Sea Archives | Page 49 of 71

Shipping line rate increases sticking

Aug 16, 2023 | Sea

The container shipping lines’ GRIs seem to be sticking as spot rates climb above long-term prices on key routes from China.

General Rate Increases (GRIs) have been a persistent battleground since April this year, as carriers struggle to tackle the supply-demand dynamic and recover sea freight rates.

However, until now, their efforts have largely been unsuccessful, but August’s GRIs appear to be encouraging for carriers…for now.

2023 has seen the container shipping industry striving to overcome the ‘double whammy’ of declining volumes and escalating overcapacity, leading to lower rates and lost revenues.

The shipping lines have been implementing GRIs in an attempt to jumpstart rates growth, and recover their lost margins on the critical Asia and China trade-lanes, but have so far failed to make the desired impact.

Their biggest success has been on the Far East to US West Coast route where successive GRIs have been deployed May through to August, pushing spot rates up by 51.5%.

For the Far East to North Europe trade lane, spot rates bottomed out in early May, and from the end of July to the beginning of August, they have risen by nearly 40%.

This change has narrowed the spread between Far East to North Europe and Far East to the Mediterranean to the closest it’s been all year.

It is clear that new GRIs have clearly had an impact, pushing the short-term market above the long-term on all three leading corridors and while the GRIs have fallen short of the lines original ambition, given their lacklustre performance up until this point, the increase will be welcomed by the carriers.

With the traditional peak season for container shipping now looming large, carriers will have their fingers crossed for greater demand at the higher rates.

However, given that the market has shown significant weakness upon implementation of GRIs earlier in the year, it is still too soon to know if the hikes are here to stay, and how the next round of GRIs (in September) will fare.

After a massive splurge in vessel ordering over the past two years, the new container ship order book is larger than at any other time and with record number of new ships joining the global fleet, the ocean carriers will be getting more aggressive in withdrawing capacity, to support their newly recovered rates.

The sea freight market from China and Asia is extremely dynamic and actions by carriers often have a profound impact on individual trade-lanes, which is why we work closely with our carrier and network partners in China, to scan the market and identify opportunities for our customers.

If you have any questions or concerns about your Asia supply chain or the developments outlined here, please EMAIL our Chief Commercial Officer, Andy Smith.

Shipping lines follow Maersk’s Asia-Europe rate increase

Jul 19, 2023 | Sea

Maersk took a sea fright market struggling with excess capacity by surprise a fortnight ago, when it announced its intention to impose a 49% freight all kinds (FAK) general rate increase (GRI) on the 1st August 2023.

The carrier said that to continue offering a broad portfolio of high-quality services it was raising its FAK rate from Asia to the Northern European hubs of Rotterdam, Gdansk and Felixstowe, in a move that would add hundreds of dollars to a TEU.

Despite the lack of any apparent peak season, Maersk's GRI appears to be targeting peak season imports by European shippers.

Other shipping lines haven’t waited to see if shippers will take Maersk’s bait, announcing their own GRIs, in the days since the original announcement.

The following lines (so far) have announced FAK rate increases in the range of $200-300 per TEU (double for FEU) effective on 1st August 2023:

Maersk | CMA | MSC | HMM | Evergreen | OOCL

Rate erosion on the Asia to Europe trade has been accelerating, virtually halving since the beginning of the year, but it does feel like we’re back in a pre-pandemic market where a carrier announces a key-trade GRI, with the rest tagging along, using the GRI as a starting point for negotiations.

In the past, GRIs which run counter to supply and demand fundamentals have typically struggled to succeed, as demonstrated by trans-Pacific GRIs through the first two quarters, that did little to lift spot rates.

At this point in the year, rising peak season demand should be exerting upward pressure on rates, but sustained weak demand and huge amounts of available capacity have been suppressing the market.

The financial impact of a damaging second quarter for carriers is encouraging carriers to follow Maersk’s lead, with their own increases and the desire to bring an end to sub-economic trading may see the lines return to more disciplined volume control, particularly as the new container ship order book currently sits at 7.3 million TEUs.

The equivalent of a third of the current global fleet is due for delivery by the end of next year, with 2.5 million TEUs due in 2023 and the remainder by end of 2024, with the biggest share to be deployed on the Asia-Europe trade.

Without significant cuts in capacity through an increase in blank sailings and/or idling vessels, many carriers could be in loss-making territory.

The sea freight market from China and Asia is extremely dynamic and actions by any carrier or alliance can have a profound impact on the competitive behaviour of major trade-lanes, which is why we work closely with our carrier partners, to stay abreast of developments, so that we can protect and identify opportunities for our customers.

If you have any questions or concerns about your Asia supply chain or the developments outlined here, please EMAIL our Chief Commercial Officer, Andy Smith.

The shipper’s new normal

Jul 4, 2023 | Air, Sea, Supply Chain

The rapidity of the collapse in air and sea freight rates has given carriers the same level of trauma and shock experienced by shippers when freight rates exploded in 2021 and while the turnabout in the market was anticipated, its intensity and extent is far greater than expected, with shippers very much back in the driver’s seat.

The pandemic triggered supply chain disruptions of the last few years were particularly profound and far outside anything we might expect and while we should not expect new challenges or disruptions to have anything like that impact again, there will always be competitive pressure in the market, that will create capacity issues and rate fluctuations.

Many commentators describe the return of ocean freight rates to pre-pandemic levels as a ‘return to normal’ but 2019, which is often taken as a reference year, was a bad year for shipping company results on East-West routes and carriers’ operating costs have increased by about 30%.

A real ‘return to normal’ would require a return to schedule reliability, normal sailing speeds and freight rates at sustainable levels, to support long-term planning.

None of these three conditions currently applies on the major trade lanes and therefore, it is, incorrect to talk about a return to normal, in these terms.

And it is important to keep in mind that a normal freight market is not the same as a global shipping market with no changes or disruptions.

There will always be challenges and operational disruptions.

In the United States, we may have avoided strike action on the US West Coast (subject to ratification), but labour negotiations in Vancouver have failed to avert an ILWU Canada strike, which began on the 1st July, with no end date announced and a drought on the Panama Canal has been impacting container vessels transiting to the US East Coast.

Just as operational disruption will manifest anywhere, at any time, there is always a point in global supply chains that is being impacted by adverse weather conditions, such as storms or fog.

It may not feel like it, but all things considered, the markets are much more normal and maybe this will be as good as it gets for the short-term.

It is because businesses need to thrive against this backdrop of a complex supply chain environment that our MVT platform provides end-to-end visibility, with purchase order management and transparency of inventory throughout the supply chain.

Synchronising inventory across all transport modes and locations, with accurate real-time dashboards and reports, MVT provides supply chain executives with the data they need to assess and react to operational challenges.

Please EMAIL our Chief Commercial Officer, Andy Smith, for ‘normal’ insights and intelligence.

Pure car and truck carrier orders reach new high

Jul 4, 2023 | Automotive, Sea

As Chinese car exports continue to rise and British car manufacturing continues its resurgence, orders for car and truck RoRo (PCTC) vessels are the highest since 2008.

During the pandemic many PCTCs were scrapped and few built, as working from home depressed vehicle demand, but rising Chinese car exports, up 58% year on year and increased demand from Japanese and European manufacturers, particularly to Europe and the Americas, has seen global tonne-mile trade growing 12% in the last year.

The PCTC shortage has caused daily charter rates to soar with shipowners and two carmakers in China, rushing to build vessels, while many manufacturers are adopting Metro’s container shipping solution, which offers efficiencies and cost savings over RoRo alternatives.

BYD, which make electric and hybrid cars, is ordering six PCTC ships with the capacity to carry 7,700 cars, while state-owned SAIC Motor Corp is tendering for seven new carriers that can each hold 8,900 vehicles.

BYD and SAIC aren’t the first car brands to run their own shipping fleets. Toyota owns shipping company Toyofuji Shipping Co., while Hyundai has logistics group Hyundai Glovis Co., and Volkswagen charters its own vessels.

Last year, 90 PCTCs, totalling 560,000 car-equivalent units (ceu) were ordered, nearly tripling the 38 commissioned in 2021, while so far this year, 33 have been commissioned.

With only 11 vessels expected for delivery in 2023 and China planning to export 2.3m units to Europe this year, the RoRo capacity currently expected will only serve half of that number.

But with container shipping rates slumping, there is a massive opportunity for shippers of finished vehicles to move units on dependable and regular services – without volume constraints – at relatively low cost.

Metro has specialised in automotive, construction and agricultural vehicle supply chains and movement, using road transporters, RoRo, sea containers, air freight, charters and specialised equipment for over four decades.

Working with many of the most respected and established global brands, our specialist teams coordinate the end to end movement of vehicles and machinery around the world, regardless of origin or destination.

Long-standing partnerships and volume agreements with the leading container shipping lines means we can offer the widest choice of services, routes and solutions for finished car and KDV movements.

To learn more, or to discuss our automotive capability, EMAIL Ian Tubbs.