U.S. shipping media Marine Link recently pointed out that U.S. consumers’ demand for goods shows no signs of slowing down, and container shipping prices from East Asia and China to the two U.S. coasts are expected to begin to rise again. According to a survey conducted by container leasing and trading platform Container of deterioration.
Looking at the WCI index on February 10, Drewry’s latest World Container Index Composite Index fell slightly by 0.2% to $9359.10/FEU, but it was still 80% higher than the same period in 2021. The freight rate from Shanghai to New York increased by 2% to US$13,437/FEU. Shanghai-Los Angeles fell 1% to $10,437/FEU. There is no change in the freight rates for Shanghai-Genoa and Shanghai-Rotterdam.
Just like the predictions at the beginning of the article, Taiwan Hongyuan Investment Consulting already put forward similar views at the “2022 Investment and Prospects Briefing” held on December 14 last year. At that time, the company’s researcher stated that “the global logistics world is in chaos and the container shipping situation is excellent.” “, pointed out that shortage of containers, shortage of ships, and congestion in the logistics supply chain are common problems in advanced European and American countries. Infrastructure such as ports and inland transportation are outdated and insufficient, which will worsen the shortage of supply in the container shipping market in 2022. Marine Link analysis noted that the National Retail Federation (NRF) said in its monthly Global Port Tracker report compiled jointly with Hackett Associates that throughput at U.S. ports will return to normal growth later this year, while Until then it will remain high.
Jonathan Gold, NRF’s vice president for supply chain and customs policy, said, “While the holidays have passed, supply chain challenges continue. Although the sharp increase in imports has leveled off, import volumes remain at high levels.” Gold also pointed out that Omicron The emergence and rapid spread of variant viruses is an uncertain factor. On the one hand, it may affect the number of labor forces in the supply chain; on the other hand, if consumers stay at home instead of going out and spend money on retail goods, it may once again push more of imports.
Supply chain pressures and port congestion to persist into 2023
U.S. media analysis pointed out that supply chain chaos and port congestion may continue until 2023. Alphaliner recently stated: “Adjustments to the container shipping market forecast have been repeatedly pushed back (the initial forecast for the market downturn was after China’s Golden Week holiday in October 2020, then after the Lunar New Year in 2021, then mid-2021, and then late last year, and then after the Lunar New Year in 2022). There is now a growing consensus that the current supply chain chaos will last at least throughout 2022.” As the Lunar New Year in 2022 passes, container freight rates, ship leasing Rates and port congestion remain at or near record highs, with the turnaround being pushed into 2023.
Confidence in the longevity of the shipping boom has driven the market for buying and selling container ships to record levels. Alphaliner said: “The number of container ship transactions reached an all-time high in 2021 after shipowners appeared willing to pay almost any price to secure capacity.” It reported that there were 572 container ship transactions last year, equivalent to 1.93 million TEU, 26% higher than the annual record set in 2017. At the same time, rents in the ship leasing market have risen to a record high in 2022.
Evidence of the industry’s confidence in 2023 is that MSC has not stopped expanding its fleet after replacing Maersk as the world’s largest liner operator by capacity in January this year.
According to reports, MSC has extended the lease of the 6,493TEU “MSC Bosporus” for five years at a price of US$50,000 per day.
Alphaliner also reported that MSC has also extended charter contracts for several 8,500 to 9,500 TEU vessels owned by Danaos, some of which will come into effect next year. Danaos confirmed it has extended some leases with a latest expiration date of April 2023.
In addition, MSC recently purchased four container ships from Changjin Merchant Shipping for US$350 million, which is equivalent to 7 times the purchase price of Changjin Merchant Shipping that year.
DNB analyst Jorgen Lian said that a large number of new ships will enter the market in 2023 and 2024. If the congestion problem is not alleviated before the delivery of these new ships, the capacity waiting in the port queue will increase by 15%.
Zim Chief Financial Officer Xavier Destriau has said that the possibility of overcapacity due to new ship deliveries in 2023 is low, in part because land transportation congestion, especially in the United States, will continue to have an adverse impact on fleet efficiency. Supply chain obstruction factors in the United States are likely to persist, and land transportation bottlenecks will partially offset the net increase in shipping capacity brought about by increased ship orders.
Matson CEO Matthew Cox said last month that he expects trans-Pacific congestion and rising consumption trends to continue at least into the October peak season, while demand for Matson’s services in China will remain unchanged for much of the year.
The Biden administration and ports continue to focus on mitigating the supply chain crisis. The question is whether significant progress is possible before U.S. import demand plummets. Flexport chief economist Phil Levy said in a recent interview that rising demand is driving the trend.
If the sustained demand theory is correct, and if the U.S. in 2022Absent a fall in demand due to the recession, the argument that supply chain pressures and port congestion will continue into 2023 seems increasingly credible. In turn, this means cargo shippers face higher shipping costs and longer transit times.
How difficult is it to ease the pressure on port congestion? About 80% of disruptions are related to congestion at North American ports
Judah Levine, director of research at Freightos, an online freight marketplace and platform provider, said that worrying epidemic restrictions near the Chinese port of Ningbo in the last week of January have been largely lifted. But, as is often the case during this epidemic, as the situation improves in one area, new cases appear in another. Levine said that after new outbreaks were discovered at the ports of Shenzhen and Tianjin, although the logistics business has not yet been significantly affected, new measures have been taken. Levine also noted that congestion at U.S. ports has improved slightly but not significantly.
As of February 9, data from the Southern California Maritime Exchange showed that there were currently 85 ships anchored outside the Port of Los Angeles and Long Beach, 20 less than the 105 ships on January 6. In the same period last year, the number of ships waiting to be berthed was only about 30.
It is worth noting that on February 1, 2021, there were 40 container ships waiting for berths at the ports of Los Angeles and Long Beach, which handle 40% of U.S. imports. One year later, in early February 2022, there were 101 ships waiting to be berthed. Last year, the queue dropped by 30 ships from early February to the third week of June. Since then, seasonal imports have ruthlessly pushed the queue up into the year-end holidays.
In order to reach the same data in 2022 as the starting point before the peak season in late June last year, the number of ships in the queue must be reduced at a rate of three times that of last year in the next 15 weeks. However, given the still large backlog and the impact of the epidemic and unstable demand, the prospect of clearing the queue before 2023 looks increasingly unrealistic.
However, Mario Cordero, executive director of the Port of Long Beach, said in a briefing on the 9th that the unpredictability of the epidemic and the historic import volume are challenging factors. As Peter Tirschwell, head of research in the shipping and trade field at IHS Markit, said, a recurring problem since the epidemic is that after being hit, it is difficult for the overall shipping system to recover, and the next shock will come soon.
Data from the Port of Los Angeles shows that its port yard utilization rate reaches 90%, which has seriously affected the operational efficiency of the terminal and also led to traffic congestion in the port area.
Kuehne + Nagel releases the Supply Chain Disruption Index through its Seaexplorer platform to measure the operational efficiency of the global container shipping network. The index provides insight into the impact of the current situation on global trade and provides in-depth analysis and trend previews.
At the end of January, the 11.6 million TEU waiting days reflected by this indicator was a continuously high level. At nine specific ports (Prince Rupert, Vancouver/Seattle, Oakland, Los Angeles/Long Beach, New York, Savannah, Hong Kong, Shanghai/Ningbo, and Rotterdam/Antwerp) normal wait times The number of days should be less than 1 million TEU. Analysis shows that about 80% of these disruptions are related to congestion at North American ports.
Due to congestion and waiting times, delivery time from the Port of Dalian to the main European port of Antwerp increased from 68 days in December to 88 days in January. This compares with 65 days in January 2021, according to analysis by logistics platform project44.
Delivery time from Dalian to the eastern UK port of Felixstowe increased from 81 days in December to 85 days in January, compared with 65 days in January 2020.
Josh Brazil of the project44 platform said, “It will take several years to return to the supply chain stability before the epidemic.”
Will there be a summer window? Peak season coming early?
Gene Seroka, executive director of the Port of Los Angeles, said on February 9 that peak demand this summer may arrive earlier than usual. “Most retailers have indicated that they will replenish inventory in the second quarter of 2022 to bring inventory to a safer level, so that there will be an opportunity to enter the peak season earlier than normal in early June or early July,” he said.
Seroka agrees with Maersk CEO Søren Skou that shipping should start to gradually return to normal in the second half of this year. On February 9, Maersk expected that the first half of 2022 would be quite strong, and the backlog of ships would begin to decrease in the second half of the year. This shift will reduce pressure on container shipping capacity.
However, this outlook also depends on a big unknown: whether U.S. consumer demand for goods will persist when the epidemic subsides and service spending returns to normal. After all, about 80% of global trade in goods is carried out by sea. A number of stimulus programs launched by the U.S. government have increased spending power. This has resulted in a nearly 20% increase in U.S. imported container volumes in 2021 compared with 2019. Under this situation, the lack of shipping capacity has exacerbated the crisis in the container supply chain.
Many industry experts said that compared with factors such as equipment and labor shortages, the port blockage issue is more positively related to domestic demand in the United States. For future development, it mainly depends on demand and epidemic trends.
From the demand side, unless U.S. demand plummets, and it must be sluggish for two consecutive months or more, as time goes by, the import of goods will decrease and congestion will become less and less, and the problem will be alleviated.
But even now, in terms of the epidemic, new disruptions such as the Omicron virus strain may further disrupt the shipping system and make it difficult to find containers. Peter Tirschwell, head of research in the shipping and trade field at IHS Markit, said that at least in the first half of 2022, the shipping industry is still unlikely to return to its pre-epidemic state.
At present, in terms of the epidemic, new disruption factors such as the Omicron virus strain may further disrupt the shipping system and make it difficult to find containers. Peter Tirschwell, head of research in the shipping and trade field at IHS Markit, said that at least in the first half of 2022, the shipping industry is still unlikely to return to its pre-epidemic state.
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