CMA CGM has published their Q3 results and in line with the other major Asia/Europe and trans-Atlantic carriers, they have made an extremely high degree of profit, due to the continued demand for space, exacerbated by global disruption diminishing the amount of vessel space available.

The CMA CGM group reported a net profit of USD 5.64bn for the third quarter, narrowly beating the Maersk group, currently the largest global container carrier.

Despite operating one million less teu than Maersk, the French line reported a greater increase in revenue versus the previous three months: group sales rose 23% quarter-on-quarter to USD 15.3bn; while Maersk reported a 17% revenue increase and a net profit of USD 5.46bn.

CMA CGM says it expects to achieve an even stronger financial performance in the fourth quarter.

Comparing performance between carriers based on Q3 2021 to Q3 2020: CMA CGM’s average revenue per TEU increased 107%; which is in line with Hapag-Lloyd which saw a 106% increase; and ahead of Maersk with a 90% increase; while ONE outperforms all with a 129% increase. Let’s conclude that asset owning shipping lines are reaping the benefits of their investments.

By contrast, the Global Freight Forwarding market contracted by -8.7% in 2020, recording its worst year since the 2009 financial crisis, as a direct result of the pandemic. The sea freight forwarding market contracted by -3.8% in 2020, but air freight forwarding suffered worse with a decline of -12.3%.

The freight forwarding market is expected to come back, with growth of 11.6% forecast for 2021, with an anticipated compound annual growth rate (CAGR) of 5% from 2020-2025, if and when volumes recover. This is without factoring in the impact of global macroeconomics and dynamics of consumer confidence, interest rate implications and available disposable income, in every country and territory.

The ocean carriers collectively are on a path for profits in excess of USD 150 billion this year, and higher from some sources, and the global container shipping market is anticipated to rise at a considerable rate between 2021 and 2025, progressing at a CAGR of 9% over the period, although this figure is likely to be exceeded by some margin.

Global supply chains are likely to be under intense and sustained pressure for some time yet, well into 2022 and beyond, and we will continue to share with you the most important developments so that you are informed and prepared to make critical decisions ahead of potential issues. 

We negotiate rate and volume agreements with carriers across all three alliances, which means we have the freedom to react to market conditions and changes. 

Please contact Elliot Carlile or Grant Liddell to discuss your supply chain expectations and deadlines to ensure your business is ‘future proofed’ for the rest of 2021 and 2022.

Congestion at both ends of the critical Asia-North Europe (this still includes the UK) shipping trade is wrecking vessel schedules, with the average delay of container ships completing a round-trip loop rising by over two weeks, as carriers skip congested ports at both ends, and quite often in between.

These extended transit time delays are removing much-needed capacity from the sea freight market, with analysts suggesting that the three alliances would need to add a further 44 ships of between 14,000 to 24,000 TEU to cover the delays and maintain a weekly sailing frequency on all 17 Asia-North Europe loops. 

In essence up to a quarter of total container shipping capacity has been removed, with the extended transit situation. The equivalent of parking up and idling 25% of the world’s global container shipping fleet to put it into perspective. Unbelievable a few years ago – but reality as of today.

Comparing the voyage durations for ships on the 17 Asia-North Europe loops arriving in Asia, for their next westbound sailing, during a week last month, shows that they needed up to 54 days additional time to complete a round trip, with delays averaging 18 days. This, therefore, affects both imports and exports – from and to everywhere – on the trade lanes between Europe and Asia. It is unavoidable not to.

Measuring the delays on a full round trip revealed the massive impact of port congestion on lines’ schedules, with an average of seven days’ delay for the OCEAN Alliance, 19 days for 2M, and 35 days for THE Alliance.

THE Alliance’s performance is particularly marked because it has not been skipping ports in Europe and trying to maintain its original rotation. But Rotterdam, Hamburg, and Antwerp have added significant delays because these ports were far more congested than smaller ports like Zeebrugge or Wilhelmshaven that are used by the OCEAN Alliance.

A significant and often overlooked factor in the operational stress that creates port congestion has been the excessive growth in call sizes over the past year and the sheer volume of containers that need to be loaded and discharged on a single vessel call.

While container ship volumes on the Asia-North Europe trade increased 11.3% year over year, this was just 2.8% above the 2019 total, but more vessels are also not a solution to the congestion. Due in part to the time between order, build and delivery of new vessels and in part because injecting more vessels would run the risk of simply compounding existing bottleneck problems. It’s a conundrum that is not easily solved.

Maersk warned, and other carriers followed, in an October market update that congestion would force them to join other carriers in implementing ad hoc port omissions, to try to maintain schedules, with extra loaders deployed to sweep up cargo and minimise the delays that customers are experiencing.

It does seem that decisions on port call omissions are not being communicated to freight booking desks and consequently, shippers are being offered space on sailings for which cargo may only arrive at the original destination port several weeks after the advertised date.

We have been offered space on MSC’s Shogun/Maersk’s AE1 sailing from China in early November, on the 19,224 TEU MSC Erica. MSC is advertising a transit time of 29 days to Felixstowe, while Maersk is quoting a transit time of 46 days for the same vessel.

We have seen similar errors from the Ocean Alliance and THE Alliance partners because their schedules have not been updated and it’s a major problem because shippers may make inventory calculations based on incorrect ETAs.

For the latest information and updates on your ocean freight planning and supply chain for the end of the year and 2022 please contact Chris Carlile or Grant Liddell for immediate advice and the latest intelligence relating to your global freight movements.

DP World has opened an 11.5 acre container park near Southampton, to increase storage capacity during the peak pre-Christmas season and work has begun on a fourth berth at London Gateway container port, to increase supply chain resilience and create more capacity for the world’s largest vessels.

The new park at Southampton will be able to hold additional empty containers and reduce stack sizes at the nearby container port, a critical factor in keeping supply chains moving at a time when dwell times at terminals across the UK have increased.

The new £3m empty park is part of DP World’s £40m investment this year at Britain’s second largest container terminal - designed to take it up to the next level as a smart logistics hub - which will provide 25% more storage capacity at Southampton and enable the port to maintain productivity and service levels for the vital next few months.

Southampton has already benefitted this year from the dredging and widening of berths to ensure continued accommodation of the world’s biggest ships and a £1.5m extension of a quay crane rail by 120 metres to ensure that the world’s biggest cranes can service the entire terminal and receive the largest container vessels that are operating today and in the foreseeable future.

In the first half of 2021, a record volume of cargo was handled at Southampton, with throughput of 995,000 TEU, while London Gateway saw record throughput of 888,000 TEU, a more than 23% increase on the previous best performance. Impressive although not without some pain during the process.

Southampton and London Gateway have both been awarded freeport status as part of Solent Freeport and Thames Freeport respectively.

The new London Gateway berth is part of a £300M investment by DP World, to support Thames Freeport and will raise capacity by a third. Completion of the new berth will coincide with the delivery of a new wave of 24,000 TEU vessels in 2023/2024, which will undoubtedly be operated between Asia and Europe. 

Along with the Port of Tilbury and Ford’s Dagenham plant, London Gateway will form part of Thames Freeport after being awarded ‘freeport’ status by the Government earlier this year, as a stimulus to both the local and national economy and global trade initiative.

With 40 commercial ports in the UK and hundreds across continental Europe to choose from, we select the optimum mix of cost and operationally effective port-pairs, to complete your transit in the shortest possible time.

Taking advantage of current market dynamics shipping lines are trying to move the biggest shippers - retailers and manufacturers - onto two-year terms for 2022, with some container carriers trying to negotiate even longer periods, of three or even four years.

Contract rate spreads from base ports in China and other parts of Asia are in the top two quartiles of the highest spot rate levels (which is extremely high for BCO’s) with rates for 20’ containers being quoted at much higher than 50% of the 40’ price, placing a penalty on the smaller containers.

While some carriers have walked away from their contracts, pushing importers to costly spot (FAK)  and premium rates, others are looking to shift some BCO customers and logistics providers onto long term contracts, but there are questions about what dynamics the lines are looking at. Because, even with rates at all-time highs, ships full and capacity reduced by congestion and a lack of equipment, the market’s peak may have been reached. 

Rates on a few trans-Pacific trades did soften as a result of China’s Golden Week holiday, but the market has picked up again very rapidly, because backlogs continue and demand for space is still strong as consumers continue to consume and low inventory levels need replenishment.

If the power-cut enforced closures of factories in parts of China continue, it may well allow Asian, US and European ports to catch up with the processing of containers through their terminals, which will assist with the mitigation of congestion and allow shipping schedule reliability to improve. However it may just suppress demand temporarily, if manufacturers’ backlog of orders simply pile up.

It is clear that the carriers expect continued pressure on lead times and costs through to the end of next year. At a time they are making record profits, they have also been ordering new vessels (equivalent to 5m teu of new capacity) with the first deliveries coming in 2023. And with 2023 not too far away, carriers may find themselves with more capacity than demand once again.

It may be that some lines, particularly those with long-term exposures to very high charter rates, have been looking to lock-in contracts at long-term rates that will allow them to meet those obligations.

The current logjams and challenges within global supply chains will be worked through as demand settles to more realistic levels and with an order-book that now stands at around 20% of the fleet, it is very likely that some sort of discounting may begin in the market, before those vessels are delivered.

It should be noted that the majority of this new capacity will be provided by ships carrying more than 20,000 TEU and this could simply reignite much of the current global port disruption, because many ports do not have the infrastructure with cranes, equipment or capability to handle Ultra Large Container Ships (ULCS), which can be 61 metres wide, 400 metres in length and require 17 metres depth clearance.

Carriers that have secured capacity at very high rates with long contracts beyond the 2023 period, when much of the order book will be delivered, may be desperate for market share, but with the three alliances functioning so well, don’t expect it to be any of the big lines.

The leading shipping lines got through the tricky second and third quarters of 2020 much better than they had expected through cutting capacity, so even though their share prices fell the lines were in good shape financially.

Carriers have been forced to become very effective at managing their capacity and they will evolve into the post-pandemic era in a much stronger position, so while some may falter, the majority – certainly the larger lines – will maintain healthy returns.

Global supply chains are likely to be under intense and sustained pressure for some time yet, and we will continue to share with you the most important developments so that you are informed and prepared to make critical decisions ahead of potential issues. 

We negotiate rate and volume agreements with carriers across all three alliances, which means we have the freedom to react to market conditions and changes. 

Please contact Elliot Carlile or Grant Liddell to discuss your supply chain expectations and deadlines to ensure your business is ‘future proofed’ for the rest of 2021 and 2022.