September 30, 2022

Container freight rates on trades out of India continue to taper off amid falling demand, according to a new market analysis by Container News.

On the westbound India-Europe trade, contract prices from West India [Jawaharlal Nehru Port (JNPT)/Nhava Sheva or Mundra Port] to Felixstowe/London Gateway (UK) or Rotterdam (the Netherlands) have slipped to US$4,400/20-foot container and US$4,800/40-foot container, down from US$4,650 and US$5,200, respectively, last month.

For West India-Genoa (the West Mediterranean) cargo, carriers are accepting bookings at US$4,900/20-foot box and US$5,100/40-foot box, compared with the August levels of US$5,000 and US$5,300.

Eastbound cargo rates have declined by double-digit percentages – now hovering at US$1,525/20-foot container and US$1,700/40-foot container, versus US$1,725 and US$1,900 for shipments from Felixstowe/Rotterdam or Rotterdam to West India (Nhava Sheva/Mundra).

Short-term contract prices offered by major carriers for Indian cargo to the US East/West coasts have further moderated from the August levels – averaging at US$7,137 per 20-foot box, from US$7,937, and US$9,015 per 40-foot box, from US$10,015, for bookings to USEC (New York), and at US$7,032/20-foot container, from US$8,357, and US$8,913/40-foot box, from US$10,569, for loads to USWC (Los Angeles).

For the West India-US Gulf Coast trade, rates have decreased to US$9,257 per 20-foot and US$11,615 per 40-foot container, versus US$10,527 and US$12,925, respectively, in August.

On the return leg, average rate levels have remained steady with the rates maintained by major operators last month – at US$1,075/20-foot box and US$1,434/40-foot box from USEC; at US$2,484/20-foot box and US$3,193/40-foot box from USWC; and at US$1,770/20-foot and US$1,843/40-foot box from the Gulf Coast, into West India (Nhava Sheva/Mundra).

Intra-Asia trades out of India have seen the sharpest month-on-month slide, after hitting new highs following the end of Covid lockdowns in and around Shanghai.

Contract prices from India to Central/North China, Singapore and Hong Kong have dropped between 25% and 50% this month from the levels reported at the end of August.

Average contract rates offered by major carriers to regular clients for bookings from West India (Nhava Sheva/JNPT or Mundra) to Shanghai/Tianjin are now at US$350 per 20-foot container and at US$450 per 40-foot box, down from US$505 and US$810, respectively, during August.

Rates on the West India-Singapore movement have also seen a similar trend, with contract rates slipping to US$250/20-foot container and US$400/40-foot box, from US$500 and US$800 last month.

For Indian shipments to Hong Kong, average rates are hovering at US$300/20-foot container, versus US$505, and US$400/40-foot container, compared with US$810, the analysis shows.

Contract rate levels on the return leg have also fallen significantly month on month, with the slide averaging between 40% and 50%.

Local freight forwarder sources attributed the steep pricing corrections to weakening demand and noted that rate levels could come under further pressure in the coming weeks.

“The contraction in global trade is also visible from the sharp decline in the freight rates, which have reduced by about 50% on major trade routes,” said the Federation of Indian Export Organisations (FIEO) in a statement. “With inflation plaguing all economies, inventories are very high globally in all economies as the purchasing power has dwindled which has affected the offtake and thus the demand is slowing.”

FIEO added, “The demand for liquidity has gone up as buyers are delaying the payments and asking exporters to withhold further shipments or release small quantities of such shipments.”

The premier association also noted that inflationary pressures are clearly sapping consumer demand across major sourcing markets. “With inflation plaguing all economies, inventories are very high globally in all economies as the purchasing power has dwindled, which has affected the offtake and thus the demand is slowing. However, the demand for low value [Indian] products is increasing by leaps and bounds,” it said.

FIEO explained, “Therefore, while we expect volumes to remain intact, the value may take a hit.”

Forwarders have also expressed concerns about slowing export order flows. “The country saw a fall in the various export sectors, including chemicals and engineering,” Sanjay Bhatia, co-founder and CEO of Mumbai-based Freightwalla, told CN.

He went on to explain, “This has impacted the container movement to and from India as the demand for the same is declining. Container volumes at the top ports across India and global ports are dropping.”

Bhatia also noted, “As we understand, there was a 4% decline in the volume witnessed at ports. We see that demand was not as high as expected in the first quarter regarding growth, and the same was seen for the most part in the second quarter.”

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Jenny Daniel
Global Correspondent – Container News

Martina Li
Asia Correspondent – Container News

Vasi Star, a 1,728 TEU feeder container ship owned by Singaporean operator Vasi Shipping, collided with a barge on the morning of 11 October.

Vasi Star, which was deployed to a Thailand-Malaysia-Bangladesh-India service, was on its way to Bangkok port from Kattupalli, India, when it collided with a tug and barges along the Chao Phraya River, at around 7.10 am local time.

The tug, Wimonwan 8, was towing four barges loaded with steel cargoes from Kohsichang to Bangkok. One of the barges, Maha Nakhon 2, sank, but no one was hurt. Thai media reported that visibility in the area was limited at the time of the accident.

Vasi Star continued navigating and arrived at Bangkok’s Sahathai Terminal at 10.30 am the same day.

Vasi was established in 2012 and its container shipping services focus in the area between Thailand and Bangladesh, using Vasi Star, its sole owned ship, and two chartered vessels.

Container News requested Vasi for comment but there was no reply.

However, vessel-tracking data shows that Vasi Star’s status has been updated to “In Casualty or Repairing” as of 11 October

Jenny Daniel
Global Correspondent – Container News

Indian exporters – now relieved to see some moderation in sky-high freight rate levels amid slowing volumes – have a new cost burden to deal with: a government tax levy.

The setback follows the end of previously-granted federal exemptions from the applicability of Goods and Service Tax (GST) on export freight.

GST, a unified national tax system, was introduced in 2017, intended to make a one-market environment.

As a result, from 1 October, exporters must meet a tax slab of 5% on ocean freight and 18% on air freight charges.

“GST on export freight rates will put further pressure on the already-tight liquidity position of the exporting community,” a Mumbai-based shipper told Container News.

“In the current situation, the focus should be on providing liquidity at a competitive cost to the export sector,” said A. Sakthivel, president of the Federation of Indian Export Organisations (FIEO), in a statement.

Sakthivel added, “The government should look into the request of the export sector for continuing with IGST [Integrated Goods and Services Tax) exemption on freight for exports, which lapsed on 30 September, particularly as the freight rates are still at much elevated levels and GST on such freight will affect the liquidity of the exporters, though refundable later.”

Major shipping lines operating to/from India have already issued customer advisories that they would apply GST on international outbound freight charges from 1 October.

“Subsequent to expiry of the validity of the said notification and with no further extension, every export transaction would be taxable under GST,” Maersk Line said in a trade notice.

Reflecting weakening demand trends, Indian merchandise exports in September slipped 3.5% year-over-year, according to the latest government data.

“The slowdown in exports is a reflection of the toughening conditions of the global trade facing demand slowdown on account of high inventories, rising inflation, economies entering recession, high volatility in currencies and geopolitical tensions,” FIEO added.

Sanjay Bhatia, CEO and co-founder of digital forwarder Freightwalla, has also noted that Indian export growth is facing challenges.

“Global trade is on the verge of noticing a slowdown,” Bhatia said. “The US and Europe caught a rise in inflation that has hit the consumption, leading to lower offtake of goods. Plummeting freight demands hint towards low export, implicating a decrease in the long-term contract rates.”

He went on to explain, “We noticed demand was not as high as expected in the first quarter regarding growth, and the same was seen for the most part in the second quarter.”

 Sam Chambers October 11, 2022

With Yangzijiang Shipbuilding recently confirming Mediterranean Shipping Co (MSC) has ordered a dozen LNG dual-fuelled 16,000 teu ships, the orderbook at the world’s largest carrier now stands just shy of 2m teu, a figure so large that analysts are struggling to find the right scale of charts to highlight this extraordinary expansion.

MSC has taken its orderbook to a record of 1.96m teu, equivalent to 43% of its current fleet, according to Linerlytica.

Putting MSC’s giant orderbook in perspective, it is larger than the entire extant fleet of Germany’s largest liner, Hapag-Lloyd, which is the world’s fifth biggest containerline. Adding perspective, MSC’s orderbook is larger than the combined orderbooks of Maersk, CMA CGM and COSCO, the world’s second, third and fourth largest liners, respectively. By Splash estimates, MSC’s orderbook now stands at above 25% of all boxships on order in terms of teu slots. So large and extreme is the Geneva-based carrier’s order tally that it no longer fits in the standard lay-out on Alphaliner’s popular top 100 rankings site.

Alphaliner officially recorded MSC surpassing Maersk at the top of the liner rankings at the start of the year. While Maersk has continually stated it does not intend to have a fleet larger than 4.3m teu, MSC has very quickly widened its lead over its Danish alliance partner, the gap today between gold and silver on the Alphaliner podium standing at some 225,000 slots.

With record deliveries coming in 2023 and 2024 for MSC and the global liner industry, speculation is growing that many orders will be deferred. Today’s global orderbook, for which MSC accounts for approximately 27%, stands at around 7.2m teu, significantly higher than the previous 6.6m teu record set in 2008.

The number of secondhand container vessels bought by MSC has also made plenty of headlines in the 26 months since the carrier embarked on an unprecedented ship buying spree in August 2020. In the space of just over two years, the carrier has bought around 240 secondhand ships according to Alphaliner, the latest being the 8,814 teu Northern Jasper, one of three secondhand ships MSC was listed buying last week in multiple broking reports.

“Seeing a large liner company transact does help reinforce some confidence that perhaps we are closer to the S&P market finding its feet, but there remains a significant adjustment on prices still to come if the charter market does not soon find some stability,” brokers Braemar noted on MSC’s latest secondhand buying spree.

While historically MSC, whose roots date back to 1970, has had a strong focus on chartering in ships, this has changed during liner shipping’s record earnings period of the last couple of years. Since the start of 2020, MSC’s share of owned ships increased to 69% from 51%, according to Linerlytica.

MSC’s actions as the market turns will help dictate market conditions. Not only will other carriers be hoping it defers delivery of many of its newbuilds in the coming couple of years, a massive clear-out of older tonnage for recycling is on the cards for MSC in 2023 and 2024, with many analysts expecting liner scrapping to hit historic high levels soon.

Martina Li – Container News

China United Lines (CULines) and Antong Holdings, parent of Quanzhou Ansheng Shipping, have signed a pact to jointly invest in shipping and logistics.

The agreement includes the joint deployment of four 1,900 TEU ships that CULines ordered at CSSC Huangpu Wenchong Shipbuilding in February 2021 and are being gradually delivered currently.

The pact, signed on 22 September, extends a relationship which already saw CULines charter a dozen  4,100 – 4,700 TEU ships from Antong for the East-West trades in 2021. CULines is also understood to have taken two smaller ships of 600 TEU from Antong for the intra-Asia trade.

CULines said that given Antong’s higher proportion of owned tonnage, the arrangement has allowed it to reduce its has enabled it to reduce the ratio of its chartered fleet to 20%, at a time of high charter costs.

The strategy also helped CULines to move up the liner operator ranks from 95^th place in 2020 to 20^th spot today, without substantial newbuilding orders.

CULines expanded into the transpacific and Asia-Europe in 2021, while last November, it appointed Lars Christiansen, former director of Hapag-Lloyd, as co-CEO alongside Raymond Chen.

 Sam Chambers October 10, 2022

Assessing where the rates floor is in the consolidated container shipping market is keeping experts busy as multiple indices continue to report steep declines.

UK consultants Drewry last week lowered its demand outlook for 2022 to 1.5%, and to 1.9% for 2023 on the back of heavily downgraded GDP predictions.

“Carriers will have accepted that prices and profits were unsustainable,” Drewry suggested, going on to state that carriers would start cutting back when rates sink close to a level that would be acceptable in the long run. “Recent news of more East-West service suspensions, including a 2M Transpacific loop, indicates that time is now,” Drewry stated, predicting that the next course of defensive action would be to offload older, gas-guzzling ships with 2023 likely to see near-record volumes of boxship demolitions, while a number of the huge swathe of newbuilds ordered will be deferred.

What level of profitability will the carriers balk at lowering their sales revenues?

Despite these measures, Drewry reckons they will be insufficient to fully bridge the supply-demand gap next year, with an estimated net increase in effective capacity of 11.3%, way above the projected demand growth of 1.9%. Adding in missed sailings will get them closer and should be enough to keep freight rates and profits above 2019 levels, Drewry is forecasting.

“The question should not be what is the new normal for the rates, but at what level of profitability will the carriers balk at lowering their sales revenues?” argued Kris Kosmala in conversation with Splash today.

Kosmala, a regular Splash columnist, said that carriers have got better at aligning capacity with demand at a more granular level than they were able to do in the past, a dividend of their investments in better analytics technology.

“Historically, during the ‘steady as she goes’ periods, the average profitability for the industry was about 10%,” Kosmala observed, going on to forecast: “Let’s assume this is the comfort level the shipping carriers are willing to live with. That’s a very long descent path from the 70+% results seen today, but that means the rates will be allowed to drop for some time yet. When you see the industry start reporting profitability between 10 to 20%, the rates we will see at that time will become the new normal”.

Parash Jain, HSBC’s global head of shipping and ports research, has repeatedly maintained that liner shipping now has a stronger bargaining position thanks to consolidation.

“Going forward, we argue that after years of consolidation and the formation of mega shipping alliances, the shipping lines have learnt the capacity discipline and while there might still be volatility in freight rates, the rock-bottom level of freight rates seen in the past decade might no longer persist in the future,” Jain told Splash in a report published earlier this year.

The consolidated nature of global liner shipping, where the top liners control more than 85% of capacity, was also brought up by shipping analysts at Jefferies in a recent report, who argued that their ability to move in a far more bigger fashion gives them the chance to make quick supply responses. This was most visible in 2020 when liners idled as much as 13% of vessel capacity, which supported freight rates and allowed for profitable earnings despite the significant slowdown in market activity during the first few months of the pandemic.

The swiftness and severity of the container drop in fortunes has also been analysed by Clarksons Research.

Faced with significant macroeconomic headwinds and surging inflation for consumers, container trade has faltered, down by 1.6% year-on-year from January to August, whilst since July container port congestion has reduced according to Clarksons, from close to 38% of capacity at port to around 34% today, freeing some of the tied-up tonnage.

“Sentiment has weakened at a rapid rate, amplified by increased uncertainty for consumers and businesses,” Clarksons noted in a recent market report, stressing that today’s rates still remain well above pre-covid levels. Freight is twice as high as the 2019 average, charter rates are still two and a half times higher, while the the Shanghai Containerised Freight Index (SCFI) is 100% above the 2010 to 2019 average and Clarksons’ charter rate index is only 20% off the 2005 peaks in the previous boom.

“In a ‘base case’ rate levels might not fall back as far as previous lows, but watch closely for incoming fleet growth (6-8% p.a. in 2023-24, though slippage may impact), ongoing trade headwinds and the development of port congestion (will recent easing persist?) which will determine how far and fast the softening goes from now,” analysts at Clarksons advised.

Container Trade Statistics (CTS) has released the new global demand data for August 2022, which has turned out to be the weakest month since early 2020.

Global demand measured in teu declined by 4.2% year-on-year whereas demand measured in teu*miles declined by 5.5%. Compared to pre-pandemic August 2019, global demand in teu has grown 1.3% whereas demand in teu*miles has now declined 2% compared to August 2019.

Looking at the CTS figures, Lars Jensen, CEO of consultancy Vespucci Maritime, suggested via LinkedIn that from a fundamental global supply/demand perspective, there is no longer a fleet capacity shortage and the balance is poised to worsen further.

“This means there is no fundamental support to revert back to the high rates of the last two years, but also that there is no structural support to halt the current rate decline,” Jensen wrote.

“Global demand is clearly weakening and weakening quite rapidly. We should expect continuing declines in spot rates – and associated spill-over into the contract markets. And we should also expect a ramp-up in not only blank sailings, but also the complete closure of a range of services, on especially the Transpacific trade,” Sea-Intelligence warned in its latest weekly report.

Drewry’s World Container Index (WCI), a global spot rate reference, plunged below $4,000 per feu last week for the first time since December 2020, with most container indices – whether spot, long-term, or charter, on the slide in recent months. The WCI dropped another 8% last week to close on $3,688.75, still more than twice as high as the historical average, but a far cry from the $9,408.81 per feu registered at the start of this year.

Multiple chartering indices have continued to report steep drops in recent days.

“The temperature is dropping fast, not only in Northern Europe but also in the container chartering market and consequently the New ConTex Indices are all bathed in red,” the latest report from Hamburg’s New ConTex stated.

Covid lockdowns are ticking up in China again with neighbourhoods in key port cities such as Shenzhen and Dalian forced back home this week, and mass testing underway at other important maritime gateways including Tianjin.

There is no let up in the government’s zero-covid policy, which has stretched global supply chains a great deal this year. The difference today is that while outbreaks have been getting more widespread in the last fortnight, lockdowns are pursued neighbourhood by neighbourhood rather than city-wide, and quarantine times have been cut back since the middle of June, according to analysis from research firm Gavekal Dragonomics.

Nevertheless, the quickening spread of the omicron variant has some analysts concerned.

At a news conference Monday, Shenzhen officials said the latest outbreak is mainly driven by new subvariant Omicron BF.15, which they said is more transmittable and harder to detect.

“The upcoming period will be the most stressful, high-risk and grim period for epidemic prevention and control in our city,” a Shenzhen official told the news conference.

“Markets could once again be hit in the next couple of weeks, likely triggering another round of cuts by economists on the street,” Japanese finance company Nomura warned in a note on Tuesday, adding that the situation might be worsening, as omicron has spread to large cities.

Nearly a quarter of European companies in China are considering shifting their investments out of the country thanks in large part to the nation’s strict covid policies, results from a survey released in June by the EU Chamber of Commerce in China said. Similar sentiment was echoed in other reports from American and British chambers of commerce.

Despite Beijing taking some heed of the negative sentiment from foreign conglomerates, resulting in some easing of the rules earlier this summer, there are still plenty of signs of big brands looking for alternative manufacturing sites outside of China, an issue that will be under the spotlight in tomorrow’s issue of Splash Extra.

Preparations are still underway to get Ukrainian grain shipments exported across the Black Sea, but international shipping still has many unanswered questions as to the safety of the operation.

Russia, Ukraine, Turkiye and the United Nations (UN) hammered out a deal last Friday to create safe shipping corridors from three Ukrainian Black Sea ports to move last year’s harvest. Combined, the three ports of Yuzhne, Chornomorsk, and Odesa accounted for 65% of the country’s total grain exports over the past five years, according to data from BIMCO.

The deal is valid for 120 days, with an option to extend, and it allows bulkers to be escorted to the ports through a safe corridor. To create a navigable passage, the corridor will have its sea mines removed, a process that is expected to take one to two weeks.

Over 20m tonnes of Ukrainian grains are ready for export and the country’s grain traders union expects around 25m tonnes more to come from the 2022 harvest. With the wheat harvest underway and the maize harvest to start in September, a swift export of grain is needed to ensure space in silos for the new harvests.

Initially, only ships owned by nationalised Ukrainian companies will be transiting the humanitarian relief corridor. Commercial ships will follow in subsequent days, after regulation and advisories from the newly formed Joint Coordination Center (JCC) in Istanbul have been published.

Frederick Kenney, director of legal and external affairs at the International Maritime Organization and a retired US Coast Guard rear admiral and judge advocate, has been put in charge of the JCC.

Data from shipping platform Sea/ today shows none of the 80-plus mothballed ships have left Ukrainian ports and no vessels have indicated they are calling at the war-torn country yet. All Ukrainian seaports have been closed since Russia invaded on February 24 this year.

“With this deal, the UN hopes to increase monthly grain exports from Ukraine by 5m tonnes. However, since over the past five years, these three ports have not ever handled such a high amount of grain, meeting this target could prove to be a challenge,” said Niels Rasmussen, chief shipping analyst at BIMCO. “Even if port logistics accelerate to expedite exports, the need to escort ships in and out of the ports is likely to cause some congestion.” 

To accelerate exports the Danube ports, as well as land routes, will likely continue to play an important role in the shipment of Ukrainian grain in the short to medium term.

“A significant obstacle to Ukrainian grain exports will be the voyage risk and corresponding insurance premiums. For the shipping of Ukrainian grain to be attractive, high rates will be necessary to mitigate risk-related expenses,” said Rasmussen. “Russia’s recent missile strikes in ports such as Odesa will add to the insecurity and uncertainty of operating in the Black Sea.” 

The issue of insurance is one that continues to vex. The UK’s foreign secretary Liz Truss said on Monday, during a televised leadership debate, that “an agreement has been reached” with Kyiv on maritime insurance for getting grain out of Ukraine.  Ukraine’s infrastructure minister Oleksandr Kubrakov cautioned yesterday that in fact no deal had been concluded, but he was hopeful an agreement could be reached soon.

Beyond insurance, there is the issue of crew safety, something touched on by InterManager secretary-general Kuba Szymanski at an online meeting of members yesterday. 

“There is no way we can send anybody there because the green corridors are not approved, we have not got a deal with Russia, we have not got a deal with Ukraine. Therefore the shipmanagement industry is on standby, if it is safe to do so we will be sending ships there,” Szymanski said. InterManager is the global association for shipmanagers. 

Looking at the overall situation, maritime security consultants Dryad Global suggested that despite assurances within the terms of the treaty, vessels participating in the Black Sea Grain Initiative will be exposed to significant ongoing threats during transit through Ukrainian territorial and international waters and whilst at anchor in the ports of Odesa, Chernomosk and Yuzhnhnyi. 

“The persistent threat of sea mines remains the most prominent threat, although such a threat can in part be mitigated via both effective mine avoidance and mine clearance where required. The additional threats of Russian aggression and continued commitment to the terms of the agreement are harder to account for, and as such present a potentially greater threat to the continuation of the agreement over the longer term,” Dryad Global stated in a new report published this week. 

The first week of the operation will be highly significant for the initiative, Dryad Global argued, as these types of agreements are most vulnerable to being broken in their early days. 

“Whilst there are strong reasons for Russia to act strictly within the bounds of their agreement with Turkiye and prevent any attacks on grain terminals and ships, this conflict has repeatedly demonstrated the importance of never assuming Russia will behave within the bounds of reason,” Dryad Global warned. 

Xeneta has called out the peak for long-term contracted freight rates. The Scandinavian box freight rate platform has detected a slowing month-on-month growth for long-term rates in July, following many months of spot rates declining suggesting prices may have peaked. However, according to the latest Xeneta Shipping Index today’s valid long-term agreements stand 112% higher than this time last year, and a massive 280% up against July 2019.

Xeneta CEO Patrik Berglund said the signs were clear that there is a shift in sentiment.

July’s increases are the slowest since January, with upward pressure on long-term agreements easing as spot rates fall across major trades. In addition, volumes on many corridors are down, with, for example, containerised European imports down by 3%, and exports 6%, in the first five months of 2022.

“Indications are there that we may have reached a peak and that prices of new agreements are more likely to hold than suddenly leap up again, as we’ve become accustomed to seeing of late,” Berglund said.

Splash reported late last month on how spot rates on the transpacific had fallen below long-term contracted rates leading many shippers to start to look at the fine print of their contracts.

Xeneta disclosed today that it ran a survey of its customer base in July and found that many were now looking to renegotiate contracted rates given the recent spot market drops.

Berglund commented: “Our customers, mainly large volume shippers, now find themselves in a stronger negotiating position.”

The survey showed that 44% no longer feel confident in the stability of long-term contracts – of that 44%, some 22% said they were more likely to allocate lower volumes only to cheaper contracts, while 22% preferred to move allocation to the spot market as soon as prices dip below long-term rates.

Many analysts have been discussing the peak of the container bull-run this month.

“[T]he post-Covid demand boom appears to have run its course,” Drewry stated in a recent report with many nations around the world battling high inflation and some of the world’s largest shippers indicating lately inventory overstocking.

Drewry is still predicting carriers will make improved profits over the records set in 2021, and that supply chain constraints will persist through the first half of next year.

“While we should stress that we believe it is too early to confidently declare that there will be no 2022 peak season, the continued signs of market weakness … are hard to miss: Spot rates tumbling faster than seasonality, congested capacity being re-activated, contracts being reopened, rate declines not driven by capacity injection, and … continued sluggish demand, utilisation dropping below the ‘magic’ rate-rocketing level, and a return to normal in US consumer demand for durable goods,” Sea-Intelligence stated in a mid-July report.

“The signs are all suggesting a return to a more balanced market,” Sea-Intelligence reckoned, going on to predict the potential return of blank sailings if volumes dry up.

Looking at the average vessel utilisation on the head haul of each of the major east-west trades shows nominal utilisation dropping below the levels which previously sustained the higher rates during the pandemic.

On the transpacific utilisation rates have dropped below the 90% level for the first time since mid-2020, according to Sea-Intelligence who said that this implies that capacity is finally beginning to open up. On Asia-Europe, meanwhile, utilisation rates are back below 80%.

Sea-Intelligence pointed out on Sunday that boxship trading distances are turning negative.

“When trading distances increase, this also increases the need for vessel capacity and vice-versa. During the post-pandemic period, this led to an added need for capacity, however in recent months this effect has turned negative,” Sea-Intelligence pointed out, adding: “As the current market is clearly on a downwards trajectory in terms of supply/demand balance, this shift in sailing distance impact once more becomes an added element, pushing the development – this time downwards.”

Highly elevated spot rates on major ocean trade lanes have passed their peak, but shippers should expect short-term prices to settle at two to three times pre-pandemic levels for the foreseeable future, the CEO of logistics giant Kuehne+Nagel said while unveiling record interims on Monday.

“Despite the falling prices, there are signs that ocean carriers don’t view this trend as the start of a complete collapse. Continued elevated rates for secondhand and chartered container ships show ocean carriers are still looking for capacity. Carriers have also scheduled 20% more transpacific capacity through October compared to last year,” commented Judah Levine, head of research at Xeneta rival, Freightos.

Sam Chambers

With Shanghai progressively reopening, gateway terminals in western consuming nations are bracing for a tsunami of boxes to hit already congested quaysides in June as the peak season gets underway earlier than normal this year.

State media in China this week claimed the port is back operating at 95%, while prime minister Li Keqiang stressed in an online meeting with 100,000 state employees on Wednesday a list of priorities including easier truck movement across provinces as he leads China’s economic fightback after a horrendous spring of lockdowns affecting a third of the nation.

Sea-Intelligence says that based on current vessel deployment, carriers stand to increase capacity on transpacific substantially starting from week 22, and by a relatively smaller margin on Asia-Europe, indicating an early start to the 2022 peak season.

Shippers have learned the hard way that it’s best to be prepared during the ongoing supply chain crunch – with added concerns about Shanghai’s long lockdown and the contract negotiations with dockworkers on the US west coast.

Drewry estimates 260,000 teu of export cargo was not shipped from Shanghai in April alone, warning in a new report of further capacity challenges in the coming months coinciding with the peak summer season.

Data compiled for Splash by Danish liner analysis platform eeSea shows the boxships bound for North America and Europe (see maps below) with eeSea founder Simon Sundboell suggesting that for the moment the feared tsunami effect was not in evidence.

“We’re not seeing major disruptions. The vessels have continued to flow through the Chinese ports throughout the crisis , only slightly slower, and possibly – unverified – with lower volumes loaded – and so we’re not at this point able to verify an avalanche or any sort of whiplash effect,” Sundboell told Splash.

Congestion at the port of Shanghai remains high for the time of year, but is steadily normalising as the city’s covid wave subsides.

VesselsValue data shows average waiting times for tankers, bulkers and containerships at the port are now down to 34 hours today, from a peak of 66 hours at the height of reported omicron spread in late April. This is around 10 hours longer than levels this time last year, and the higher end of the three-year range.

Average waiting times for containerships at Shanghai are now down to 36 hours, from a peak of 69 hours in late April. This remains some 13 hours higher than year ago levels and the top of the three-year range, but is also falling back towards normal levels, according to VesselsValue.

A joint research paper published last week by Windward and Sea-Intelligence looked at the congestion issue in Shanghai, the world’s largest container port, suggesting that when the port does fully reopen, it will be mainly for imports of full containers, many of which contain raw materials required for the starved factories in the hinterland to function. Export containers will consist of goods produced before or during the lockdown, but held up in export facilities at the factories, or elsewhere.

“There is no way of knowing how many containers are, or can already be, stuffed and ready to move, but it is safe to say that the amount is substantial,” the joint study suggested, adding that for export operations to run efficiently, Shanghai port must first be “drained” of many prepositioned empties, which will take time.

“Shanghai is now bursting with such containers, and if not cleared or substantially reduced, there may be little room for export loading movements to occur as smoothly as they normally do,” the authors of the report warned, going on to discuss the so-called ketchup effect that will hit overseas destinations when Shanghai ramps up exports, something that will be all the larger as both US and European ports are already suffering from very high congestion levels – and in the case of the US, far lower productivity with the ports of Long Beach and Los Angeles faring dreadfully in a new global port productivity report issued by the World Bank this week.

According to HSBC the time it takes for a boxship to travel from China to the US is now 104 days versus pre-pandemic levels of under 50 days.

According to New York-based Ocean Audit, a total of 690,000 teu is destined from Asia to Long Beach and Los Angeles between May 25 and July 1, up from last year’s “extreme” 646,000 teu for the same period.

Maersk said this week that it foresees the ports of Los Angeles and Long Beach soon implementing the container dwell fee, announced in October and since delayed week after week, as the ports continue to tackle congestion and brace for the delayed Shanghai boxes. The company said in a rate announcement that the likelihood the fee will be implemented “has risen significantly this month”.

Sam Chambers.