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  • Writer's pictureStephen Fodor

Trans-Pacific rates run sideways, CMA CGM freezes spot rates, shipping options dry up

Monday Morning Wake Up Call

September 13, 2021

Trans-Pacific all-inclusive rates run sideways as supply-chain woes persist

(hellenicshippingnews) All-inclusive rates on the trans-Pacific trade were heard largely flat during the week ending Sept. 10, even as bearish shippers braced for mid-September increases.

Even so, premium bookings continued to dominate the market, while Freight All Kinds rates were described as “illusive,” by one freight forwarder.

“Three times a week I’m on calls with customers saying ‘what if we pay more, what if we pay more.’ It’s surprising to me that people are immune to 30 grand rates into the Midwest,” the forwarder added.

During the week, S&P Global Platts heard some all-inclusive bookings to the USWC at just over $22,000/forty-foot equivalent unit, but the majority of USWC bookings remain closer to $15,000/FEU.

And with updated premium levels, ZIM has overtaken MSC as the most expensive carrier operating on the trans-Pacific, sources said.

“ZIM premium higher than MSC now, which is crazy, but we still can’t guarantee space” another freight forwarder said. “[They] increased BAF too, and added on some creative surcharges.”

Most market players expect further increases to come into effect as the US market continue the peak season rush.

Southeast Asia premiums flat on week, but primed to rise

The premium rates on the Southeast Asia-to-North America route remained largely stable during the week but sources indicated a possibility of increases as the shortages continued with no resolution in sight.

For Southeast Asia-to-East Coast North America, the all-inclusive premium rates largely remained stable in the $20,000-$25,000/FEU range.

However, during the week, S&P Global Platts also heard one Freight All Kinds, or FAK, rate on the trade lane at $17,500/FEU — quoted to a freight forwarder in Thailand by Hong Kong-based carrier OOCL.

“There is simply no space,” the freight forwarder said, adding that these rates for FAK values are too high, since carriers will levy hefty premiums and surcharges over and above the FAK rates to confirm bookings.

Platts Container Rate 25 — Southeast Asia-to-East Coast North America — which tracks the FAK rates in the market was assessed at $11,000/FEU on Sept. 10.

“This rate should come down next month, before it can continue increasing again as the market continues to struggle with shortage in vessel space and containers,” the freight forwarder added.

For the Southeast Asia-to-West Coast North America trade lane, the all-inclusive premium rates ranged between $17,000/FEU and $20,000/FEU, unchanged from the last week.

Equipment availability is declining as supply-chain constraints and port congestion around the world prevent the smooth rotation of empty containers, sources said.

“I have a shipment for Russia, have made the booking, but we have been waiting for containers for the last 10 days … Australia is even worse, no bookings available. The situation keeps getting worse, prices are so high still we are suffering,” an exporter based in India said.

In Vietnam, lockdown restrictions and curtailed port operations have continued to hamper the port operations and movement of cargo in the country, further adding to the concerns about backlogs and pileups, sources said.

“We have still not received any official notice from the government on when the lockdown will be lifted. There are no containers available. It’s a sad year, we don’t know when things will come back to normal,” a freight forwarder based in Vietnam said.

Asia-Europe bookings still ‘largely FAK’

Container rates from Asia-to-Europe still remain largely done on FAK basis, rather than with premiums attached as the market continues to grapple lengthy delays and congestion at ports, with many containers still remaining quayside.

Despite this, freight rates remain high, with some market participants starting to appear concerned at the longevity of these firm freight levels.

This comes on the news that some market participants are retrofitting dry bulk vessels to accommodate the need for repositioning of containers to key exporting hubs around the world to try and overcome the delays in delivery times.

“Freight is just through the roof, the issues are all supply-related, actual demand is pretty much level with 2019,” said a freight forwarder. “If we don’t see more hauliers and chassis worldwide, how will we ever shake off these issues. Even if demand was to stop overnight, these issues aren’t going away any time soon.”

Platts Container Rate 1 – North Asia-to-North Continent – lost $500 on the week to $17,500/FEU on Sept. 10.

Container Shipping Giant Freezes Spot Rates Amid Trade Chaos

(Bloomberg) The world’s third-largest container carrier is capping spot rates for ocean freight for the next five months, it said on Thursday, yielding to pressure from some customers and regulators who are concerned that global trade disruptions have pushed the cost of shipping too high.

“Although these market-driven rate increases are expected to continue in the coming months, the group has decided to put any further increases in spot freight rates on hold for all services operated under its brands,” CMA CGM SA said in a statement on its Web site.

The decision, which should resonate throughout the industry, took effect on Thursday and runs through Feb. 1.

Based in Marseille, France, the company said it is “prioritizing its long-term relationship with customers in the face of an unprecedented situation in the shipping industry.”

The cost of shipping a 40-foot container from Shanghai to Los Angeles reached US$11,569 in the past week, nearly eight times higher than before the COVID-19 pandemic, according to the Drewry World Container Index.

Global supply chains, with container shipping as their backbone, are struggling to keep pace with the demand for goods and overcome labor disruptions caused by COVID-19 outbreaks. One illustration of the strained system is the line of ships outside the twin California ports of LA and Long Beach, which jumped to a record 49 vessels as of late Thursday.

Separately on Thursday, the Federal Maritime Commission in Washington announced the membership of its newly formed National Shipper Advisory Committee. The panel of 24 members representing exporters and importers would “advise the commission on policies relating to the competitiveness, reliability, integrity, and fairness of the international ocean freight delivery system.

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Shipping Options Dry Up as Businesses Try to Rebuild From Pandemic

'The top six container operators control nearly three-fourths of all ship space, giving cargo owners fewer options; ‘Our hands are tied’

(WSJ) A wave of shipping consolidation over the past five years is adding to the supply-chain woes caused by Covid-19 outbreaks, further delaying the movement of cargo across the oceans.

A handful of big shipping players control the majority of containers via giant vessels, leaving the world with fewer routes, fewer smaller ships and fewer ports that could keep the flow of goods moving when the pandemic disrupted operations, according to cargo owners and freight forwarders, who secure ship space to move cargo.

The top six container operators control more than 70% of all container capacity, according to maritime data provider Alphaliner. As businesses try to restock after the lifting of the Covid-19 restrictions, they are paying at least four times more to move their products compared with last year and face long delivery delays, industry executives say.

“A few years ago we would get a half-dozen competitive freight offers from shipping companies within a couple of hours,” said Mark Murray, owner of DeSales Trading Co., a North Carolina-based importer of rubber threads and elastic bands. “Now it’s a couple of days to get an offer from one of the big boys, you have to pay crazy freight rates and your shipment is months late. Our hands are tied.”

The shipping industry consolidated between 2016 and 2018, when a string of deals valued at around $14 billion cut the number of global boxship operators by about half. The deal making was part of shipowners’ efforts to cope with difficult conditions in the aftermath of the 2008 financial crisis, when freight rates barely covered fuel costs and ships operated at deep losses.

Among other factors driving the consolidation were a surge in Asian manufacturing and demands by cargo owners to keep transport costs under control.

The big liners have also formed three global alliances that share ships, cargo and port calls. Some smaller operators have joined in giving those groups control over the vast majority of Sea Change Number of ultra-large container ships delivered or scheduled for delivery Source: VesselsValue 2012 '15 '20 0 5 10 15 20 25 30 35 available capacity.

The result was a streamlined system in which fewer, but bigger, ships called in at specific ports in Asia and then sailed to Europe or the U.S., carrying cargo that would go straight onto shelves or production lines. The new model cut waste from the system, limiting unused space on ships and reducing warehousing expenses for importers.

Covid-19 highlighted the fragility of the new supply-chain model in times of stress. Outbreaks over the summer at big export hubs like Yantian and Ningbo in China idled ships for weeks as they waited for terminals to reopen. After they sailed, they got stuck again at congested Western ports that couldn’t handle the cargo deluge.

Unlike in the pre-consolidation era, when shippers could call on a range of small- and medium-size operators to help them manage through disruptions, cargo owners say they have largely had to choose between long waits and crippling costs.

Mr. Murray of DeSales said a shipment from Malaysia that was supposed to leave June 26 got bumped back to July 7. Then a Covid-19 outbreak delayed sailing to early September with an estimated arrival date in early October.

DeSales paid $9,500 to book the container, up from around $3,000 before the pandemic, Mr. Murray said. It got the price after negotiating with a number of freight forwarders, who had originally asked to be paid around $19,000.

The shipping industry has aimed to cut waste from the system, limiting unused space on ships. PHOTO: SAEED KHAN/AGENCE FRANCE-PRESSE/GETTY IMAGES The big liner operators say the issue isn’t that capacity is being controlled by a few big players. They say Covid-19 outbreaks at global transport hubs have exposed capacity shortcomings on shore, where there isn’t enough manpower, trains, trucks and warehouses to move the cargo inland.

“In the U.S. West Coast the terminals can’t absorb more capacity,” said Lars Mikael Jensen, head of global ocean network at Denmark-based A.P. Moller-Maersk A/S, the world’s biggest boxship operator. “There are sufficient ships if we could get into Los Angeles and then sail off the next day. But now we can waste weeks waiting.”

Forty or more loaded ships have been waiting at anchor off the coast of Los Angeles on any given day in recent weeks, according to the Marine Exchange of Southern California. Before the pandemic, a single ship at anchor was unusual.

The capacity crunch has led some shippers to hire their own vessels. Walmart Inc., the world’s biggest retailer, said in August that it chartered its own ships to move Asian imports, following a similar move by Home Depot Inc. in June.

Athens-based Capital Maritime Group, which operates 108 vessels of all types, had a client charter a small, 2,000-container ship to move furniture and sports clothing from China to Liverpool, England, said Evangelos Marinakis, Capital Maritime’s chairman.

“Using such small vessels for long voyages is unprecedented and a testament to the crazy demand out there,” Mr. Marinakis said. “We are in talks to charter more such ships across the Pacific.”

Shipbrokers said small vessels chartered for point-to-point voyages now earn around $150,000 a day, multiple times more than levels before the pandemic, when such sailings were rare because of the high cost.

Mr. Marinakis, who mostly operates tankers, said he has spent more than $1.2 billion over the past year to order 16 boxships with capacities ranging from 1,800 to 13,000 containers.

“I wish I had more of them,” he said. “We are not done with Covid, and I expect supply chains will continue to be rattled for another year and a half. There is a lot of money to be made.”

Shipping consulting firm Drewry said in July that it expects the industry to generate more than $80 billion in profits in 2021, compared with $25 billion last year, fueled by elevated freight rates.

Nils Haupt, a spokesman for German liner Hapag-Lloyd AG , said the industry needs an additional 20% capacity to deal with the crunch.

“We are being yelled at by customers,” he said. “They complain about the freight rates and the delays. It’s not a good thing for customer relations and we are trying all the time to add capacity.”

French container shipping line CMA CGM SA said Thursday it would suspend any further freight rate increases until next February. “The group is prioritizing its long-term relationship with customers in the face of an unprecedented situation in the shipping industry,” CMA CGM said.

Freight forwarders said the capacity reign by so few players leaves cargo owners with few options. They said daily rates from China to the Mediterranean are now around $7,000, compared with up to $1,000 before the pandemic.

“Half the options we get offer no ship space for weeks, and there is a race to get space on the other half,” said Vicky Zervou, a sales manager at Athens-based freight forwarder Aritrans SA. “We spend weeks trying to book a single container.”

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