The Asia export trades are now as challenging as it was during the pandemic, with extremely tight vessel space, equipment shortages and port congestion colliding leading to a surge in spot rates, with analysts speculating it could reach USD 20,000/FEU on the Asia-Europe trade before too long.

Vessel schedule reliability is slipping, dropping below 50% on Asia-Europe and Asia-US East Coast trades in April, with further deterioration expected across all trade lanes.

Compared to a year ago, spot rates on the major Asia export trades are up significantly. For example, Asia-Europe +300%, Asia-US West Coast +200%, Asia-Mediterranean +200% and Asia-US East Coast up almost 150%.

The level of weekly increases is not slowing with week on week increases of between 10-20% now a sustained pattern with no sign of slowing.

There are several factors driving the rate increases, but the speed of change has created nervousness in the market, generating more demand and ‘highest bidder’ pricing.

Typically, retailers start importing goods for the November Black Friday sales and Christmas shopping season between late summer and autumn, but having experienced the pandemic’s capacity crisis, they are front-loading orders, fearing that there may be a capacity squeeze during the Q3 peak season.

This report by the BBC – ‘Shops rush for Christmas stock as shipping costs surge’ – confirms that retailers are placing orders early, as soaring costs and disruption threaten their supply chain deliveries.

One business told the BBC that increased costs were likely to feed through to the price on the high street and they were having to plan and book well in advance to make sure their Black Friday and Christmas stock arrive on time.

And even though it impacts cashflow and creates warehouse capacity challenges as they must store the goods for longer, they can’t risk ordering later, and potentially paying even higher freight rates or risk not being able to get cargo on a vessel at all.

There have been many articles in the trade press recently, reporting that container shipping lines are restricting allocations to beneficial cargo owners and freight forwarders alike, as carriers try to allocate space and equipment in a market where demand is far exceeding forecasted volumes.

We note that such reports refer to ‘sources’ rather than cite examples and whilst we are not immune to this, our carrier partners continue to be supportive and the strategic agreements we agreed are still intact, underpinned by strong relationships and decades of partnership.

In the current market we believe communication is paramount and we ask our customers to support us by providing advanced forecasts and early booking. This enables our team to plan and allocate capacity in an optimal way and reduces the risk of not being able to ship as planned.

To learn how we can enhance your ocean freight solutions, please EMAIL our Chief Commercial Officer, Andy Smith.

Significant and sustained terminal congestion in major Mediterranean and Asian ports is soaking up available capacity, which directly impacts freight rates and results in substantial delays to vessel schedules, with reliability dropping and the likelihood that delays will persist through the summer.

Port congestion has been building for months, adding more complexity to an already over-stretched container shipping market that is struggling to cope with shortages of vessel space and container equipment at key origins, as a consequence of the Red Sea diversions. Today, approximately 8% of global capacity (or 2.3m TEU) is now absorbed due to port congestion. This is expected to rise further in the coming weeks.

Ship bunching and congestion has spread to ports in Asia including Singapore, Shanghai, Qingdao and Shenzhen, with vessels waiting up to five days for a berthing slot in some ports.

Singapore, one of the world’s largest ports, has seen container volumes rise nearly 10% so far this year, and berthing delays are now extending beyond five days, with over 350,000 TEU currently waiting to berth. Singapore’s Maritime and Port Authority (MPA) said the congestion is the culmination of months of disruption triggered by the vessel diversions avoiding the Red Sea leading to bunching of vessels arriving into the port.

In the first week of the June, only six out of eleven Asia-Europe sailings departed on schedule, due to delays on the Eastbound voyage caused by the port congestion at the key hub ports of Singapore and Tanjung Pelepas.

Looking ahead
With ocean freight demand expected to continue into the summer, the danger is that average vessel waiting times will continue to lengthen, due to increased cargo flows and lowered terminal productivity, which in turn impedes facility operations. And when terminal capacity is limited, operators restrict the amount of cargo accepted, to avoid severe congestion, which simply serves to exacerbate the situation.

As primary hubs fill, transshipment networks require more ships to feed into peripheral ports, which means carriers may remove ships from other trades, which could create a new capacity squeeze and add further fuel to the fire pushing spot rates even higher.

Port congestion creates a de-facto reduction of available vessel capacity, which leads to an increase in blank sailings, because there is a schedule gap when vessels are unavailable, which again squeezes capacity.

We continue to monitor the evolving situation, while working closely with our local network and carrier partners to mitigate any impact on our customers.

We will keep you updated and provide alternative solutions where appropriate or necessary.

If you have any questions, concerns, or would like any further information regarding the situation outlined here, please EMAIL our Chief Commercial Officer, Andy Smith.