Container Market Shows Signs of Weakening

BIMCO’s Chief Shipping Analyst, Niels Rasmussen, said there were early signs of weakness in container volumes. Head-haul and regional volumes have fallen by -0.4% y/y and -1.4% y/y respectively in March 2022. However, it remains above Q1 2019 levels according to the April Container Trade Statistics (CTS) index quoted. Additionally, the China Containerized Freight Index (CCFI) has tumbled -12.6% from its peak in early November 2021. Rates have also slackened in the time charter market, second-hand S+P activity and the pace of newbuilding contracting have similarly lessened.

Rasmussen noted a fall in the International Monetary Fund (IMF) global GDP growth forecast to 3.6% for 2022 and 3.6% for 2023, with an even lower outlook for the Europe and Mediterranean region of 1.8% and 2.1% respectively for 2022 and 2023. The forecast is the result of compounding downside risks including supply chain disruptions, inflation, and potential impacts on commodity prices.

For the U.S., indications are that consumer spending is leveling off as inflation cuts discretionary spending, increased rates creep up, consumer confidence falls, and Manufacturing Purchasing Managers' Indexes (PMIs) start to drop around the world.

“All in all, conditions for consumers appear to be worsening across most of the world and businesses will naturally be impacted as well. Considering this and the predictions made by the IMF, we believe that demand growth in head-haul and regional trades will be muted during 2022 and 2023 and will be considerably lower than the average annual growth of 3.4% that was observed between 2013 and 2019,” Rasmussen said.

Source: CTS via BIMCO

US$5-10 Billion Loss for Shippers Following Cargo Delays

A study by Sea-Intelligence Maritime Analysis estimates shippers have lost up to US$10 billion stemming from cargo delays over the past two years. Measuring schedule reliability from the perspective of cargo being moved, data by Sea-Intelligence shows that pre-pandemic, the baseline level of cargo arriving late was at 20% but had increased to 70% in the past few months. 

Sea-intelligence calculated the number of TEU*Days lost due to late arrivals and found that the pre-pandemic baseline was an average of 8 million TEU*Days lost to delays each month. In January 2022, this increased to almost 70 million TEU*Days, before dropping in March 2022 to 57 million TEU*Days.

"To place this measure into context, it can be argued that the loss of 31 TEU*days in January is the same as having an “inventory” of 1 TEU of cargo just standing idle for the full month," said Alan Murphy, CEO of Sea-Intelligence. He explained that using this definition of “inventory”, the pre-pandemic normal is a permanent inventory of 260,000 TEU globally, due to cargo delays. Current supply chain delays have brought up numbers to a present level of 1.8 million TEU of inventory.

Lost TEU days depends on the value of the cargo in the container as well as an internal rate of return (IRR) or the interest rate that a company assigns to their inventory value. Sea-Intelligence used a benchmark cargo value of US$40,000 per TEU and applied interest rates of five percent and ten percent. The cumulative loss was calculated across January 2020 to March 2022, over the 2019 baseline level to assess the total impact (See Figure 1). 

"What this tells us, is that the severe vessel delays alone have resulted in a financial loss for the shippers globally, of roughly US$5-10 billion thus far. This is only the ocean side and does not include any inland delays or port congestion,” Murphy pointed out. 

Source: Container News

Global Air Cargo Demand and Capacity Fall in April 2022

IATA said despite supply chain and capacity issues, the air cargo market looks likely to improve in the months ahead. The association said airlines adding to air cargo capacity in spite of widespread inflation was “pointing to a degree of optimism amidst the challenges”. 

Air cargo demand dropped by 11.2% year on year in April, while cargo load factors slipped by 5.2 percentage points on a year ago to 51.6%. Global capacity was down by -2% below 2021 according to IATA’s latest market update (see Table 1) with Asia seeing the largest reduction in capacity. 

“The main reasons behind the downturn are the Omicron wave spreading in China and the ongoing Ukraine-Russia war both of which cause supply chain and capacity issues that are limiting the movement of air cargo,” according to IATA’s report. 

New export orders, a leading indicator of cargo demand and world trade are now shrinking in all markets except the U.S.

IATA director general Willie Walsh sounded a note of optimism. “The operating environment is challenging for all businesses, including air cargo. But with China easing lockdown restrictions, there is cause for some optimism and the supply/demand imbalance is keeping yields high,” he said. 

Source: Air Cargo News

Chassis Shortage Forces Traffic Metering in U.S.

Norfolk Southern Railway (NS) is restricting international intermodal volumes shipped through five inland markets due to a shortage of marine chassis. The railroad said it is trying to keep its network fluid amid longer street dwells, chassis shortages, and importers not picking up their containers in a timely manner.

The latest disruption affects imports from the Port of New York and New Jersey and the Port of Virginia going to Columbus, Cleveland, Pittsburgh, and St. Louis, according to an NS advisory although, no details were provided on the container limits. Exports from Memphis to Savannah on NS will be limited to 75 containers per day, down from a cap of 100 containers established in early May. 

“We utilize metering and temporary pauses of in-gating for a variety of reasons to alleviate congestion when needed with reasons varying from terminal to terminal,” an NS spokesperson said in a statement. “For example, the Columbus, Cleveland, and Pittsburgh markets continue to see chassis shortages which international customers supply for their cargo. In St. Louis and Rossville [Memphis], those slow pickups are leaving the [container] stacks at capacity.”

NS is not the only railroad facing challenges of late. BNSF Railway is stacking containers in Chicago, Memphis, and Kansas City. Canadian National Railway is facing congestion in Ontario, Canada, and using an auxiliary lot for containers in Chicago. Canadian Pacific Railway is metering loads switching in Chicago destined for Montreal and Toronto and Union Pacific Railroad is stacking containers in Dallas and Memphis.

Source: Journal of Commerce

Industrial Action in Germany and South Korea

Hamburg container terminals at HHLA and Eurogate were severely impacted by strike action on June 9 by 12,000 dockworker members at Hamburg, Bremen and Lower Saxony. The German united services trade union Verdi indicated it was a first of what could be several “warning strikes”.

A spokesperson for port logistics company HHLA told the Hamburg press that the strikes were coming at “a rather untimely time”. Beforethe stoppage, Hamburg’s container quays were recording yard utilization at 80% to 90%.

Ocean carriers will have very few options to overland Hamburg imports at other ports in the event of strike action. German exporters could also face many weeks of delay before shipment is secured.

In South Korea, more than 20,000 unionized truckers have been on strike since June 7. The truckers are demanding an extension to the Safe Trucking Freight Rates System scheduled to expire in December.

Unionized truckers have halted work while non-unionized drivers have not reported to work for fear of retaliation from their trade union colleagues. Cargo movements at Busan container port have dropped significantly according to reports. There has been a sharp reduction in throughput with only 5,418 TEU moved through the port on Wednesday, a -75% decline from usual levels. Container storage occupancy stood at 75.2% which is 5% higher than the May average.

The steel, auto and cement factories as well as major South Korean shippers have halted their shipments due to the inability to secure trucks to move their cargos. 

Source: The Loadstar 

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