Tonnage continues to be shifted from intra-Asia and North-South trades to the more lucrative East-West routes at the expense of regional coverage. Consequently, freight rates on the secondary trades are being driven higher.
Data by maritime consultant, Alphaliner shows Trans-Pacific routes between Asia and North America saw the most extra tonnage deployed over the past few months. There are currently more than 30 ‘extra sailers’ between the Far East and the U.S. West Coast alone. Additionally, Alphaliner data indicates carriers have ramped up capacity substantially. Between Asia and North America, capacity has increased by 30.6%, and on Asia-Europe tradelanes by 19.7% in the past 12 months (see Figure 1).
Not all carriers are sharing capacity growth equally on the Trans-Pacific. Of the 30.6% growth on Asia-North America routes, five lines have increased their average weekly nominal capacity more than the market average. “2M partners Maersk (+50.4%) and MSC (+81.7%) have added the largest number of slots to the Trans-Pacific trade and have both started or announced additional sailings and/or services outside the scope of their vessel-sharing agreement,” said Alphaliner.
Carrier Wan Hai has ramped up capacity by 2,615% on the Trans-Pacific. Alphaliner data shows 32% of Wan Hai’s fleet is currently deployed on services between Asia and North America. The data also shows Zim similarly targeting e-commerce traffic, having increased its average weekly capacity by 37.4% in 12 months.
With this winning move, carriers are able to command much higher rates for secondary trades now facing capacity shortfalls. As example, 2M suspended its North Europe-US east coast TA4/NEUTL4 loop in April, despite rapid demand growth on the route. As a consequence, since March, spot rates for a 40ft from North Europe to the U.S. East Coast have soared from $2,000 to $6,000, on top of additional premium fees being asked from shippers to guarantee equipment and shipment.
Source: The Loadstar
Newly reported positive COVID-19 cases in China have meant the re-introduction of restrictions to curb the spread of the virus. Plamen Natzkoff, senior trade expert at VesselsValue said that as long as long as lockdowns are limited to China, the impact of freight markets would be “muted”. He noted that the container market would be the “most vulnerable” in the event of severe disruptions to manufactured products supply chains.
Alan Murphy, CEO of Sea-Intelligence addressed the possible consequences on the container sector and recapped how carriers responded with blank sailings when China first went into lockdown in February 2020. “Assuming that a strict China lockdown would lead to a scenario as in February 2020, we would expect a drop in production of 15-20% for about a month,” Murphy suggested.
“Cargo owners, already stressed beyond sanity from devastatingly high freight rates and absurd surcharges, and with no way to secure neither equipment nor space, would suddenly see their procurement costs sky-rocket in addition to their back-breaking logistics costs,” Murphy predicted. He said one possible benefit for shippers could be that as the production decreases begin to ripple out to the Chinese ports, pressure would start to ease off on the ocean bottleneck, which could de-escalate freight rates.
“For container shipping, which is more than red-hot at the moment, even a brief halt in Chinese exports is likely to ease the crunch a bit logistically so long as a lockdown only closes manufacturing sectors and not ports and terminals,” commented Peter Sand, chief shipping analyst at BIMCO.
Mark Williams, who heads up British consultancy Shipping Strategy, told Splash: “More likely than a national lockdown is a series of targeted lockdowns by province or county. If those lockdowns include coastal regions, key ports and logistics centers, then globalized supply chains will become chaotic.”
Source: Splash247.com
The latest statistics from WorldACD show cargo volumes, measured in chargeable weight, in the first six months of 2021 were back at 2019 levels. Meanwhile, volumes compared to the same period in 2020 increased by 22%. On a monthly basis, cargo volumes in June were up by 31% year-over-year. (see Figure 1).
Air cargo revenues were up 79% in the first half of 2021 compared to 2019. When compared to the same period in 2020, there was a 47% upswing.
Regionally, WorldACD said there were two exceptions to the return to 2019 levels. Africa recorded robust performance of 28% in the first half compared with 2019 and European carriers which struggled with a 5% decline.
Assessing freight forwarding trends, WorldACD said, “The world’s Top-20 forwarders consolidated their position as a group (Yo2Y), but there were interesting differences depending on the origins of the forwarders in this group.
“The top-forwarders from Europe did better than average comparing 2021 with 2020 but did not yet fully reach their 2019 market share. The top-forwarders hailing from Asia Pacific improved considerably, registering volume growth of 47% compared to 2020, and of 18% compared to 2019.”
Source: Air Cargo News
Aside from the demand boom into North America, global demand growth has been modest. However, vessel delays have sharply reduced effective capacity despite additional tonnage deployed by container lines on key trade lanes, contributing to escalating freight rates.
Since the start of 2021, carriers had already increased Trans-Pacific capacity by a fifth to maintain the same weekly capacity. “This extreme degree of capacity increase is more an effect of the sharp drop in capacity in spring 2020, than of an actual increase. Comparing to 2019, capacity has shown an average annual increase ranging from 5-10%,” said Alan Murphy, CEO of Sea-Intelligence.
Murphy said the “delay-effect” was absorbing all capacity. Whether the measurement is taken on a year-over-year basis or compared to two years ago, the net capacity development remains negative. “This means that despite the injection of significantly more vessels into the Trans-Pacific, the cargo-carrying capacity on a roundtrip-basis measured in TEU/days has declined,” Murphy explained.
A similar impact was observed on the Asia-Europe tradelane. Murphy said that although the level of Europe’s port congestion has not matched the severity of some places in North America, it had worsened in recent months. “The impact is still very sizeable at 13% additional capacity needed, simply to compensate for the delay-effect. In other words, the impact of delays in Asia-Europe is the same as if demand grew another 13%, on top of what we have already seen.
Newbuilds ordered today and delivered in late 2023 and in 2024 will not solve the issue as introducing more vessels “compound the bottleneck problems in ports, effectively increasing the delay time.” Murphy also said, “The resolution has to come from solving the congestion problems on the landside. This does not only imply solving the congestion in the ports, but also the hinterland infrastructure related to trucks, chassis, rail, etc.”
Source: Lloyd’s Loading List
Consultant Drewry’s latest July 2021 assessment of the Drewry Port Throughput Index reported a month-over-month increase in May 2021 over April. Annual growth of 15.8% for the month confirmed that worldwide volume recovery continues. Container throughput is expected to increase further through the 3Q21 peak season, after which Drewry anticipates a modest seasonal slowdown in the final quarter. The company pointed out that growth forecasts are subject to COVID-19 developments.
Greater China Index: 9.8% year-on-year increase with growth concentrated at the largest Chinese gateways. The top six ports (Shanghai, Ningbo, Shenzhen, Qingdao, Tianjin, Xiamen) accounted for close to 90% of the volume growth, representing more than 65% of total throughput of the region. Drewry expects to record the highest 10-year reading of China’s throughput growth in full-year 2021.
Asia Index (excluding China): 15.8% year-on-year increase with the top three regional hubs (Singapore, Port Kelang, and Busan) witnessing double-digit annual growth. In percentage terms, Port Kelang recorded the highest growth of 33% while in absolute terms, Singapore topped the list by handling 3.2 mTEU (million TEU), an increase of 410,183 TEU over April 2021.
Middle East and South Asia Index: 16.9% increase year-on-year. More than 65% of the annual increase in throughput came from the top three ports of the region (Dubai, Mundra and JNPT), together accounting for close to half of the total regional throughput. Mundra and JNPT registered extraordinary annual growth of 62% and 65% in May.
North America Index: 40% growth year-on-year. The top three ports of Los Angeles, Long Beach and New York reported 44.4%, 74.0% and 48.2% year-on-year gains respectively. Rapid demand growth has resulted in severe congestion in the region since the end of 2020, with vessel queues at almost all major gateway ports.
European Index: 16.9% year-on-year improvement indicates reasonably strong demand recovery in the market however, it was still lower than the level recorded in May 2019.
Latin America index: 17.8% increase compared to a year ago. The Brazilian market is growing with volumes at Santos up by 24% year-on-year in May. Panama hub Balboa also performed strongly, recording a 32% year-on-year growth.
Oceania Index: 16.8% annual increase. Two major Australian hubs (Melbourne and Sydney) witnessed a record annual increase of 28% and 16%, respectively in May. The Africa* index was down by 4.9% in May 2021 against an increase of 29.4% over the same period in 2020. Drewry said the Africa index is based on a small sample size and advised caution in the reading.
The Drewry Container Port Throughput Indices are a series of volume growth/decline indices based on monthly throughput data for a sample of over 235 ports worldwide, representing over 75% of global volumes. The base point for the indices is January 2012 = 100.
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