Sea Archives | Page 57 of 70

More blank sailings show wisdom of mixed rate portfolio

Aug 18, 2022 | Sea, Supply Chain

As we enter the traditional peak season for sea freight, demand for space from China is falling and the lines are taking action to counter over-capacity in the North Europe and Mediterranean trades, while transPacific demand in stasis.

As Hapag-Lloyd published its Q2 2022 results, the impact of increasing contract rates in 2022 is clear, with more record breaking profits and average freight rates up 70% year-on-year, even with the supply/demand equation shifting in favour of the shipper.

The overall picture is mixed, with rates on some routes experiencing downward pressure, while continuing port congestion has reduced the amount of effective capacity, which stops rate erosion on others. Most notably on the Asia-North Europe trade lane, where major hub ports are suffering a combination of increased import dwell times, labour shortages and industrial action.

Ocean carriers will be looking to blank as much capacity as possible in the short term, to move the supply/demand equation back in their favour.

While no blanking details have emerged, research by Sea-Intelligence has found that certain sailings crop up repeatedly, when it came to blank sailings from Asia to North Europe.

The Danish analysts measured the average number of weeks between a blank sailing on each respective service, to identify those most at risk of blanking.

2M’s AE5/Albatross and AE10/Silk were blanked once every 9-13 weeks in the last 12 months, while AE55/Griffin and AE6/Lion were blanked every 5-6 weeks in the last 12 months.

Ocean Alliance’s AEU2 and AEU6 were hardly blanked in the last 12 months, while AEU7, AEU9, and AEU1 were blanked every 5-7 weeks, while THE Alliance services, were all blanked quite frequently.

Carriers favour certain services, either by virtue of value, routes, or the ports that they call at and knowing which services are more likely to be blanked help us limit disruption to our clients’ supply chains.

To move cargo on specified vessels and routes, in the most efficient and cost-effective method, we apply the most beneficial pricing model for our customer, which may be based on contracts, FAK or spot rates.

We negotiate annual volume and rate contracts across the three alliances, primarily for the largest shippers, who need pricing stability and the best space guarantees.

Freight All Kinds (FAK) pricing allows us to leverage our buying power, to get competitive rates from individual shipping lines on a variety of routes, locked-in for a specified period.

The spot-rate market can offer the lowest rates, but it applies to individual sailings and needs to employed with caution, to minimise instability. It is by far the most unpredictable pricing model, with significant risks, such-as cargo rolling, which may result in financial and transit penalties.

We negotiate long-term and FAK contracts with shipping lines across all three alliances to secure space and rates, to provide the best alternatives and options, whatever the situation.

By leveraging agreements across the alliances - and spot rates, when appropriate - we can often adapt port pairs and routings, to work around blanked sailings, to maintain resilient and reliable supply chains.

Supply chain disruption may soak up sea freight capacity on major Asian container trades

Aug 2, 2022 | Sea, Supply Chain, United States

Capacity from Asia to the West Coast will be 20% higher through September, than last year, but inland supply chain disruption is continuing and threatens to wipe out any benefit from the increased capacity.

Carriers serving the US West Coast will have 20% more peak-season capacity from Asia, compared to the same period in 2021, by the first week of October and we are watching developments closely, as what transpires on trans-Pacific routes tends to be mirrored on the European lanes within weeks. The trades are thoroughly interlinked with trends and how they operate, quite often one event on the route effecting the other routes from Asia to Europe.

Despite the ability of Los Angeles/Long Beach to process boxes from ship to shore, the uplift in capacity may be significantly diminished, because there are insufficient railcar assets at terminals to bulk move containers away from the ports. Container dwell times at the West Coast ports shot up to a record 13.3 days in June, when the average dwell time should be no more than three to four days to prevent stacked containers from compromising operations.

A fortnight ago Long Beach had 12,650 rail containers on dock, while Los Angeles had 31,186, of which 23,880 were sitting on the terminals for nine days or longer, when there should be none.

Chassis providers complain that shippers are taking twice as long to release marine chassis, compared with pre-pandemic, while other shippers are simply leaving import containers in rail and marine terminals because they have inventory clogging their warehouses.

Much of the blame for the current situation is being laid on the biggest retailers, who are not keen on taking in more inventory amid slowing sales, because they do not have available storage space, which means backlogs build back from their warehouse doors, through the inland transport ecosystem.

In other developments, despite the Ocean Shipping Reform Act of 2022 becoming law in mid-June, to provide oversight of container storage fees and revised rules on loading exports, calls are growing to end the antitrust immunity currently enjoyed by container lines.

The lines warn that the benefits of more services to more places, delivered more efficiently, would be undermined if legal certainty for operational agreements were removed. FMC chairman, Daniel Maffei, has floated the idea of increased monitoring of alliances and has also warned that shippers would suffer without the vessel-sharing agreements.

The International Longshoremen’s Association has also voiced support of vessel-sharing agreements because they provide more frequent service at a lower cost, which includes calls at small and medium-sized ports, that would no otherwise be served.

The ILWU and marine terminal employers have reached a tentative deal on health benefits for West Coast dockworkers, which is a positive move towards an overall agreement on a new labour contract.

Sources close to the negotiations believe that the likelihood is growing that a deal will be reached in August or September with little disruption occurring on the docks.

It is interesting to observe the North American markets as often many of these situations are emulated in The UK and Europe a few weeks later. Due to the shorter quay to quay transit times on the Transpacific routes its acts as a barometer on the Asia/ Europe trade so it is well worth following the market in USA and Canada and Americas as a whole as they are as significant in Boston in Lincolnshire as they are in Boston in Massachusetts.

We are working closely with our offices and network partners in North America to monitor these developing situations, set up contingency platforms and ensure product is delivered to market, without delay, however the peak season develops.

Our services continue to be among the most reliable in the market, thanks to our fixed validity contracts and access to our own dedicated fleet of vessels to further enhance access to container slots.

Contact Elliot Carlile to learn more about our US capabilities, or to discuss your supply chain requirements, as we enter peak season, so that we can ensure you are prepared for the increased market activity.

Shipping line CEO sees signs of June recovery

The world’s largest container shipping lines – and there are not that many!

Aug 2, 2022 | Sea, Supply Chain

With around 80% of global trade transported by sea and three major shipping alliances controlling 95% of the critical trade lanes from Asia to North America and Europe, a handful of shipping lines have massive influence over the cost and effectiveness of international trade.

The three major shipping alliances - 2M, THE Alliance, and Ocean Alliance - were formed in 2017 to support economies of scale, low prices and broad service coverage. These three alliances account for 80% of the global container market, with greater market share on many trade routes.

The high fixed-cost structure of shipping lines is one of the main arguments for shipping lines to collaborate. The rationale being that each liner service requires investment in a number of vessels to complete round trip voyages between different ports, which will sail on fixed dates regardless of how much cargo they are carrying, often leading to very poor utilisation, which is cost ineffective and environmentally unfriendly.

However, allowing collaboration between carriers, means that the alliance partners can agree to operate a liner service along a specified route using a specified number of vessels. It is not necessary for each alliance member to allocate equal numbers of vessels, because the space that is available for loading and discharging at each port of call is shared between the partners.

The amount of space that each partner gets may vary from port to port and could depend on the number of vessels which are operated or placed by the different partners within the agreement and means that the partners have flexibility to meet demand and increase utilisation rates, which reduces operating costs and boosts efficiency.

Collaboration in this way has allowed the alliances to leverage each partner’s geographic strengths to develop more comprehensive global shipping networks, which have extending coverage and provide more routes, which improves the service offerings for their customers.

Entering alliances seems to be a good fit for smaller lines, that benefit from the extended service coverage and larger shipping lines who can bleed their assets. This is demonstrated in the different strategies of MSC and Hapag-Lloyd, with the former focused on organic growth and the rapid growth of its fleet, while Hapag-Lloyd has been collaborating in partnerships since 1989 and has only recently committed to the acquisition of the mega-ships, that have become synonymous with the rise of the alliance on the trade lanes from Asia.

The three major shipping alliances collectively account for 80% of the shipping market and include all of the biggest container lines:
2M Alliance: Maersk and MSC
Ocean Alliance: COSCO, OOCL, CMA CGM, and Evergreen
THE Alliance: Hapag-Lloyd, ONE, Yang Ming , HMM

Courtesy of Alcott Global - alcottglobal.com

Metro leverage opportunities across the shipping alliances, with long established relationships across a portfolio of carrier partners, to give our customers access to new solutions and the widest range of service offerings, port-pairings and rates.

By working closely with our global network and inland logistics partners we deliver a range of upstream and downstream value added services, initiatives and solution innovations, which the carriers cannot match.

Our bespoke solutions are always driven by our customers’ requirements and expectations. For further information contact Elliot Carlile, who would be delighted to talk to you about your requirements.

China/Hong Kong update; cross-border trucking capacity cut

Aug 2, 2022 | Hong Kong, Sea, Supply Chain

Increasing COVID case numbers in China are cutting cross-border trucking capacity, prompting carriers to drop calls at Hong Kong, raising fears that the city is losing shipping line favour as a transhipment hub.

With almost one million people in lockdown in Wuhan, where COVID was first detected, the Politburo confirmed last Thursday that China will maintain its “zero-COVID” policy. And with increasing numbers of COVID cases on the mainland, regional authorities have cut cross-border truck movements with Hong Kong, from 3,500 to 1,500 a day until further notice.

The significant reduction in trucking capacity and stricter testing policies (with truck drivers required to show proof of a negative test result within 24 hours, rather than 48 hours) is creating substantial fluctuations in cross-border traffic and we are expecting to see demand for feeder, barge and air solutions spike again.

Hong Kong is moving toward greater relaxation of COVID restrictions, but this may not align with mainland requirements, which complicates the situation and reduced capacity may extend lead times for any shipments coming over the border, to ship from Hong Kong.

The number of ships calling at Kwai Chung container terminal fell 21% in the first quarter, compared to 2021, while the number of Hong Kong calls for Europe services dropped 36%, with a 22% drop on intra-Asia services and calls on trans-Pacific trades down nearly 5%, prompting fears that Hong Kong will lose its position as a leading transshipment hub.

Hong Kong handled about 17.8 million TEU last year, of which around 60% was transshipment. But with so much cargo now shipping through terminals in China or, for regional cargo, transshipping at other ports, Hong Kong may see less transshipment cargo, which would mean fewer calls and fewer calls would mean even less containerised cargo, in a downward spiral.

Container exports are down 12% and imports down 6.6% year on year through June which, terminal operator (and Felixstowe port owner) Hutchison Port Holdings said, negatively affects shipping lines’ preference to use Hong Kong as one of their hubs for transshipment.

In a possible demonstration of this new reality, Hutchison said throughput at Shenzhen’s Yantian International Container Terminal was up 7% year-on-year, but volumes at its Kwai Tsing terminals in Hong Kong were down 7%, which it attributed to “lower local and transhipment cargo”.

We will continue to monitor the situation with our local colleagues and offices throughout China and keep you advised immediately of any new lockdowns or COVID related events that may have an impact on global logistics and your supply chains. We are very close to the market and the intelligence available and will share updates as they occur.

Cuts to Hong Kong border trucking capacity reflect an ongoing situation, with curbs and relaxations fluctuating constantly, that our local team have become adept at handling.

Despite these challenges we continue to secure trucking capacity and barge capacity is currently sufficient, but if the situation does deteriorate delays to transit times may increase to around five-to-six days.

Our cloud-based supply chain management platform, MVT, makes every milestone and participant in the supply chain transparent and controllable, which means you can adapt and flex your supply chain, to react to local changes dynamically.

To discuss how our technology could support your supply chain, please contact Simon George our Technical Solutions Director or Elliot Carlile.