at least – is now beginning to impact major box shippers with significant amounts of contracted volumes.

Freight forwarders in Europe this week told The Loadstar major shippers were being forced to pay space guarantee surcharges on at least a part of their volumes.

“Importers and big BCOs are now beginning to see the effect, with space getting ever tighter,” one forwarder said.

“Even if their carrier has maintained its full commitment in terms of volumes – every carrier is down 30% to 40%, in terms of space – so from the middle of July, retailers that were on contracts are now having to accept $3,000-$4,000 increases on a least a portion of their boxes to get them loaded.

“Some of the multinationals are buffered, but we are now talking to all sorts of importers that previously wouldn’t give us the time of day; now they are calling us to see if we have any loading options – and it’s almost accepted that higher rates are here and paying them is the only way to get cargo onboard vessels.

“This will remain elevated until Golden Week,” he added, which appeared to be a common consensus this week.

Another said that spot rates on Asia-North Europe had already breached $10,000 for many customers, and claimed the elevated pricing would continue until China’s Golden Week holiday, which begins on 1 October – and could even persist until the second quarter of next year.

“I think this is an early peak season, but I also believe this will continue to Golden Week – after speaking with customers they are mindful of the current challenges and do not want to be in a situation where they have no stock for Christmas, and are forecasting strong orders until at least then.

“Should the peak last that long, there is only four-to-six weeks before we start to ramp up for the peak just before Chinese New Year, so realistically the market will not start to come down significantly until Q2 next year, even with extra capacity coming in,” he said.

Another believed there could well be a further 50% increase between now and Golden Week.

“Demand in July and August is quite strong, so we are predicting that a ceiling of $15,000 is not unrealistic,” he said adding that there was very little vessel space for at least the next month.

“We are now booking four weeks ahead for some retailers and it’s the soonest we can do. If a booking is released, 9 August is the first ship I can get onto.”

Maersk ship entering the Port of Rotterdam. Photo: Shutterstock

Container Spot Rates Set to Rise Further

Mike Schuler, June 14, 2024

Ocean freight container shipping spot rates are set to increase further, but growth may be slowing, according to ocean freight rate benchmarking firm Xeneta.

Xeneta data indicates average spot rates from the Far East to the US West Coast are expected to rise by 4.8%, reaching USD 6,178 per 40ft equivalent container (FEU). This contrasts with a 20% increase on the same trade earlier in the month. Similarly, rates from the Far East into the US East Coast should go up by 3.9% to stand at USD 7,114 per FEU, a more moderate jump than the 15% increase on June 1st.

These increases, while less dramatic than previous ones, still present a challenging situation for shippers, as some face the potential of not being able to ship containers on existing long-term contracts.

The rates from the Far East to North Europe are set to rise by 10% on June 15th, hitting USD 6,357 per FEU. Meanwhile, rates from the Far East to the Mediterranean should go up by 7.2%, reaching USD 7,048 per FEU.

Peter Sand, Xeneta Chief Analyst, says the market remains challenging with ongoing conflict in the Red Sea region, port congestion, equipment shortages, and potential labor issues at US ports.

“With ongoing conflict in the Red Sea region, congestion at ports in the Mediterranean and Asia, equipment shortages and shippers frontloading imports ahead of the Q3 peak season, the pressure within the ocean freight container shipping system is still at severe levels,” Sand said.

He also pointed out the potential impact of increasing spot rates on inflation in the US and Europe if these costs are passed on to consumers. Compared to mid-December, average spot rates from the Far East have increased by 276% into the US West Coast and 316% into North Europe due to the conflict in the Red Sea. However, he noted that predicting the market accurately is challenging given the number of factors in play, including potential ceasefires and union actions at US ports.

“At the moment it is unlikely – but not impossible – that spot rates will reach the levels seen during the Covid-19 pandemic but there are so many factors in play it is not possible to predict the market with any degree of certainty,” said Sand.

Fadhlur Rahman Abd Raffar | Dreamstime.com

By Angelo Mathais, India Correspondent 18/06/2024

Soaring demand is allowing container lines serving Indian trades to flex their pricing muscles on intra-Asia services, especially out of China.

Average spot rates from North China (Tianjin) to West India (Nhava Sheva or Mundra) have exceeded $5,000 for a 40ft container booking, according to market sources.

The rate push is not just for Chinese ports alone. Prices for India-bound shipments from other Far East locations, such as Singapore, Port Klang and Hong Kong have rocketed.

For Singapore-India, carriers are now selling space at $4,500 per 40ft, a sharp jump from the $1,100 they were quoting last month.

Simply put, intra-Asia rates into India have generally seen increases of 200% to 250% over the past month, data from market sources reveals.

And vessel capacity remains acutely tight, because of fewer sailings and schedule disruptions, often causing cargo rollovers for Indian importers, according to shipper sources.

“Shipping costs from China have become a painful thorn for Indian imports,” one senior executive at a Mumbai-based industrial house told The Loadstar. “Nobody wants their production line affected, so we are being forced to pay higher freight rates.”

The source also noted that port congestion problems plaguing Singapore, Port Klang and other South-east Asia hubs had made sailing schedules erratic and transit times unpredictable.

“It’s a guessing game on cargo delivery schedules,” said the official.

And Jitendra Srivastava, CEO of Mumbai-based freight forwarder Triton Logistics & Maritime told The Loadstar the capacity-stressed situation for Indian shippers was expected to last until February.

As container lines increasingly concentrate on the lucrative Chinese trade, with more regional operators jumping onto the demand bandwagon, Indian ports are also seeing a rush of empty equipment outflows, particularly at Mundra Port, in some part, due to major lines repositioning into China.

“Empty evacuation means an additional move from the empty yard to the port, thus creating pressure on the dockside,” a port executive told The Loadstar.

Shortage of equipment will be a concern for Indian exporters, as trade prospects brighten. India’s merchandise export trade reported an impressive 9% year-on-year increase in May, according to new provisional government data.

“A positive growth momentum for the second month in a row on the back of buoyant order bookings goes to show the resilience of the export sector and Indian exporting community,” said Ashwani Kumar, president of the Federation of Indian Export Organisations.

Pushpank Kaushik, CEO of Hyderabad-based ship agent and forwarder Jassper Shipping, also believes this capacity pressure could cause some trade impacts for India, given that China remains its largest trading partner.

“The combination of high demand and limited capacity is resulting in increased costs and cargo delays,” he said. “Addressing vessel shortages is crucial to keep two-way trade flowing,” he added.

A French frigate under participating in operation EUNAVFOR ASPIDES supports commercial vessels in the Red Sea and in the Gulf of Aden.

Industry Mixed on Duration of Prolonged Red Sea Crisis

Mike Schuler, June 17, 2024

The maritime industry faces an uncertain future due to the ongoing Red Sea crisis, with a majority of industry insiders predicting the issues will continue throughout this year and even extend into 2025, warns Drewry, a leading maritime industry consultant.

Since November, the Iranian-backed Houthis in Yemen have launched numerous attacks on merchant ships in the Red Sea and Gulf of Aden, compelling most shipping services to reroute around the Cape of Good Hope, thereby avoiding the more-direct Suez Canal. The crisis has led to an unexpected extended period of disruption, marked by longer voyages, growing risks, and increased costs.

Since May, the industry has witnessed a resurgence of capacity challenges, coupled with skyrocketing spot freight rates, severe port delays, and an unanticipated surge in volumes. The Drewry World Container Index, a key indicator of spot rates on eight key East-West routes, showed a 74% spike between late April and early June.

Drewry has identified four main factors driving the pricing increases. Despite carriers adding multiple ships to their East-West services to counter shortages due to Red Sea re-routings, effective capacity growth has been relatively stagnant. Drewry highlights that a 24% increase in ships and a 17% increase in total capacity on the Asia-North Europe route resulted in just a 2% increase in monthly effective capacity.

Another contributing factor is demand growth. Drewry points out that container volumes on the Transpacific and other routes have been surprisingly strong, with U.S. containerized imports predicted to hit 2.1 million TEU in May, an 8% year-on-year increase.

Shipper behaviour has also played a role. A Drewry survey suggests that some international shippers are shipping earlier this year, leading to capacity strains and delays. However, this early peak season is considered a short-term market shift.

Finally, operational disruptions have escalated, with port productivity declining and longer waiting times for berthing. Asian transhipment ports, in particular, are seeing near-record container densities, further hampering supply.

A recent Drewry survey regarding predictions for the end of Red Sea diversions paints a grim picture, with less than 17% of the 90 respondents expecting the diversions to end before the end of this year, while the majority of respondents (60%) predict that the current situation will end in the first half of 2025. The second most popular prediction is the second half of 2024, followed by the second half of 2025 and the first half of 2026. Only 3% of respondents do not foresee an end before the end of 2026.

Alternatively, following the end of Red Sea diversions, most respondents (43%) predict a 3-month normalization period for liner operations, followed by 27% who believe it will take longer than 3 months, and 25% who expect a 2-month period.

 Sam Chambers (Splash 247.com) May 13, 2024

After a decade of declining output, shipyard production has begun to edge up in recent years with deliveries in Q1 reaching a seven-year quarterly high of 10.1m cgt, according to new data from Clarksons Research. Clarksons is projecting a 15% increase in shipyard output for full year 2024 to 40.6m cgt. 

“With increased pricing (up ~40% since 2020, albeit with significantly increased costs for yards), a strong forward orderbook (3.5 years versus 2.5 years) and good, cross-sector, order demand, shipyard capacity has been a limiting factor in output,” Clarksons noted in its most recent weekly report.

The total number of active yards has dropped by two-thirds since 2010, according to the British broker. 

Analysts at Danish Ship Finance are bullish on the outlook for the shipbuilding industry, but only in the short term, with global utilisation rates forecast to peak in 2024 before potentially softening in the following two years. 

“Continuously firm contracting activity and limited yard availability are pushing newbuilding prices ever closer to an all-time high,” Danish Ship Finance noted in a report issued last week.

Since the start of 2023, annual global yard capacity has increased by 6m cgt to 59m cgt, according to Danish Ship Finance. 

“Additional active second-tier yards in China have been the main contributor to this growth,” the report noted. 

Splash has been reporting a great deal about new shipyard capacity hitting the market.

For instance, Jiangsu-based New Times Shipbuilding, one of China’s largest privately owned shipyards, is awaiting government approval for a new drydock with broker Gibson reporting Q1 2027 deliveries will open up once the yard gets the green light. 

After several years of capacity reduction, last year saw several attempts to reopen some Chinese facilities. 

Hengli Heavy Industries Group, a subsidiary of the Hengli Group, is running the assets of STX Dalian. The yard restarted in January 2023. 

In August 2023, Wuhu Shipyard took over the land and facilities of the former Samjin Shipbuilding Industry part of the automobile group Chery. 

Kouan Shipyard has been going through a reorganisation process since 2019 and is currently building blocks and ships for the account of third-party shipbuilders including Dajin, Taizhou Changqin and Taizhou Changyue. 

Jiangxi New Jiangzhou Shipbuilding lndustry was established on March 31, 2023. The main investors are Qinshi (Xiamen) Trading and Jiangsu Yangchuan Investment Development. Qinshi (Xiamen) is the parent company of a listed company, Bestway Marine & Energy Technology, whereas Jiangsu Yangchuan is a subsidiary of Yangzijiang Shipbuilding Group. The yard has signed contracts for stainless steel tankers with Chinese buyers. 

Private company Fujian Guanhai Shipbuilding, which stopped production in 2013 and went bankrupt in 2019, has now been taken over by Fujian’s private steel giant Jinshenglan Group and renamed the Fujian Songmin Group. 

Quanzhou Shipyard, which was established in 2004 and entered bankruptcy in 2019, reached an agreement with a local government-owned company to invest and reorganise the yard. In September 2023, a ceremony was held for the resumption of work and production. 

The Review of Maritime Transport 2023, published in September by the United Nations Conference on Trade and Development (UNCTAD), urged shipyards to expand quickly to aid with shipping’s green transition.

“Shipyard capacity is currently facing constraints. Tanker and dry bulk owners are anticipating long waiting times and high building prices. Increasing shipbuilding capacity is crucial to ensure that shipping meets global demand and its sustainability goals,” the UNCTAD report stated.

While many other analysts are predicting bottlenecks at shipyards, with shipbuilding executives mulling expansion plans for the first time since the global financial crisis, the Danish Ship Finance report takes a contrarian view, based on how it sees seaborne trade volumes declining in the coming decades. Demand for shipyard capacity may decline by 25% towards 2040, the Danish report predicted. 

 

Sam Chambers, (Splash 247.com) May 14, 2024

India’s shipping minister, Sarbananda Sonowal, was in Iran yesterday for the official signing of a 10-year contract to jointly run Chabahar port, a giant complex that has been on the drawing board for more than a decade. 

At the event, Sonowal’s Iranian counterpart, Mehrdad Bazrpash, hinted that the two countries could reestablish a joint venture shipping line. Through to 2013, the two countries used to run Irano Hind Shipping together, a company that was eventually disbanded as sanctions rained in on Tehran. 

On signing the 10-year port agreement, Sonowal said, “Today is a historic day for the maritime sector of the region as India and Iran signed this long term agreement on Chabahar Port heralding a new age of trade, marine cooperation as well as transhipment while boosting trilateral trade among India, Iran and Afghanistan.”

Located in Sistan-Baluchistan province on Iran’s southwestern coast, Chabahar is located on the Arabian Sea with easy access from India’s west coast. For shippers from landlocked Afghanistan, it gives an alternative outlet to the Pakistani ports of Gwader and Karachi.

Chabahar will be run by India Ports Global (IPGL) and an Iranian state-backed port operator. IPGL first took over operations of the port at the end of 2018. 

IPGL, which is 100% owned by the Ministry of Ports, Shipping and Waterways, has also recently won the rights to operate another overseas port at Sittwe in Myanmar. 

© Narisa Hongsuwan

By Martina Li in Taiwan, Loadstar 14/05/2024

Container output reached 521,000 teu last month – a post-Covid peak, according to Linerlytica today.

And its report adds that all manufacturing slots in container factories are reserved until the end of July, with more than 4m teu of new boxes expected to be delivered this year – more than double the 1.97m teu produced in 2023.

Container production achieved a record high in 2021, with more than 6m teu built to meet the demand caused by the slow return of empty containers during the pandemic.

Linerlytica said: “Carriers are fanning the panic, with Maersk claiming capacity loss on the Asia-Europe and Mediterranean routes has reached 15-20%. Although the effective capacity situation is not as dire as the carrier suggests, the strong demand has taken the market by surprise, with box equipment and vessels also in short supply.”

Its report shows that so far this year, of the mainline operators MSC has ordered the most containers, just under 400,000 teu, followed by ONE and Evergreen.

Last week, Cosco Shipping Development (CSD), the holding company for Dong Fang Container, the world’s second-largest box manufacturer, and equipment lessor Florens, suggested at a post-results briefing that container demand was expected to stabilise this year, after demand plunged in 2023.

In Q1 24, CSD’s net profit of CNY447m ($61.91m) was up 12% on Q1 23, as demand recovered. In contrast, net profit last year fell 64% year on year, to CNY1.41bn.

CSD chairman Zhang Mingwen said: “Since the fourth quarter of 2023, container shipping has recovered rapidly, due to the impact of the Red Sea situation, which has pushed up container demand to a certain extent.

“In fact, this year, the Red Sea situation has slowed container turnover, the allocation of ships and shipments before Chinese New Year. Due to this, liner operators and shippers are more willing to buy containers. We predict that the demand for new containers and the need to replace old boxes, as well as new container applications will give us a strong foundation this year.”

Dong Fang has no dry container slots available until after August, while reefers are all booked until July.

© Mr.siwabud Veerapaisarn

By Martina Li in Taiwan, Loadstar 07/05/2024

Trading of China’s container shipping futures (CoFIF) rallied last week, as Middle East peace talks collapsed and Israel indicated it was going to attack Rafah.

Rates on the two main Asia-North Europe futures contracts, EC2406 and EC2408, traded higher on 30 April and yesterday, despite the shortened work week due to the US Labour Day holiday on 1-2 May.

Both contracts rallied as Israeli prime minister Benjamin Netanyahu said Hamas’s proposed ceasefire deal fell short of meeting Israel’s demands.

EC2406 and EC2408 contributed nearly 80% of daily trading volumes, while the longer-dated contracts for EC2412, EC2502 and newly launched EC2504 tactically sold off as trading hedges.

Average daily volumes were unchanged but open interest was up 15% on the previous week, indicating that shippers believe rates will stay elevated.

EC2406 contracts rose for the third consecutive week, gaining 11% to reach 3,101 for the week, and currently trade at 40+% premium on the latest rate of $2,209 per teu, published by the Shanghai Containerised Freight Index (SCFI) on 26 April.

Linerlytica’s latest report, today, notes that spot market rates have risen by almost $1,000/feu over the past month, with capacity utilisation at its highest level since January 2023.

Linerlytica says: “Further gains are imminent, with the CoFIF freight futures for end-June contracts currently trading at a 40% premium to the SCFI. Capacity utilisation to North Europe jumped to a three-year high, with capacity still constrained by the Red Sea diversions.”

Overcapacity concerns are on the backburner, with containership diversions to the Cape of Good Hope effectively removing more than 7% of the total fleet.

And Container xChange’s Container Price Sentiment Index suggests an expectation of stable and gradual price increases over the coming weeks. Prices for a 40ft container now stand at $2,500-$2,700, up 13%-17% on last month. Container xChange suggests container sellers may be hoarding stocks in anticipation of further price hikes this month.

It added: “Traders in China are witnessing significant volatility, with new container prices emerging every 48 hours, reflecting the market’s sensitivity to geopolitical tensions and uncertainties. Depots in the US and Europe are reporting higher utilisation rates, with increased equipment usage fees and storage rental charges since the Houthi attacks began in November.”

Photo: Unifeeder

By Angelo Mathais, India correspondent, Loadstar 07/05/2024

The Red Sea-altered, or ‘new normal’, container flows seem to have given niche feeder and regional ship operators a “beachhead” in the supply chain service provider market, as mainline carriers re-adjust port calls to maintain service schedules.

A new feeder service between China and the Middle East by Unifeeder is the latest example of that expanded reach: the China Gulf Express (CGE) loop begins on 19 May on a declared rotation of Shanghai, Ningbo, Shekou, Jebel Ali and Shanghai.

Unifeeder explained: “This 35-day round voyage offers competitive transit times, brings China closer to the Middle East and is positioned to enable transhipment connectivity via Jebel Ali to the Persian Gulf, Red Sea, East and South Africa and Pakistan.”

Part of DP World Marine Services, Unifeeder added that CGE offered a fixed weekly schedule and would accept bookings for both dry and reefer loads.

The Denmark-based operator has significantly expanded its global service network in recent years as shortsea shipping opportunities grew amid the frequent disruptions to the traditional supply chain ecosystem. For example, in February, Unifeeder launched a Colombia-Panama route, linking Turbo, Santa Marta, Cartagena, Barranquilla and Manzanillo.

DP World Marine Services claims to have added some 20 new shipping routes since late 2022, including the Vietnam-Indonesia Service (VIS) in April 2023 and the India-Middle East Service (IMS) last August.

Last month, Unifeeder added Venezuela to its Latin American network and, looking to expand operations in the region, this month opened its first office in Panama City, which it called “a key step forward in our strategy to become the logistics partner of choice in the region”.

From a broader trade perspective, the heightened industry focus around transhipment came as the detour from the Suez Canal via southern Africa forced long-haul carriers to suspend or scale back direct calls to many Persian Gulf ports.

To deal with these connectivity challenges, major lines like MSC and CMA CGM have opened an array of intra-Gulf feeder connections to aggregate cargo for available capacity. The Sri Lankan port of Colombo has been a notable beneficiary, logging a 24% year-on-year increase in Q1 transhipment volumes, according to available data.

“The disrupted market and service reliability pressures is conducive for shortsea service providers to sell their offerings,” an industry observer told The Loadstar, adding: “Shortsea demand will continue to build, as the container industry seems to be in a period of prolonged volatility.”

And other regional carriers have also joined the race for market share gains. Dubai-based Emirates Shipping Line has announced a two-string revamped network between South-east Asia, India and the Gulf to replace its Vietnam-Gulf-India  service. Starting 16 May, the first new loop will rotate Laem Chabang, Singapore, Port Klang, Nhava Sheva, Jebel Ali, Dammam, Nhava Sheva and Port Klang.

The second ESL loop will feature calls at Port Klang, Cai Mep, Jakarta, Port Klang, Mundra, Jebel Ali, Dammam, Mundra, Port Klang and Laem Chabang.

“The call at Jakarta marks ESL’s expansion into the Indonesian market,” said the carrier. “The country presents immense potential, with a positive macroeconomic outlook and a strong domestic market.”

© Jason Row |By Martina Li in Taiwan, Loadstar  01/05/2024

Liner operators should not be too confident that Q2 will be any better than Q1, despite the Red Sea crisis absorbing the tonnage overhang, said Yang Ming chairman Cheng Cheng-mount this week.

Mr Cheng, who is also chairman of the Taipei Shipowners’ Association, told its members: “The rerouting of ships round the Cape of Good Hope has merely distracted attention from structural overcapacity. Furthermore, market risks, such as China’s real estate and economic problems, the uncertainty of the US Federal Reserve’s interest rate cuts and the Russia-Ukraine war, have not disappeared.”

Yang Ming has not yet released its Q1 24 results, but data from the Taiwan Stock Exchange shows cumulative revenue of TW$43.8bn ($1.37bn) in the first three months, up 16% from Q1 23, as freight rates rose amid the Red Sea crisis.

Mr Cheng added that even if Israel reached a ceasefire with Hamas, reverting to Suez Canal transits would not happen overnight, as liner operators would need to adjust shipping schedules.

Houthi attacks have caused vessels totalling around 5m teu of capacity on Asia-Europe lanes to detour round the Cape of Good Hope from the Suez Canal route.

He said: “I expect the diversions to continue as long as the Houthi attacks continue. Mainline operators have to watch the market quarter after quarter.”

While Evergreen had indicated recently that shippers had become more decisive in signing long-term transpacific shipping contracts, ahead of two rounds of GRIs this month, Mr Cheng declined to discuss contractual commitments at Yang Ming, citing business sensitivity.

He explained: “The market can fluctuate dramatically and it’s difficult to predict freight rates each month. We can only deploy ships according to market demand and try to meet our customers’ needs.

“The PMI of major economies has returned to more than 50%, which is an important signal of economic recovery.”