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The yawning gap between container shipping spot rates and contract rates leaves a question on how much volume shippers will commit to contracts when they renegotiate.

Marcus Hand | Dec 21, 2022 Seatrade Maritime News

Container shipping spot rates have crumbled since the start of the year and in early December Drewry’s World Container Index (WCI) was 79% below the peak of $10,377 reached in September 2021.

The quarterly Global Shippers Forum (GSF)/MDS Transmodal Container Shipping Market Review noted that in Q3 spot rates fell by a fifth “leaving many shippers ‘burnt’ by their decisions to commit to long-term contacts earlier in the year”.

According to Xeneta in report at the start of December spot rates on Asia – Europe had gone from a position of a $5,640 per feu premium on 1 January 2022, to sit at $4,460 below long-term rates on 1 December. On the Asia – US East Coast trade the gulf was even larger with contract rates at 237% premium to spot rates at the start of December.

James Hookham, Director of Global Shippers Council, noted a decline in volumes in Q2 had turned into a sustained decline, market conditions not seen in a decade.

The resulting combination of market conditions could well see shippers committing lesser volumes to contracts with lines.

“The widening gap between spot rates and contact prices agreed six months prior to these data will anger shippers further and demands a flexible and immediate response by carriers if their dream of securing a majority of their business on contracted terms is to be achieved,” Hookham said.

“The big question going into 2023 will be how much of their diminished volumes will shippers commit to renegotiated contracts and how much will they reserve for the spot market, which is expected to fall to below pre-Covid levels in the next few weeks?”

The strategy of reserving cargoes for the spot market could run foul of efforts by lines to shore up rates by blanking sailings and even putting tonnage into lay-up. While reduced capacity has so far failed to stem the tide the fall of spot rates, greater spot cargo demand could tip that balance, in particular if vessels have been laid-up.

“Countering this trend will be efforts to manage capacity through ‘blanked sailings’ However, the extent to which spot rates are being supported by this permitted co-ordination between consortia partners is playing out just as competition authorities in Europe and North America are evaluating existing anti-trust measures and considering possible options for the future,” Hookham commented.

Photo: Dalian Port

Container volume at eight major Chinese ports increased 2% year-on-year in late November buoyed by domestic cargo.

Katherine Si | Dec 23, 2022 Seatrade Maritime News

Export container volume dropped 3.5% while the domestic volume grew 26.4%. The port of Dalian posted a growth rate of over 20%. In November, foreign trading empty container volume increased 23.73% while the loaded container volume declined 9.7%.

Cargo throughput at major coastal hub ports dropped 7.65%. The international trading cargo throughput declined 10.53% while domestic volume also fell 4.88%.

Crude oil shipments at major coastal dropped 0.5% year-on-year. Among which, the northern port of Dalian reported a strong surge of 75%. 

Metal ore shipments at major Chinese ports declined 17.8% while the port inventory grew 0.22%.

In late November, cargo throughput and container volume at three major Yangtze river ports, Nanjing, Wuhan and Chongqing grew 6.7% and 25.6% year-on-year, respectively. 

For the whole month of November, major coastal ports’ cargo throughput increased 0.8% year-on-year. Container volume of eight major ports increased 5.3%. Demands from manufacturing industry and both overseas and domestic markets all falling in November.

 Sam Chambers December 14, 2022 Splash247.com

 12,499 1 minute read

With the first significant amount of boxships being put up for recycling as the container market sinks to pre-covid levels, analysts are anticipating a significant swathe of vintage tonnage to be torched in the coming weeks and months.

Wan Hai Lines of Taiwan has put 10 small boxships up for recycling and there are reports of another five ships from different companies all ready to be scrapped.

“These recycling sales in quick succession could signal the start of what could become a massive wave of containership demolitions, triggered by the looming overcapacity and the new carbon regulations expected in 2023,” Alphaliner noted in its most recent weekly report, observing that demolition of cellular container tonnage has been at an all-time low in 2022.

As well as a record orderbook set to deliver over the coming couple of years, carriers are having to contend with a significantly worsening demand environment.

“The ongoing trade slowdown is expected to worsen for 2023. While the outlook for global trade remains uncertain, negative factors appear to outweigh positive trends,” a new report from the United Nations Conference on Trade and Development (UNCTAD) warned this week.

“The market collapse is clearly continuing to intensify” Sea-Intelligence noted in its most recent weekly report, published on Sunday. “New demand data shows a market in a full state of collapse, driven by a strong desire amongst importers to reduce their inventory exposure,” analysts at the Copenhagen outfit wrote.

India must reorient its trade policy to take advantage of the increasingly popular China-plus-one strategy. Find out why India is struggling to register itself as a favourite investment destination?

Bhaswar Kumar  |  New Delhi – Business Standard

Coined way back in 2013, it is a global business strategy. China-Plus-One, or just Plus One refers to a strategy in which companies avoid investing only in China and diversify their businesses to alternative destinations.

Where did the need for it arise from? For the last 30 years, Western companies have invested heavily in China, attracted by its low labour and production costs, as well as the considerable and growing size of its domestic consumer market. Leading to an overconcentration of their business interests in China.

In late July, a grouping of 18 economies, including India, the US, and the European Union, unveiled a roadmap for establishing collective supply chains that would be resilient in the long term. The roadmap also included steps to counter supply chain dependencies and vulnerabilities. This can be seen as a part of the overall China-plus-one strategy.

Officials and companies in Japan and the United States had begun mulling a diversification strategy away from China as early as 2008. However, it was only towards the end of the last decade, when US-China trade tensions were at their peak, that China-plus-one gained steam as an alternative strategy for MNCs. The driving factors range from China’s cost advantage diminishing in recent years to growing geopolitical distrust between China and the West.

Other business challenges have also emerged. For example, foreign technology companies have been exiting or downsizing their presence in mainland China because a strict data privacy law that specifies how they collect and store data has been brought in. China’s Personal Information Protection Law came into effect in November last year. Among other requirements, companies must now get permission to send personal user information abroad. The new regulation has raised compliance costs and created uncertainty. Also, companies that break the restrictions will face hefty fines.

And then the Covid-19, which continues to make its presence felt. China’s continuing Zero-Covid Policy meant that there was industrial and supply chain disruption. Then there was the associated container shortage. All of a sudden, lead times went up and the global supply chain’s reliability took a hit. As a result, the US and Europe, with their sourcing dependence on China, were forced to look at other locations for both reliable supplies of components and materials and production cost advantages.

Beijing’s Zero-Covid policy, the resultant supply chain disruptions, and high lead times from China ended up giving a fillip to the China-Plus-One strategy for many global firms.

Clear winners of the China-plus-one model have been the EU, Mexico, Taiwan, and Vietnam, across sectors such as machinery, automobiles, and transport and electrical equipment. According to experts, apart from marginal gains in the machinery sector, India, however, did not significantly benefit from this trade diversion.

But why? India’s declining participation in global value chains has been one of the reasons. Its trade policy has been more protectionist than the other developing countries and has not been driven by the objective of integrating with global value chains. India has also been hesitant in forging preferential trade agreements. It shied away from regional trading arrangements. Clearly, India must reorient its trade policy to take advantage of the increasingly popular China-plus-one strategy.

Seatrade Maritime News

Photo: TOC

Container shipping could be headed into a prolonged rate war as cash rich carriers battle falling demand and a sharp increase in supply.

Marcus Hand | Nov 29, 2022

Speaking at TOC Asia Alan Murphy, CEO and Founder of Sea-Intelligence, said the container market was returning to normality but asked if this was pre-pandemic level of normality in 2019, a relatively good year for container shipping if 2020 – 2022 is excluded, or a much worse scenario of five – six years ago.

Murphy noted that container spot rates had been driven to stratospheric levels by a combination of a sharp rise in consumer demand and some 15% of global capacity being lost due to congestion at ports and in the supply chain.

What is happening now is that consumer spending on durable goods has come down to a more reasonable level and this is being translated into container volumes which saw a quite serious contraction in September.

Capacity loss, which normally stands at around 2%, is now down to around 8% and Sea-Intel expects it to reach normal levels in Q1 next year. Murphy noted an almost perfect correlation between lost capacity and spot rates, with a 95% correlation with Drewry’s World Container Index (WCI) which is down 77% from its height.

For contract rates the decline is slower but looking data from Xeneta Murphy commented, “For contracts signed in last three months we are seeing contracts are being renegotiated at lower rates.”

Meanwhile lines are facing an influx of some 2.4m teu in new capacity in the next few years, the largest amount in nominal terms ever and well above previous highs of around 1.5m teu.

One key difference to the past is carriers now have huge amounts of cash and it was noted lines had earned the same amount in the first six months of 2022 as they did in 10 years prior to the pandemic.

Murphy sees two scenarios playing out – a managed decline with lay-ups starting now or a rate war. “What I personally think is much more likely is headed into we’re in for a rate war,” he said, putting an 80% chance on a rate war.

“The carriers have much large war chests than before,” he said. “The only thing scares me more than shipping lines with no money and is shipping lines with money.”

The result could be a prolonged rate war which is dragged out by carriers with more money to fight.

But shippers looking forward to prolonged low rates were warned of a possibility of a repeat of 2009 – 2010 down the line where once large amounts of tonnage is in lay-up only a relatively small spike in demand could tip the market in carriers’ favour.

Copyright © 2022. All rights reserved.  Seatrade, a trading name of Informa Markets (UK) Limited.

Seatrade Maritime News

Photo: Guangzhou Port

The port of Guangzhou plans to construct four 200,000 tonnes-class container berths at Nansha port area.

Katherine Si | Nov 30, 2022

To further improve container handling capacity at Guangzhou port, Nansha is going to construct four 200,000 tonnes-class container berths at Longxue island, plus twenty-three 5,000 tonnes-class container feeder berths. The total annual design handling capacity of the new berths will be 9.06m teu. 

New berths’ construction is expected to start from 2025 and complete in 2028. 

Related: ZIM launches first ro-ro service to South America from Nansha port

Nansha port area currently has sixteen deep-water berths, having annual handling capacity of 20m teu. The foreign trading services are connected with over 400 ports from 100 countries and regions. 

Nansha aims to run 150 international routes and have 22m teu container throughput by 2025. 

Copyright © 2022. All rights reserved.  Seatrade, a trading name of Informa Markets (UK) Limited.

Seatrade Maritime News

Photo: Ningbo – Zhoushan

Container volume at China’s Ningbo-Zhoushan port has exceeded 31.08m teu surpassing the total throughput the last year.

Katherine Si | Nov 28, 2022

The number of sea-rail services has increased to 22 and the sea-rail combined container volume also grew 25% year-on-year. 

As the end of October, Ningbo-Zhoushan port operates over 300 container services to domestic and overseas markets.

Related: Ningbo-Zhoushan port forecasts 14% drop in cargo throughout in 2022

Amid the volatile market, Ningbo-Zhoushan port is promoting port infrastructure construction at major deep-water port areas, and has preliminarily completed 10m teu container berths cluster at Meishan port area, providing solid supports to improve container handling capacity of Ningbo-Zhoushan port. 

In September this year, Ningbo-Zhoushan port forecast a 14% decline of cargo throughput in 2022.

Copyright © 2022. All rights reserved.  Seatrade, a trading name of Informa Markets (UK) Limited.

in Freight News 30/11/2022

India’s finished steel imports from Russia during April-October rose to their highest in at least four years, government data compiled by Reuters showed, underscoring Moscow’s bid to divert shipments in the wake of Western sanctions.

Russia’s steel exports to India reached 149,000 tonnes in the first seven months of the current fiscal year that began in April, up from around 34,000 tonnes shipped a year earlier.

Russia accounted for just about 5% of India’s total steel imports but was among the top five exporters.

India’s total steel imports between April and October stood at 3.2 million tonnes, up 14.5% from a year earlier. South Korea exported 1.3 million tonnes to India, accounting for a 41% share of the country’s total purchase.

Between April and October, India emerged as a net exporter of steel, even as overall shipments more than halved due to an export tax and a slowdown in global demand.

Earlier this month, India scrapped the export tax levied on some steel intermediates, reviving expectations of a turnaround in exports.

JSW Steel Ltd, India’s largest steelmaker by capacity, said six to seven distressed Russian steel shipments arrived during the current fiscal year. Other than buying large quantities of steel from Russia, Indian firms have also been importing coking coal from Moscow.

Indian steelmakers have so far imported record 5-6 million tonnes of Russian coking coal in 2022/23, compared with less than 2 million tonnes last year.
Source: Reuters (Reporting by Neha Arora; Editing by Mayank Bhardwaj and Subhranshu Sahu)

 Sam Chambers November 29, 2022 Splash 247.com

Mediterranean Shipping Co (MSC) has taken delivery of its first MSC-branded aircraft, built by Boeing and operated by Atlas Air. The B777-200 freighter will fly on routes between China, the US, Mexico and Europe.

Jannie Davel, senior vice president air cargo at MSC, said: “Our customers need the option of air solutions, which is why we’re integrating this transportation mode to complement our extensive maritime and land cargo operations. The delivery of this first aircraft marks the start of our long-term investment in air cargo.”

Davel brings extensive air cargo experience, having worked in the sector for many years, most recently heading Delta’s commercial cargo operations, before joining MSC in 2022.

He said: “Flying adds options, speed, flexibility and reliability to supply chain management, and there are particular benefits for moving perishables, such as fruit and vegetables, pharmaceutical and other healthcare products and high-value goods.”

Atlas Air is supporting MSC on an aircraft, crew, maintenance and insurance (ACMI) basis. This aircraft is the first of four B777-200Fs in the pipeline, which are being placed on a long-term basis with MSC.

Other top lines such as CMA CGM and Maersk have created air cargo divisions during container shipping’s recent record earnings period.

 Sam Chambers November 29, 2022 Splash 247.com

The stock markets in Hong Kong, Shenzhen and Shanghai closed up today as Beijing cracked down on nationwide protests and gave an indication that it was going to up its vaccination programme among the elderly, seen as a key hurdle in the opening up of the country post-pandemic.

The country had experienced anti-zero covid protests in many major cities in recent days, rallies on a scale not seen since the Tiananmen Square massacre of 1989.

However, a very heavy police presence at hotspots over the past 24 hours has quelled the protests.
China’s health authorities released a plan to boost elderly vaccination today, according to a notice on the National Health Commission’s website. At a press briefing this afternoon, health officials stressed excessive covid restrictions should be avoided.

The shipping industry – whether in tankers, dry bulk or containers – is anxiously watching news of an easing of covid restrictions to boost the economy, which is on track to grow at just 3% this year, its slowest growth for decades. The nation is by some considerable distance the most important country in the world for the fortunes of the shipping industry.

“The mood among investors has improved in today’s trading environment as protests in China have eased and suggestions that the country is looking at ways to ease the current strict Covid rules,” the latest daily markets update from chartering platform Shipfix suggested.

Goldman Sachs said yesterday that the nation may have a messy, but earlier-than-expected exit from its zero covid policy.