Lost Liner Capacity Undermines Economic Recovery of Smaller Developing Nations

A report by consultancy MDS Transmodal, commissioned by the Global Shippers’ Forum (GSF) showed the extent of container capacity lost due to blank sailings or skipped port calls by carriers which resulted in delays and disruption for shippers and economic harm to some smaller developing nations.

Up to 40% of container capacity failed to arrive at the ports of Colombo (Sri Lanka) and Piraeus (Greece) in the last quarter of 2021 versus a pre-COVID level between 15-20%. Jebel Ali (United Arab Emirates) and Felixstowe (U.K.) also failed to see around one-third of their expected capacity (see Figure 1). In the Asia -Pacific region, Port Klang (Malaysia) saw a 40% loss of capacity, Melbourne (Australia) and Tauranga (New Zealand) were down by a third. In 2019, the average loss of expected container capacity was between 10 and 15% (see Figure 2).

Antonella Teodoro, senior consultant at MDS Transmodal explained, “Carriers have been reducing the scheduled capacity offered to some ports but also reduced the level of capacity actually provided. These reductions have translated in deterioration of connectivity with some countries losing direct connections.”

GSF’s director James Hook said regional economies were negatively impacted by the service failures and the loss of capacity. “Skipped ports and blanked sailings have evidently become central to the way shipping lines are managing the capacity of their heavily utilized fleets,” he added.

*Lost Capacity: A measure of the total number of container ship slots that were expected to be available at the port but did not materialize because the port was skipped, or the entire service was blanked by the shipping line.

Source: The Loadstar 

Cargo Accumulating at Western Europe’s Ports

Ships and cargoes have been accumulating at ports across Europe following sanctions on Russia after it invaded Ukraine. According to Israeli maritime data agency Windward, ports in Cyprus, Bulgaria, Latvia and Finland are experiencing a sudden spike in congestion of between 40% to 80% (see Map 1).

The shutdown of shipping lanes to Russia and Ukraine has worsened the backlog of containerized freight in ports and terminals, adding to congestion woes with cargoes needing to be re-routed. Alphaliner said, “More congestion means more shipping capacity held up, and further pressure on the supply of tonnage, which can only contribute to keeping charter rates at sky-high levels.” 

Christian Roeloffs, co-founder and CEO of Container xChange said the ongoing disruption to shipping in the Black Sea will lead to “a build-up at ports and worsen storage areas across the region”.

Source: Splash247.com 

Return of Blank Sailings on Asia-North Europe Services

Carriers are reinstating blank sailings in response to softening demand on the Asia-North Europe route. 

The 2M alliance has planned for service omissions on scheduled AE6/Lion loop sailings for the next two weeks. In an advisory, Maersk said the decision came from “a high degree of uncertainty and significant delays on the network” while partner MSC cited the “ongoing challenging market situation”. 

According to the March 11 report by the Ningbo Container Freight Index (NCFI), weekly available export capacity is exceeding demand. Carriers have started reducing rates to fill allocations. “The overall cargo volume in the market was not sufficient,” the NCFI said about the current week’s freight market and noted that carriers had “increased their efforts” to book cargo. 

Asia-North Europe spot rates have been gradually trending down after peaking at the end of January. The latest analysis by Alphaliner reports that average weekly capacity between Asia and Europe is around 450,000 TEU, 9% higher than a year-ago. 

Meanwhile, on the Trans-Pacific, Alphaliner data shows weekly capacity increased by 28% to 673,000 TEU between Asia and North America compared to last year. Yet, there no indications of freight rate relief from the currently elevated levels. 

Source: The Loadstar

Demand and Congestion Drive Up Trans-Pacific Contract Rates

Vessel capacity and service have been prioritized above price. Retailers and Importers have signed long-term contracts at significantly higher levels in Trans-Pacific Eastbound trades than in previous years, Xeneta reported. Rates have continued to climb the past two months even as contract negotiations continue. “Trans-Pacific contracts are catching up with spot market rates,” Alan Murphy, CEO and partner at Sea-Intelligence Maritime told TPM22.

Average rates in long-term contracts of three to 12 months from Asia-U.S. West Coast signed during Dec. 1 through February have risen 125% year-on-year (y/y), and up 350% from pre-COVID-19 (see Figure 1). East Coast contract rates signed since Dec. 1 are up 160% y/y and 300% from 2019. Xeneta said that importers are heading to the U.S. East Coast “to avoid the congestion and risks associated with the West Coast”. 

Attendees at TPM22 which included ocean carriers, shippers, NVOs, freight forwarders and industry experts, have said ocean and landside congestion in the U.S. will continue to keep vessel capacity tight and rates are unlikely to ease before 2023.

New vessel deliveries scheduled for 2023 and 2024 will not address the supply/demand challenges in the Trans-Pacific. Industry analysts pointed out that the International Maritime Organization’s 2023 decarbonization regulations targeting greenhouse gas emissions could substantially reduce the deployment of older, smaller Panamex vessels reducing available capacity.

Source: Journal of Commerce 

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