Stephen Fodor
- Apr 19, 2021
- 6 min read

Shipping rates skyrocket, Suez debacle could cost 916 Million, Port of Savannah sees boom

Monday Morning Wake Up Call

April 19, 2021

Shipping rates rocketing again, with contract talks 'a game of musical chairs'

(Load Star) Container spot rates are beginning to head upwards again across all trades from already elevated levels, as carriers reduce their commitment to contract volumes in favor of much higher FAK rates.

The Freightos Baltic Index (FBX) China-North Europe component edged up to $7,316 per 40ft this week, and market reports to The Loadstar suggest rates on the route are set to soar again next week, returning to their mid-February peak of $8,430, and possibly higher.

“The squeeze on shipping capacity on the route has caused freight rates to rise,” said the Ningbo Containerized Freight Index (NCFI) commentary, which recorded a 4.6% rise in its North European index this week.

The FBX China-North Europe component is up a phenomenal 430% on the same time last year, at a time in the supply chain cycle when rates are generally under slack season pressure before a peak season recovery in July.

“Releasing the Ever Given mitigated the crisis, but in many ways the damage was already done,” said Freightos research lead Judah Levine. “Two weeks post-Suez blockage, global trade is beginning to feel the slow-moving hit on both capacity and pricing fronts.”

Indeed, one UK-based NVOCC told The Loadstar this week his carrier had not only doubled his contract rate from Asia, but had also cut his MQC (minimum quantity commitment) by 75%.

“We now have only a quarter of our business covered by the new contract and the rest will be at the mercy of the line’s FAK rates and all manner of surcharges,” he said.

The forwarder also works for clients with a sizeable US market and complained that rates on the transatlantic were now “out of control”.

According to the FBX, spot rates from North Europe to North America jumped by a more ‘modest’ 10% this week, to $3,306 per 40ft, having spiked by over 50% in the past few weeks.

And there is growing evidence that there will be another big spike in transpacific spot rates in the coming weeks, with the US National Retail Federation (NRF) saying it expects import volumes to be 14% higher this month than April last year.

Notwithstanding the severe initial impact of the pandemic on volumes last year, Blue Alpha Capital reported March imports to the top ten US ports were up by a massive 69% on 2020.

The FBX recorded spot rates from Asia to the US west coast this week at $4,986 per 40ft, a slight drop on the previous week, but the Shanghai Containerised Freight Index (SCFI) today recorded a 13% uplift in its spot, suggesting some big increases coming down the pipeline.

And increases are already working through for the US east coast, with the FBX recording a 3.5% increase in its spot this week, to $6,208 per 40ft.

Commenting on the final stages of the transpacific contracting season Jon Monroe, of Jon Monroe Consulting, said carriers were reducing MQCs in contracts “at the last minute” and, in some cases, hiking agreed rates at the eleventh hour.

“Contract rates are double last year, premium rates are up and bookings are backed up for three to four weeks,” said Mr Monroe. “This is like a game of musical chairs and the last [BCO] to the signing party may be left standing [with no MQC],” said the consultant.

Dislodged ship held in Suez Canal as talks continue over $916 mln claim

(Reuters) A ship that blocked the Suez Canal for almost a week in March is being held in the waterway as canal authorities pursue a $916 million compensation claim against the ship's Japanese owner, one of the vessel's insurers and canal sources said on Tuesday.

The Ever Given container ship, owned by Shoei Kisen, has been in a lake separating two sections of the canal since it was dislodged on March 29, as the Suez Canal Authority (SCA) conducts investigations.

Two SCA sources, who declined to be named, told Reuters a court order had been issued for the ship to be held. Negotiations over the compensation claim were still taking place, according to one of the sources.

UK Club, the protection & indemnity (P&I) insurer for the Ever Given, said the canal's claim included $300 million for a "salvage bonus" and $300 million for "loss of reputation".

"Despite the magnitude of the claim, which was largely unsupported, the owners and their insurers have been negotiating in good faith with the SCA," UK Club said in a statement.

"On 12 April, a carefully considered and generous offer was made to the SCA to settle their claim. We are disappointed by the SCA's subsequent decision to arrest the vessel today."

Earlier on Tuesday Yumi Shinohara, deputy manager with owner Shoei Kisen's fleet management department, confirmed that the canal had made a compensation claim and that the ship had not been given clearance to leave, but gave no further details.

CARGO

The decision to hold the ship could impact its cargo, said Jai Sharma, a lawyer at Clyde & Co. "I anticipate that there will be companies that are going to air freight cargo replacements," he said.

There was no immediate comment from the SCA, but the authority's chairman Osama Rabie said on Egyptian TV last week that the Ever Given would not leave until the investigation was finished and compensation paid.

He said the canal had borne "great moral damage" as well as shipping fee losses and salvage operation costs. He has also said he hoped to settle matters amicably.

Results of the SCA's investigation were expected by the end of the week, according to SCA sources.

International supply chains were thrown into disarray when the 400-metre (430 yard) Ever Given ran aground in the canal on March 23, with 18,300 containers on board. read more

Specialist rescue teams took six days to free the vessel, delaying the passage of more than 400 ships and causing others to divert around Africa.

Industry sources told Reuters last week that reinsurers were set to foot most of the bill for the ship's grounding. read more

Asked about the SCA's claim, Sharma said: "It would seem surprising that the claim could be quantified so quickly with any accuracy."

One maritime lawyer said that normally the ship owner would provide an agreed security that would allow the vessel and crew to continue on their way with a court setting a final award later. "Of course in this case, they are hoping for cash now," he said.

Port of Savannah container moves jumped 48% in March

(American Shipper) It’s definitely not just West Coast ports touting record after record. Georgia’s Port of Savannah just reported an all-time high: 498,000 twenty-foot equivalent units (TEUs) of container throughput in March, up 48% year on year.

Last month’s volume was also a big rise from the preceding month, 27% higher than February’s 390,804 TEUs.

The Georgia Ports Authority (GPA) has now handled 3.9 million TEUs in the first nine months of its fiscal year ending in June. It’s on track to top 5 million TEUs for the first time ever in a single fiscal year.

“Over the past six months, unprecedented volumes have crossed our docks,” affirmed GPA Executive Director Griff Lynch in a press statement.

Anchorages largely cleared

The lofty numbers in March came as the port was digging out from significant congestion. Fog closures of the river and vessel bunching due to weather issues up the East Coast in February forced many ships to anchor. At one point, over 20 container ships were stuck at anchor off Savannah in the first half of March.

By this month, the number of ships at anchor dropped to the single digits. On Friday, automated identification system (AIS) ship-position data showed three container ships at anchor.

Accelerated expansion plans

In an interview with American Shipper last month, Lynch explained, “We’re seeing volume this year we didn’t expect to see until 2025. So, what we’re doing now is advancing expansion plans we had targeted to happen over the next five years. We’re going to get them done sooner.”

The so-called Peak Capacity project will create 2,100 new grounded container slots, adding 650,000 TEUs in annual capacity in two phases, the first to be completed by September. A separate project will add 750,000 TEUs in capacity by 2023.

Garden City Terminal’s Berth 1 will be renovated — with a bend straightened out — to increase capacity by 1 million TEU per year by June 2021, bringing Garden City’s annual capacity up to 6 million TEUs.

The port is purchasing eight new, taller ship-to-shore (STS) cranes to arrive in 2023, replacing six older units and bringing the total in Savannah to 38 STS cranes. It’s also purchasing 20 new rubber-tired gantry (RTG) cranes that can reach stacks six containers high, one higher than its existing RTGs reach.

In addition, the second of nine new sets of working tracks will enter service this year at the Mason Mega Rail Terminal, upping GPA’s rail-lift capacity to 2 million TEUs per year.

The combined budget for all of the upgrades is over $100 million per year over the next three years. When the work is completed, Savannah’s container capacity will be increased by 20%. By 2023, the port will be able to handle four 15,000-TEU ships simultaneously.

To Read More: https://www.freightwaves.com/news/savannah-container-moves-jumped-48-in-march

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