Effective ocean carrier capacity will be decreased by up to 15% between 2023 and 2024, a result of new global fuel efficiency rules, along with slow-steaming and scrapping. The reduction will occur in spite of a continuous increase in newbuilding deliveries, container shipping analyst Lars Jensen has said. Total container shipping capacity will expand 8 to 9% in the next two years while container volume growth will fall into negative territory, keeping demand growth at a third of the pace of new fleet tonnage.
The International Maritime Organization’s (IMO's) energy and design efficiency rules that take effect January 1, 2023 will remove approximately 10% of functional global container capacity by forcing carriers to sail slower, Jensen told the South Carolina International Trade Conference. Scrapping of older vessels will take another 5% of capacity between 2023 and 2024, he added. “So what seems to be massive capacity growth coming in 2023 and 2024 is going to be severely tempered both by scrapping and by new environmental regulations,” Jensen said.
Scrapping activity is expected to increase as only 11 ships were removed in the last two years because of the bull market, Jensen noted. Slow-steaming also effectively removes capacity from a market that’s still working its way back up to normal operational numbers.
Pre-pandemic, having 2.2% of overall global capacity unavailable was the industry norm, but in January of 2022, bottlenecks pushed unavailable capacity to a peak of 13.8%. Jensen said this was the equivalent of eliminating all of CMA CGM’s fleet overnight. While unavailable capacity was almost halved to 7.9% in August, Jensen said it's key to note volume did not include new ships, rather existing vessels tied up in queues that were released back into the market.
Should ships which are already not running at top speeds slow steam even 10% more, the industry will need 10% more ships to keep up, Jan Tiedemann, senior analyst at Alphaliner observed earlier this month.
Source: Journal of Commerce
Below-deck capacity has significantly increased in Asian markets with rising long-haul passenger numbers, but freight demand in key markets of Europe and North America is slackening. Air cargo spot rates out of China have fallen sharply through the third quarter and into October, reflecting the supply-demand imbalance.
Ronald Lam, chief customer and commercial officer for Cathay Pacific, said air freight volume in September was down -21% y/y. The Hong Kong-based carrier compensated by reducing cargo flight capacity and operated fewer cargo-only passenger services on long-haul routes.
In a recent operational update, Lam said the larger-than-expected demand drop was due to lower consumer demand and reduced manufacturing activities in the Chinese mainland as a new wave of lockdowns limit manufacturing activity. The air cargo hub of Zhengzhou was locked down in the past week, while the major manufacturing and exporting centers of Chengdu, Dalian, Guangzhou, Shenzhen, and Tianjin have been affected by pandemic-tackling measures.
Despite falling demand and rates and rising inflation in Europe and the U.S., air cargo industry executives expect an improvement in the market during the coming end-of-year peak season. “We remain positive that there will be solid demand over the traditional cargo peak period, and while it will not reach the levels achieved last year, we expect it to still be above historical averages,” Lam noted.
Source: Journal of Commerce
Weakening export demand has ocean carriers ramping-up their vessel blanking programs from Asia, but the last-minute cancellations are causing confusion both within liner offices as well as for shippers. Forward berthing programs at North European container hub ports are consequently dealing with the fallout from constant network changes, along with disruption to linking feeder and barge relay services.
However, the alliances are understood to be reluctant to temporarily suspend loops, despite the poor outlook for bookings over concerns it could concede market share to rivals in other Vessel Sharing Agreement (VSA) groups. However, the current impromptu blanking strategies are not preventing the rapid decline in spot rates that carriers had anticipated.
Simon Heaney, senior manager for container research at Drewry, believes blank sailings on their own will be insufficient to halt the slide in rates. “We certainly expect them [blankings] to remain a pivotal weapon in carrier arsenals to contain capacity next year, but they need to be used in conjunction with all the other levers,” he said.
Heaney noted there were methods for carriers to keep the market in an undersupplied position but said regulators were closely monitoring the situation. “Regulators are much more watchful of carriers, and any whiff they are curbing potential trade and doing damage to economies for their own benefit will be pounced upon,” he warned.
Source: The Loadstar
Lockdowns at the world’s largest Port of Ningbo-Zhoushan, China is worsening congestion and slowing down vessel traffic.
Daxie district in Ningbo was the first to be placed under lockdown, followed by the Beilun district. The port city of Ningbo has faced repeated lockdowns over the past couple of years. Meanwhile, Chinese leader, Xi Jinping, has reasserted his zero-COVID policy, pointing to the likelihood of further lockdowns as outbreaks emerge.
Ronald Lam, chief customer and commercial officer for Cathay Pacific, said air freight volume in September was down -21% y/y. The Hong Kong-based carrier compensated by reducing cargo flight capacity and operated fewer cargo-only passenger services on long-haul routes.
In a recent operational update, Lam said the larger-than-expected demand drop was due to lower consumer demand and reduced manufacturing activities in the Chinese mainland as a new wave of lockdowns limit manufacturing activity. The air cargo hub of Zhengzhou was locked down in the past week, while the major manufacturing and exporting centers of Chengdu, Dalian, Guangzhou, Shenzhen, and Tianjin have been affected by pandemic-tackling measures.
Despite falling demand and rates and rising inflation in Europe and the U.S., air cargo industry executives expect an improvement in the market during the coming end-of-year peak season. “We remain positive that there will be solid demand over the traditional cargo peak period, and while it will not reach the levels achieved last year, we expect it to still be above historical averages,” Lam noted.
Source: Journal of Commerce
Port of Long Beach executive director, Mario Cordero voiced his concerns over stalled railroad workers/management talks during remarks made at the American Association of Port Authorities annual convention on October 17. Cordero said the nation’s economy would suffer from a strike because railroads account for about 40% of U.S. long-distance freight volume, and both the Ports of Long Beach and Los Angeles depend heavily on railroads to move cargo.
“I think my level of concern is more in that area of getting the freight moved than the real discussions at the bargaining table. That’s only because, one of the issues we have had at the San Pedro port complex and other port gateways is the lack of railcars, the lack of equipment,” Cordero said. “Our movement of railcars depends on what happens as far away as in Chicago. So, now, add to that this labor strife. I think that that concerns me more in terms of how that could disrupt not just the South, the Southwest or Southern California, but gateways overall throughout the nation.”
Meanwhile, Cordero said he is closely watching labor talks in San Francisco between the International Longshore and Warehouse Union and the management team from the Pacific Maritime Association, covering an estimated 22,000 workers at 29 locations. Speaking on the situation at Long Beach and the Port of Los Angeles, Cordero remarked, “There’s no interruption of cargo. The cargo is moving. Negotiations continue. I’m very confident that there will be a resolution at some point, and again confident that we will continue to move the cargo so that we meet the demand not only of the consumer, but the various business enterprises.”
Ongoing talks and concerns over a possible labor dispute have caused a shift in cargoes from U.S. West Coast ports to the East Coast. The Port Authority of New York and New Jersey surpassed the Port of Los Angeles in August as the busiest shipping port in the U.S.The Port of Savannah, Ga., moved into fourth place as that facility is on track to process nearly 5.8 million containers in 2022. Just two years ago, it moved 4.7 million. Cordero said labor uncertainty has been a significant factor in that shift.
Source: Transport Topics
UK-EU trade flows fell by -16% due to Brexit, while EU-UK trade dropped -20%, according to a report by the Economic and Social Research Institute (ESRI).
ESRI pointed out the impacts it measured were solely a result of Brexit and no other factor such as the global effects of COVID-19, and the resulting congestion and other phenomena.
Nicolette van der Jagt, director general of CLECAT said, “[It] is a matter of how value chains are designed. Prior to Brexit, the EU-UK supply chains were highly interconnected; they still are, but perhaps to a lesser extent. A reason that could explain the bigger decrease in EU-to-UK flows is perhaps because it was easier for EU companies to diversify their supply chains, hence giving up on operations to the UK.”
Source: The Loadstar
