By Arthur Chen.               Photo : Kurt Cotoaga 

An additional 4.5-4.8 million TEUs are expected to be delivered in 2022, with a surplus of 13 million TEUs in 2023. That is to say, starting from 2023, the supply of space will exceed the demand.

The ocean freight rate has been on the rise recently after several weeks of consecutive declines. The latest global composite freight rate index of the Baltic Sea Freight Index (FBX) rose 3% from the previous week to US$8,466/FEU, which is also after 12 consecutive weeks of declines. The first recovery. For the trans-Pacific route, the FBX freight index for the Asia-West America route increased by US$1,186 from the previous week to US$13,698/FEU (including surcharges); the Asia-East US route dropped slightly by 0.3% to US$15,931/FEU. The Asia-Nordic route rose slightly by 0.2% to $10,583/FEU, and the Asia-Mediterranean route rose 2% to $12,833/FEU. The main reason for the increase in prices is that the shipping lines control the sailings properly. According to reports, 78 sailings will be cancelled in the next five weeks, mainly on eastbound transpacific routes. One of the other reasons is that with the expiration of the labor union contract at the West American ports on July 1, the market expects that the spot freight rate may increase at an accelerated rate. Although American consumers are now facing the pressure of traffic, the demand for trans-Pacific routes is strong. Some carriers have turned to support spot rate operations. According to the latest voyage cancellation tracking report released by Drewry, between the 21st and 25th weeks, there were a total of 742 scheduled voyages on major routes such as transpacific, transatlantic, Asia to northern Europe and the Mediterranean, of which 73 voyages will be canceled, and 71% of the blank sailings will appear on trans-Pacific eastbound routes, mainly to the US West Coast. Spot freight is expected to remain stable and high in the next few weeks.

There are many reasons for the high sea freight rate, including the logistics supply chain that has not been completely solved. The problem of ports congestion on the West Coast of the United States have been going on for nearly two years. The current congestion has been exacerbated by the inefficiency of the port caused by the exchange of contracts between the union and the port association, and has begun to spread to the ports of New York and New Jersey on the east coast, so that these ports are now holding 120,000 empty containers. Containers are full. Cargo handling facilities at the ports of New York and New Jersey have been in trouble since the beginning of this year. Shippers take longer to pick up cargo from the docks, and empty containers are piled up waiting to be shipped overseas. 120,000 empty containers in U.S. East Coast ports are stacked. More than double the usual amount, the port is now preparing to open 10 acres of land to store these empty containers to ease port congestion. It is still at off-season of the shipping industry, and it is expected in a few months later, with the arrival of the peak shipping season, the import volume may increase dramatically.

As of May 13, the number of container ships waiting outside the ports of New York and New Jersey on the east coast of the United States averaged 14 per day, the highest peak since the beginning of the pandemic. On average, each ships need to stay in the port for eight to ten days. In last year, this figure was about three to four days. Since the ports of Los Angeles and Long Beach on the west coast of the United States continued to be flooded with containers last year, many ships began to try to bypass the congestion points in Southern California, and the ports of Oakland, Savannah, and Charleston, South Carolina, became the second To choose, ships are now beginning to flock to the ports of New York and New Jersey on the east coast, so the backlog of containers will naturally emerge.

Analysts believe that as the annual work contract between ILWU workers and the Pacific Maritime Association (PMA) expires on June 30, West American dockworkers are negotiating a contract change during the period. Another U.S. retailer has restocked its inventory. If the negotiation for contract replacement fails to lead to a strike, it may become another disaster for the supply chain. Although the operating efficiency of individual ports has begun to recover and the ship turnover efficiency has partially improved, a wide range of supply chain problems still exist. Currently, about 20% of the container fleet is stuck in various ports, and the ratio of ships that can arrive at their destinations on time is less than 40%. More than 60% of ships were delayed. The port congestion at the ports of Los Angeles and Long Beach on the west coast of the United States continues, and the congestion at ports on the east coast is becoming more and more serious; in European ports, the average delay of cargo ships from mainland China is four days, resulting in container shortages for ships from Europe to the east coast of the United States , In addition, the total turnover time of the three major European container ports: Rotterdam, Antwerp and Hamburg, respectively, was 8%, 30% and 21% higher than the five-year normal level.

If 2022 is to give everyone an opportunity to gradually go from chaos to normality, but pulling the sight to next year to see the market will make the hearts of shipping lines bleed. According to a report by Sea-Intelligence, a Danish maritime data analysis company, there may be a surplus of 13 million TEUs in 2023. The underlying theory is that the bigger the problem in the supply chain, the bigger of demand for containers, but when the problem decreases, so does the demand. The impact of the two-year-old supply chain issue was significant, resulting in significantly longer transit times for ocean and inland shipments. Sea-Intelligence used the data provided by Hapag-Lloyd to do mathematical and quantitative analysis, and matched the amount of cargo transported and the fleet of equipment over a long period of time. The operational performance of Hapag-Lloyd in relation to its equipment is considered representative of the overall market. The details of quantification are not repeated here. All this comes with the warming that in 2021, the global container fleet will reach 50 million TEUs. If 17% of that becomes redundant, this equates to a surplus of 8.5 million TEUs of equipment. An additional 4.5-4.8 million TEUs are expected to be delivered in 2022, with a surplus of 13 million TEUs in 2023. That is to say, starting from 2023, the supply of space will exceed the demand.

Appreciate if you could share TGL Blog among your friends who are interested in first-hand market information of supply chain and updated economic incidents.