China Archives | Page 15 of 26

Ex-Asia spot rate spiral turned into shooting star

May 16, 2024 | 4PL, China, General, Hong Kong, International Trade, Retail, Sea, Supply Chain

Container shipping lines have announced significant rate hikes on all ex-Asia trade lanes, due to increased demand and increasing equipment challenges in more origins and it would be prudent to expect more of the same.

Effective capacity to North Europe has decreased by 5% compared to a year ago, due to the longer route around Africa, despite the deployment of 18% more vessel capacity.

One leading carrier has suggested that capacity shortages could be as much as 20% and while the situation is not as grim as the carrier suggests, demand growth of 15% has taken the market by surprise with container equipment and vessels in short supply.

It is difficult to see what precipitated the steep increase in demand over the last couple of weeks, which have been remarkably strong. It may be buyers pulling orders forward because they have concerns about global geopolitical uncertainties, or they need an additional two-week buffer of stock in transit. Or rates could be driven by a more general restocking to replenish inventories.

The speed and pace of change in the market has been phenomenal, replicating the lead-up to the peak of the pandemic, with demand hugely high. Add to that the early start of the traditional peak season in May, which is now seasonalising to the pre-pandemic model and it’s a potential nightmare scenario for importers.

Carriers are putting rates out and then withdrawing them because they have already been replaced with higher levels.

FAK and spot rate quotes for most shipping lines are now closed until June, or later, so shippers can’t make a booking even if they are willing to pay premium prices.

Demand has grown consistently over the last two quarters and while new container ship deliveries continue, the diversion around the Cape of Good Hope, strong demand and additional summer service deployments are absorbing this capacity and we expect the lines to continue raising rates into the summer.

The ocean freight market has moved beyond ‘pay to play’, with carriers cutting back on contracts, blanking vessels and not carrying space forward. Shippers may look around and try to ‘play the market’ but everyone is in the same ‘boat’.

Metro are coping relatively well, thanks to our long-standing carrier relationships and sensible annual contracts, which guarantee us space and set rates.

To learn how we can enhance your ocean freight solutions, please EMAIL our Chief Commercial Officer, Andy Smith.

Red Sea diversions create Western Mediterranean port congestion

May 16, 2024 | 4PL, China, EU, Sea, Supply Chain

The mass diversion of container ships away from the Red Sea since December has raised fears of congestion across west Mediterranean container ports, as carriers from Asia drop boxes destined for the eastern Mediterranean.

Instead of entering the Mediterranean Sea dead end, created by the effective closure of the Suez Canal, Ultra-large container ships from the Far East are offloading containers at western Mediterranean ports such as Barcelona, with smaller feeder vessels transporting them to final central and eastern Mediterranean destinations.

Transhipment traffic in Barcelona was up year on year by 22%, 64% and 63% in January, February and March, while Algeciras, Valencia and Las Palmas grew at 7%, 18% and 33% in Q1 2024.

And while the ports managed the first quarter’s throughput, they are operating at (or are close to) operational capacity, which means that any continuation or increase in volumes could lead to a dangerously high level of utilisation and potentially serious congestion.

Alternatives, to spread volumes out, include the Moroccan hub of Tanger Med, but its utilisation is already sitting at 83%, so even a relatively small increase in volumes could fill it up.

The southern Portuguese port of Sines has capacity to handle an additional 1.4m teu, while the ports of Malaga and Castellon may also be worthy of consideration, to avoid a potential supply chain bottleneck, with storage yard capacity drying up at ports in the western Mediterranean.

The seven-day average vessel waiting time at Barcelona increased two days due to increased cargo flow, lowered productivity, IT issues and bad weather. Shipping lines are asking customers to pick up both their import units and empty containers as early as possible, due to congested line-up and increased waiting times.

One of the two container terminals at Algeciras confirmed that their facility was “quite full” and warned that “capacity is very limited”, leading them to restrict the amount of cargo accepted, to avoid severe congestion.

There are two potentially significant negative outcomes due to the current Mediterranean situation:

First, transshipment networks require more ships for the feeder services and carriers may remove ships from other trades, particularly those in North Europe, which could create a capacity squeeze and push rates up.

Second, port congestion creates a de-facto reduction of available vessel capacity, which leads to an increase in blank sailings, because there is a schedule gap when vessels are unavailable, which squeezes capacity and pushes up rates.

If you have any questions or concerns about the issues outlined in this article, or would like to discuss any aspect of your Mediterranean supply chain, please EMAIL our Chief Commercial Officer, Andy Smith.

Ocean demand outweighs supply

May 1, 2024 | China, Sea, Supply Chain, United States

The ongoing impact of vessel diversions as a result of the Red Sea conflict continues to absorb available capacity at a time when demand is rapidly increasing. Container volumes are already higher than many predicted and there is a possibility that we have already entered a peak season market environment.

Container shipping lines are deploying maximum numbers of their fleets and new vessel deliveries and sailing them faster to offset the longer transits around southern Africa, but there is a finite limit on how much space they can throw at the market.

The additional two weeks it takes for ships to sail around the Cape of Good Hope effectively reduces available vessel capacity, with an average of 11 weekly scheduled voyages from Asia to Northern Europe in the coming weeks. Compared to the typical average of 17 voyages through the Suez Canal.

With spot rates rising as capacity tightens, it is clear that unwary shippers’ cargo will not get shipped, as capacity hits an increase in demand, extending the booking window to a minimum of 21 days ahead of cargo ready date.

The situation is further complicated by blanked sailings, smaller capacity vessels being used to fill schedule gaps and carriers restructuring their networks to support new sailing schedules.

The overall impact means that in recent weeks there has been anything up to a 50%-80% capacity cut on certain lanes, with carriers implementing additional blank sailings around this week’s Bank Holidays in China.

The intelligence that we are receiving from our network and carrier partners is that May and June could be tough in terms of equipment and space across the whole of Asia for all the major container shipping lines and this is in what would usually be the quieter period ahead of the peak season.

European imports from the Far East are up 12% year on year and US imports up 24%, which means strong Westbound and transPacific peak seasons are assured. However, demand into other markets is even more pronounced, with Asia to Middle East/India and Asia to Oceania’s both up nearly a third.

The demand explosion means more equipment is going to these regions than forecast, with some lines imposing priority surcharges, rolling cargo and others restricting equipment for contracted clients.

China’s factory activity has been growing for six straight months, suggesting that the rebound in the world’s second-biggest economy can be sustained, with export orders surging and a significant peak period looking certain.

We urge you to provide us with forecasts ahead of time, ensure shippers book 21 days ahead of cargo ready date and to communicate with us if you have any urgent/high priority orders.

We negotiate long-term and protected contracts with shipping lines across the alliances to secure space and rates, so that we can provide the best alternatives and options, whatever the situation.

To learn how we can support your Far East, transPacific or transAtlantic trade, or to learn more about our ocean capability and solutions, please EMAIL our Chief Commercial Officer, Andy Smith.

China makes too much, but production is moving

May 1, 2024 | 4PL, China, Economics, International Trade, Supply Chain

The West says China makes too much, but many manufacturers have moved production to other countries to cut costs, leaving once prosperous manufacturing hubs like Dongguan struggling to adjust.

In recent years workers began to demand higher wages, while companies began cutting prices in order to win contracts, squeezing profits further and when Donald Trump began slapping tariffs on Chinese products companies searching for cheaper running costs and protection from the US-China trade wars – began to look elsewhere.

The “Made in China” slogan that was once ubiquitous on t-shirts, tables and TVs is now at the heart of the electric cars that are pouring into Europe, and the solar panels that are powering our renewable policies. And that is worrying Western politicians.

Rising trade tensions with the United States, strict Covid lockdowns and a global downturn mean that manufacturers who once flocked to Chinese shores are looking elsewhere, with foreign investment in the country at a 30-year low.

The old industrial pillars of furniture, clothing and electrical goods are struggling and have been replaced by high-tech products like solar panels, lithium batteries and electric cars, which are being exported in massive quantities to Europe, Africa, Australia, South America, North America and South East Asia.

But China’s new industries are far less labour-intensive than the ones that once fuelled its spectacular growth – and they require specialised, high-skilled workers and, increasingly, robots.

The US, UK and European Union believe this is how China is trying to save its economy – producing cut-price and state-subsidised green technology that is being ‘dumped’ abroad. They say it’s a tactic that is driving down the cost of solar panels and other emerging technology and driving Western firms out of business.

It is clear that there is a shift away of some lower-cost production from China to alternative sources, including Vietnam and India, with some companies also looking at near-shore options like Turkey, as a way of managing risk and enhancing supply chain resilience.

There is no doubt that production moving away from China has benefited many countries around Asia, including Bangladesh, Thailand and Cambodia, while other EMEA countries including Turkey, Egypt and Morocco provide opportunities to shorten lead times and carrier costs.

For over 40 years Metro has managed supply chains and helped customers extend and diversify sourcing across Asia and EMEA.

Metro’s integrated transport networks are designed to support JIT manufacturing requirements across Asia, the EU, sub-Saharan Africa and Turkey and are ideally positioned to support the new sourcing requirements that de-risk supply chain operations.

We see diversification and near-shoring as a simple extension of a client’s sourcing strategy, so that if there is disruption in one area, inherent flexibility means the supply chain will continue to flow.

Our global partner network, strategic carrier alliances and MVT supply chain platforms are all geared towards supporting the widest spectrum of supply chains.

If you would like to learn how we can boost your ability to source from alternative global manufacturing regions, EMAIL our Chief Commercial Officer, Andrew Smith, to arrange a consultation and scoping discussion.