© 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.”

Photo 29000630 © Xuejingwen | Dreamstime.comBy Gavin van Marle

 18/04/2024

With the Red Sea crisis continuing to artificially prop up container spot rates, carriers have largely abandoned the tactic of using blank sailings to adjust supply to suit demand, according to new analysis from Sea-Intelligence.

The structural overcapacity faced by the liner industry has, to a large extent, been mitigated by the Houthi attacks on Red Sea shipping forcing vessel diversions around the Cape of Good Hope.

And while these have directly hit Asia-North Europe, Asia-Mediterranean and a selection of Asia-US east coast services, a ripple effect has seen the impact stretch to other trades.

“On Asia-North America west coast there is a clear systematic trend, since 2022, of a gradual reduction in blank sailings, which has continued and shows a level now approaching almost zero,” said Sea-Intelligence CEO Alan Murphy.

“Even if we take a four-week running average to smooth out the volatility, the underlying trend is the same – a sharp drop in blank sailings in recent weeks,” he added.

Given that blank sailings had been the industry’s prime tool to address sharply declining freight rates, their absence indicated that carriers appeared to have prioritised short-term revenue gains, argued Mr Murphy.

“This suggests that the spot rate decline in itself is not the focal point, as present spot rates are significantly higher than pre-Red Sea crisis, as well as pre-pandemic,” he said.

“Keeping this in mind, and by looking at the blank sailings data, it seems that in the present market environment shipping lines are attempting to capitalise as much as possible from the relatively higher rates, by not curbing capacity.

“The likely result, however, will be continued downwards pressure on spot rates,” he added.

Numbers from the eeSea liner database support his assertion: of the 180 advertised sailings on the Asia-North America west coast for April, 11 have been blanked, and 11 of the 190 advertised for May are set to be blanked.

On the Asia-North Europe trade, just five sailings this month are set to be blanked, out of 84, while for next month, so far not a single blanking has been announced out of the 92 advertised sailings.

It is a similar picture on the Asia-Mediterranean trade: six blankings in April, out of a proforma 95 sailings, and six blankings of 102 sailings so far announced for May.

There are still some blanked sailings – or slidings – taking place, however these largely appear to be due to issues in ports rather than attempts to affect spot rates.

Today, MSC announced that next week’s sailing of the 2M’s Asia-Europe AE55/Griffin sweeper service would be subject to sliding, due to “the ongoing challenging market situation generating congestion and schedule delays across the supply chain”.

The key question of course is what carriers will do should the Red Sea crisis ends, and the true depth of overcapacity is revealed – although given the seizure of the MSC Aries over the weekend, resolution of the conflict appears further away than ever.

MSC Orion Photo: Vessel finder By Martina Li in Taiwan

 30/04/2024

Tight availability of boxships and equipment, last seen during Covid, is replaying as more and more vessels reroute round the Cape of Good Hope.

Linerlytica’s latest report, issued yesterday, says the capacity of boxships diverted to the Cape route will pass the 5m teu mark within weeks, as avoiding the threat of Houthi attacks continues to absorb record newbuilding deliveries.

Yesterday it was reported that the Houthis claimed to have attacked the MSC Orion, in the Arabian Sea, as well as two US naval ships, but the reports have not been confirmed.

Containership fleet capacity stands at 29.37m teu, and will reach 30m teu by the end of June. Although nominal fleet growth has reached 10% year on year, diversion to the Cape has rendered effective capacity growth on the Asia-North Europe, Asia-Mediterranean and transpacific routes at just 3% this year.

Globally, effective capacity on all 33 inter-regional linehaul routes tracked by Linerlytica has shrunk 4% from last year, with reduced capacity deployed on Red Sea/Middle East/Mediterranean routes dragging down the overall average, despite the growth in the main east-west trades.

Demand for ships has filtered through the charter market, which, according to Linerlytica, went into overdrive last week. Liner operators have committed to securing ships at higher rates for longer periods.

CMA CGM, Hapag-Lloyd, Maersk and SeaLead were the most active charterers, extending existing charters while fixing more ships.

SeaLead agreed to charter the 2010-built 6,758 teu Racine from Danaos for $32,500/day for two years, while Hapag-Lloyd chartered Euroseas’ newly built 2,782 teu Leonidas Z for $20,000/day for 23-25 months.

The consultancy said: “Tonnage demand is still not fully covered, despite the high level of new ship deliveries, as the surging freight market is supporting the rise in charter rates in all segments except for the 1,100 teu and smaller sizes. Container equipment and prompt vessels remain in short supply. New containers produced in China are booked until the end of June, while charter rates are rising sharply for ships above 1,700 teu.”

Mai Boliang, chairman and CEO of China International Marine Containers, the world’s largest container manufacturer, said in March that a rebound in container demand had been seen since Q4 23, when the Red Sea crisis started.

And the shortage of ships and containers is forcing carriers to increase vessel speeds again, with ships on the Cape route doing 18-20 knots currently.

The 24,188 TEU capacity OOCL Spain pictured at the Nantong COSCO KHI Ship Engineering (NACKS) shipyard in Nantong, China. Photo courtesy OOCL

Alphaliner reports a record month for containership newbuild deliveries in April, surpassing the previous record set in March.

A staggering 50 new ships were delivered in April, adding up to a remarkable 333,000 twenty-foot equivalent units (TEUs) of capacity, compared to the previous high of 41 new vessels and 260,000 TEUs delivered in March, according to Alphaliner.

Chinese shipyards led the surge in deliveries, with 37 ships representing 221,000 TEUs delivered in April. Korean yards followed closely with nine ships and 94,100 TEUs, while Japanese yards delivered four newbuildings representing 17,900 TEUs.

China’s COSCO Group led in terms of carriers, adding five ships representing 58,700 TEUs to its COSCO SHIPPING and OOCL brands. MSC closely followed with an addition of five ships and 58,600 TEUs.

Despite overcapacity concerns heading into 2024, Alphaliner notes that the liner shipping market has been able to effectively absorb the new capacity due to diversions via the Cape of Good Hope and additional slow-steaming from to stricter environmental regulations.

Alphaliner numbers showed previously that, as of January 1, 2024, the cellular container fleet stood at 5,977 ships with a capacity of 28.13 million TEUs following the delivery of 350 newbuilds and 2.3 million TEUs in 2023.

A separate analysis by BIMCO showed that in 2024, a whopping 478 containerships with a capacity of approximately 3.1 million TEUs are scheduled for delivery this year, increasing the the global fleet by 10%.

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 Adis Ajdin May 2, 2024 (by Splash 247.com)

Danish liner giant Maersk has lifted the lower end of its full-year guidance as it expects the robust box market amid Red Sea disruptions to continue into the second half of the year.

The Copenhagen-based shipping and logistics group said its first-quarter profit of $208m on revenue of $12.4bn against last year’s $2.3bn and revenue of $14.2bn was in line with its expectations. The company’s share of net earnings stood at $177m.

The Vincent Clerc-led company, still standing second in the contanerline rankings, has diverted ships around south of the Cape of Good Hope since December to avoid attacks by Houthi militants on vessels in the Red Sea, sending rates higher due to the longer sailing times.

“This not only supported a recovery in the first quarter compared with the previous quarter, but it also provided an improved outlook for the coming quarters. We now expect these conditions to stay with us for most of the year,” Clerc said in a release.

With the Red Sea crisis still ongoing, Maersk noted that the Africa re-routing it to be extended potentially for the remainder of the year, suggesting an uplift in earnings.

Maersk said it now expects full-year underlying earnings before interest, tax, depreciation and amortisation (EBITDA) this year between $4bn and $6bn, againts its previous guidance starting at $1bn. First-quarter EBITDA fell to $1.59bn from $3.97bn a year earlier, beating market expectations by some $130m.

Nevertheless, the company reiterated its previous warning that a wave of new boxships entering the market in the coming years would cause overcapacity and potentially impact its bottom line.

“We still anticipate the high number of new vessels being delivered during this and next year to eventually offset these factors and put ocean markets under renewed pressure,” Clerc added.

in International Shipping News (Hellenic Shipping News)

The global trade landscape saw positive growth in the first quarter of 2023, as both goods and services trade rebounded from the downturn experienced in the previous year, according to the June 2023 UNCTAD Global Trade Update. Yet while trade volumes and values increased during this period, the forecast for the second quarter of 2023 suggests a slowdown and a challenging outlook for the rest of the year.

After a decline in the second half of 2022, trade in goods made a strong recovery in Q1 2023, adding approximately $100 billion compared with Q4 2022. This growth was primarily driven by a revival of economic activity in China and increased trade in road vehicles and pharmaceuticals. Similarly, the trade in the services sector displayed resilience throughout 2022 and experienced 2.8% growth in Q1 2023, partly attributed to the ongoing rebound in tourism and travel following the Covid-19 pandemic.

Various negative factors contribute to this outlook, including geopolitical tensions, the war in Ukraine, weakening global economy, potential rise in trade restrictive measures, slowing industrial output, inflationary pressures, and concerns of debt sustainability.

Mixed trade growth

On a yearly basis, both imports and exports of developing countries experienced an average growth rate of 6%. However, excluding East Asian economies, the growth rate for developing countries reached approximately 14%. While most regions displayed positive trade growth on a yearly basis, trade growth in East Asia remained below average. On a quarter-over-quarter basis, Q1 2023 saw a decline in trade values in most regions, except for the Pacific region, North America, and Africa. Notably, intra-regional trade in Africa outperformed other regions, showing a 3% increase.

During 2022 and Q1 2023, the geographical proximity of international trade remained relatively stable, indicating a lack of significant nearshoring or far-shoring trends. However, there was an increase in the political proximity of trade, suggesting a shift towards prioritising countries that share similar political values, described as ‘friend-shoring’ by UNCTAD.

The war in Ukraine, the US-China trade decoupling, and Brexit played significant roles in shaping these bilateral trade trends.

The International Monetary Fund has warned of the risks of ‘friend-shoring’. Pinelopi K Goldberg, Elihu Professor of Economics and Global Affairs and an affiliate of the Economic Growth Center at Yale University, and Tristan Reed, an economist with the World Bank’s Development Research Group, said that while trading exclusively with “friendly” countries may imply greater resilience to geopolitical risks—at least in the near term—the concept of friendship is itself subject to “constant change”. It may, they said, lead to less resilience to other types of shocks, such as the recent health shock.

Added to which, restricted trade could lead to greater inequality within countries. “Greater trade barriers lead to higher prices, which mean lower real wages,” they said. “Globalisation may have contributed to more spatial inequality, but protectionism is not the cure: it will likely make the problem worse. Across countries, there is a risk of increased global inequality.”

Geoeconomic fragmentation could, they said, lead to more trade between high-income economies that are “friends”. Increasing emphasis on environmental and labour standards in trade agreements would raise entry barriers for very poor countries that find it difficult to meet these requirements. “Without access to lucrative foreign markets, there is no clear path for poverty reduction and development in such economies.”

Energy’s role

UNCTAD’s Global Trade Update noted that the energy sector has had a notable impact on global trade trends over the past year, with higher energy prices leading to increased trade values. Other sectors that experienced trade growth included agri-food products, apparel, chemicals, and road vehicles. Conversely, trade declined in the office and communication equipment as well as the transport sectors. In Q1 2023, the energy sector and office and communication equipment saw a reversal in trade values, while sectors like metals, chemicals, minerals, pharmaceuticals, and motor vehicles witnessed increased trade.

The IMF economists have, meanwhile, looked in more detail at globalisation’s impact on trade.

When measured in US dollars, global trade growth slowed after the global financial crisis in 2008–09 and declined sharply at the onset of the pandemic in 2020. But since then, trade has rebounded to the highest value ever.”

They added: “As a share of GDP, global trade has fallen modestly, driven mostly by China—which for years has pursued a ‘dual circulation’ strategy of prioritising domestic consumption while remaining open to international trade and investment—and India.”

Their analysis revealed a decline in global trade as a percentage of GDP, mainly due to China and India’s shift in priorities. These countries have experienced an end to the exceptional export booms they previously enjoyed, along with a decrease in imports of intermediate goods compared with previous years.

However, the economists emphasised that “as a share of GDP, imports of intermediates by the rest of the world are still growing”. This highlights that despite the decline in trade as a percentage of GDP in some countries, the rest of the world continues to experience growth in both imports and exports of intermediates.
Source: Baltic Exchange

in International Shipping News (Hellenic Shipping News)

Global trade remained in the doldrums during the second quarter as China’s post-lockdown rebound proved slower than expected and was offset by continued weakness in North America and Europe.

Seasonally-adjusted trade volumes were no higher in the three months from February to April 2023 than they had been 17 months earlier in the three months from September to November 2021.

Volumes were down in three of the first four months of 2023 compared with a year earlier, according to the Netherlands Bureau of Economic Policy Analysis (“World trade monitor”, CPB, June 23).

Growth from China and to a lesser extent other emerging markets in Asia was offset by a small contraction from the United States and much larger ones from Japan, the European Union and especially the United Kingdom.

Britain’s reputation as the sick man of the global economy was cemented by the fastest contraction in both import and export volumes from February to April, more than twice as fast as any other major economic area.

China’s freight movements have rebounded as the country emerged from lockdowns and the exit wave of the epidemic, though not as fast as anticipated at the start of the year.

China’s coastal ports reported container throughput rose by 4% in the first four months of 2023 compared with the same period in 2022, according to the Ministry of Transport.

The port of Singapore, which acts as one of the major transshipment hubs between China, the rest of East Asia and Europe, also reported an increase in container throughput of 3% in the first five months of 2023.

But in other regions freight remained lower than a year ago, as consumer spending rotated from merchandise back to services after the pandemic, and rising interest rates hit spending on durable goods by both households and firms.

Traffic at seven of the nine major U.S. container ports (Los Angeles, Long Beach, Oakland, Houston, Charleston, Savannah and Virginia excluding Seattle and New York) was down 16% in the first five months of 2023.

The number of shipping containers hauled on the major U.S. railroads, many en route to and from the ports, was down by 10% in the first four months of 2023, according to the Association of American Railroads.

Truck tonnage movements were also down by a little under 1% compared with the same period a year earlier, based on data from the American Trucking Association.

At Japan’s Narita airport, international air cargo was down 25% in the first five months of 2023 compared with a year ago.

Freight through London’s Heathrow airport was down 8% in the first five months of 2023 at the lowest level since the pandemic in 2020 and before that the financial crisis and recession in 2009.

Some freight is likely to have been shifted from air to sea as supply chain bottlenecks ease and shippers focus on cost control, but the downturn in merchandise shipments is unmistakeable across the advanced economies.

The most optimistic interpretation is that freight volumes have stabilised, after declining sharply in the second half of 2022, but there is no sign yet of a recovery outside China.
Source: Reuters (By John Kemp, Editing by Barbara Lewis)