/ By TJ China Freight / Shipping

The U.S. containerized cargo imports hit a record and will usher in the busiest January in history. Will Biden take office to further stimulate demand?

The new crown pneumonia epidemic has stimulated freight demand to a certain extent. In 2020, the import volume of containerized cargo in the United States will set a new historical record, and high import demand will continue until early 2021.

Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation (NRF), said: "Even in the context of the pandemic, the US retail sales will continue to grow strongly in 2020, thanks in part to the government. Stimulus policies. Retailers expect that the economic recovery will continue in 2021."

The U.S. containerized cargo imports hit a record and will usher in the busiest January in history. Will Biden take office to further stimulate demand?

According to the latest monthly global port tracking report released by NFR and Hackett Associates, preliminary statistics show that in December 2020, the import volume of container cargo in major US ports was 2.02 million TEU.

NRF stated that if the final figures for December 2020 remain unchanged, the U.S. containerized cargo imports in 2020 will reach 21.9 million TEU, an increase of 1.5% over 2019, and break the 2018 annual record of 21.8 million TEU.

In addition, the agency also predicts that in January 2021, this number will reach 1.96 million TEU, an increase of 7.7% year-on-year, the busiest January in history.

Looking ahead, until May 2021, the import volume of containerized goods in the United States will continue to increase substantially.

Specifically: February is expected to reach 1.6 million TEU, a year-on-year increase of 6.1%; March is 1.64 million TEU, a year-on-year increase of 19%; April is 1.76 million TEU, a year-on-year increase of 9.6%, and May is 1.86 million TEU, a year-on-year increase of up to 21.7%.

The U.S. containerized cargo imports hit a record and will usher in the busiest January in history. Will Biden take office to further stimulate demand?

However, what worries retailers is that there is still a risk of supply chain disruption in the United States.

On the one hand, the congestion in US ports has not been significantly eased. The data shows that as of January 10, 2021, there are at least 47 ships waiting to enter the port at the anchorages outside the Port of Los Angeles and Long Beach. Among them, 34 are container ships with a total capacity of more than 270,000 TEU. The largest ship is 16022TEU.

On the other hand, as the epidemic continues to spread in the United States, the number of confirmed cases in the United States has been increasing, and a large number of logistics industry practitioners are also unable to continue working due to the diagnosis of new crown pneumonia. Many logistics parks in the United States are facing serious manpower shortages.

The Inland Empire logistics zone, located about 100 kilometers east of the Port of Los Angeles and Long Beach, has become an important extension and logistics hub of the above two ports. However, due to the high proportion of employees in warehouses and distribution centers diagnosed with new coronary pneumonia, the supply chain of the logistics park is extremely fragile.

The U.S. containerized cargo imports hit a record and will usher in the busiest January in history. Will Biden take office to further stimulate demand?

It is also worth noting that with the US President-elect Biden will be formally sworn in on January 20, 2021, the United States may implement a trillion-dollar economic stimulus plan.

Biden once said: "In order to prevent economic collapse, we should now invest a lot of money to develop the economy, which is very necessary."

US investment bank Evercore ISI analyzed that it is expected that there will be two rounds of stimulus policies in the future. First, in the first quarter of 2021, launch a package of US$1 trillion-1.5 trillion to stimulate consumption; second, in the second quarter of 2021, launch a long-term infrastructure package of approximately US$1 trillion.

These will lay the foundation for the US consumption boom in 2021.

It is foreseeable that the US economic stimulus policy will bring more cargo volume, which is expected to directly benefit the container shipping market

/ By TJ China Freight / Shipping

With air cargo rates set to remain sky high, shippers need to plan carefully

Accurate forecasting by shippers will be crucial to manage their shipping requirements – and costs – efficiently, as air freight rates look set to remain high this year.

The Baltic Air Freight Index saw a 100% year-on-year increase this week, while the past few weeks have seen the highest readings since the Q2 capacity shortage.

However, forwarders in Asia have noted a softening market ex-China, in part due to lockdowns, although e-commerce remains strong.

One South-east Asian forwarder told The Loadstar: “Air freight wise, spot rates reduced after new year, but it was not a plunge. We might expect to see rates dropped in a couple of weeks, although in a normal year there should be a rush from middle of this month to early Feb because of Chinese new year.”

But, he added: “Air freight [rates] in general might not drop significantly for the next six months at least. After all, major passenger belly capacity will still be absent for a while.”

And there are other reasons to expect elevated rates this year, said Bruce Chan, vice president global logistics, at Stifel.

“On the demand front, restocking activity has been a major driver of global freight recovery across all modes, including air. Inventory to sales metrics remain near record lows in international consumer markets, particularly in the retail economy.

“And the capacity situation in ocean freight has not been helping, in our view. On the water, carrier capacity consolidation, a lack of available containers and hinterland bottlenecks have produced higher prices and significant delays, driving more incremental demand into the air and placing further pressure on capacity.”

He noted that forecasting models had been “upended”.

“Establishing baseline demand, apart from upstream restocking, and predicting how and when consumption patterns stabilise is a gargantuan feat, in our view. And the path forward is anything but linear, especially as Covid cases reignite and governments enact further shutdowns and border closures.

“Shippers may be more inclined to use air freight resupply as an inventory buffer in the face of such volatility and uncertainty.”

Mr Chan added that capacity shortages would continue to put pressure on rates. This is partly due to the booming e-commerce market, which Stifel believes has been exacerbated by Covid-19, with expected growth brought forward by two-to-three years, knocking traditional seasonal trends out of kilter.

And then there is PPE and vaccines.

Stifel said: “The full impact of vaccine distribution on air freight capacity may not be as severe as some anticipate, due to the disbursed nature of production and, quite simply, the form factor of the doses. We believe the bottlenecks are more likely to come from container availability, storage, handling, and road distribution.

“But the net effect will, unquestionably, be to absorb capacity, especially as vaccine shipments take priority over general cargo, with the impact likely to continue through 2021 and into 2022.”

Passenger demand is expected to return to some extent in the second half, as vaccines begin to take effect. But, as Stifel noted, this would likely drive short-haul traffic, while the long-haul market is not expected to make an early comeback.

Mr Chan also noted that the rates weren’t quite high enough to justify “short-term passenger-to-freighter conversions”.

But key to customers, he says, is to “look for creative alternatives for managing costs”.

“And the consequences of improper or inaccurate forecasting will be magnified, in our view, so accurate inputs are critical. To the extent possible, greater collaboration with partners is critical – communication with intermediaries and carriers and integration of data and technological tools. The bottom line is rates are likely to remain elevated and volatile for some time, and those looking for reprieve in 2021 may have to be patient.”

This year’s pricing for full calendar year contracts are being split between the “old normal for annual pricing and bock-space agreements, to the new normal of high market-based price heavily focused on ad-hoc agreements”, said Peter Stallion, head of air and containers at Freight Investor Services.

He said more companies were looking to index-linked contracts, with airlines pushing dynamic pricing.

2020 ended on something of a high for airlines, with volumes for 21 December to 3 January up 8% year on year, giving a record dynamic load factor of 73% in mid-December, while up to 3 January, load factors were also at an “unprecedented level for this time of the year”, of 65%, according to Clive Data Services, 13 percentage points higher than a year earlier. Capacity in December, compared with November, rose 2% and remained 21% lower than a year earlier.

“December’s performance was surprisingly strong, compared with the flattish level recorded in November and, in the second half of the month, volumes didn’t fall as much as we’d typically anticipate for this normally quieter time of year,” said Niall van de Wouw, MD of Clive.

/ By TJ China Freight / Shipping

What Is An FCL Shipment?

What is an FCL Shipment?

FCL is a term used in sea freight to describe shipments that consist of a “full container load,” or a shipment that only has one consignee in a single container and is not being shared with other shippers. Standard container sizes are 20’ and 40’ containers; both sizes offer standard and high cube sizing.

How are FCL Shipments Charged?

When working with FCL, the buyer is renting the whole container space at a fixed rate. Aside from the fixed ocean freight cost, the buyer also needs to consider some additional fixed costs, such as the handling charges and chassis fee.

Shipping lines usually change rates based on the route’s demand, similar to commercial air travel, so it’s best to check the rates depending on when and where the container is going to be shipped.

Which is cheaper FCL or LCL

FCL will always be cheaper when counting the volume rate. However, Less than Container Load ( LCL ) can be more economical if the total volume of the shipment is too small to be shipped in a full container. Shipping is a commodity, and like most commodities, economies of scale will inevitably allow for more savings in the long run.

How to calculate FCL shipment

To understand if FCL is a viable shipping method for your next shipment, knowing the basics of how shipments are calculated plays a vital role in logistics planning. In an FCL shipment, two charges make up most of the overall shipping cost: container rate, and chassis fee. The freight cost of the FCL container is a standard calculation consisting of the container size and route, along with the chassis fee, which is the cost to truck a container to or from a shipping terminal to the final destination.

If you are shipping via FCL and using the Incoterm agreement FOB, the following calculations are needed to understand the cost to ship:

  • Container freight cost and chassis fee (including both ocean and transshipment)
  • Destination port fee
  • Customs clearance including duties and taxes
  • Delivery or Trucking fee of the whole container

What is an FCL container load

Buyers are encouraged to understand the different containers that are available for their shipments. There’s no need to know everything about containers, however, learning the basic sizes and fillable space will help when calculating shipping methods. The table below outlines the standard containers available and their volume.

Type Dimensions (Interior) Capacity (CBM)
Length (m) Width (m) Height (m)
20’ 5.89 2.35 2.39 33.08
40’ 12.03 2.35 2.39 67.56
40’ High Cube 12.03 2.35 2.69 76.04

As shown in the table above, a 40-foot container is twice the dimensions of a 20-foot container. A high cube container is the same size as the standard 40-foot container, only taller. There are other container sizes available such as 45-foot, however, we rely on conventional container sizes available for comparison purposes.

Less conventional containers are not as widely available, nor are the ideal for the standard consumer-grade products being shipping around the world.

Advantages of Shipping FCL

The FCL Agreement is common for large-volume shipments because of the following reasons: Less risk of cargo being damaged, cheaper per volume rates, faster lead times than other forms of sea shipments.

Risk

With all types of shipping, risks are inevitable. While FCL does have the benefit of having significantly lower overall risks, we have outlined the potential dangers below for shippers to be aware of.

In an FCL shipment, if cargo is not loaded into a container properly, the risk of cartons toppling during transit or the unloading process could lead to damage or injury. Buyers need to discuss the carton loading plan with their sellers and ensure the warehouse workers loading the cargo stick to the plan. In the event, a seller is unfamiliar with loading products in a container, the loading risk increases. When in doubt, consult with your China freight forwarder to help you plan your loading plan.

Once the cargo is loaded, the container is sealed before it goes on to the ship for departure. Unless a container examination is required, the doors of the container will not open until it arrives at the destination port. FCL has the advantage of significantly less handling compared to LCL shipments since there’s no need to consolidate and deconsolidate other shipper’s cargo. Because of this, FCL has less risk of damage during the logistics process.

Cost

FCL can still be cheaper than LCL, even when the containers are not filled to their full capacity. When a shipment has a total volume greater than 14 CBM, FCL becomes a viable option. For example, even though a 20-foot container can hold up to 33.08 CBM if a shipment consists of 15 CBM, there is a high likelihood the cost to ship a 20-foot container would be less expensive than sending 15 CMB in an LCL agreement.

Since the space for the FCL is usually lower compared to LCL, the shipping cost is generally cheaper, making it a more economical option even though the whole container wasn’t occupied to its maximum capacity. It is best always to compare the costs of shipping LCL and FCL.

The FCL and LCL calculate the freight cost based on the volume (or every 1,000 kilograms per CBM, whichever is higher) of the shipment. Because of the way this rate is calculated, FCL could equally be a viable option for transporting heavy products compared to shipping them via air method.

Time

The total transit time is also an advantage for the FCL agreement when compared with LCL because the whole container is transported directly to the final destination. Direct shipments decrease the added time required to deconsolidate an LCL shipment before fulfilling the last leg of the delivery to the buyer’s final locations. FCL can save on average, 4 to 7 days, when compared to an LCL shipment.

Disadvantages of Shipping FCL

The major disadvantage of FCL, as well as any sea shipment, is the time it takes to reach the final destination. It can take a container ship around a month, if not longer, to travel across the world. If every second counts for your shipment, ocean freight might not be the ideal solution. However, if planned correctly and the shipping time is factored in, FCL does not have any significant disadvantages.

Volume

  • A 20-foot container can fit up to 33.08 CBM of cargo.
  • A 40-foot container can fit up to 67 CBM of cargo.
  • A 40-foot high cube container can fit up to 76.4 CBM of cargo.

Transit Time

Typically, when shipping by sea, transit time will take between 20-45 days for the cargo to arrive. Ocean freight as a whole takes significantly longer than air freight. When shipping via air, the shipment can land in a matter of days. Due to the long transit time for FCL shipments, shippers are advised to plan accordingly.

 

Despite the listed disadvantages of the FCL agreement, it is the most economical option if the transit time and volume are not barriers for the shipper.

China FCL – Standard Rates and Timeframes

Timeframes

Containers leaving most ports in China can take between 13 to 35 days to reach most of the world. The usual transit time from Shanghai to Los Angeles is from 16 to 21 days from the date the vessel leaves the port. Shipments from Shanghai to the East Coast of the United States, such as New York, will take around 26 to 35 days. Vessels leaving from Shanghai to Antwerp or Hamburg in Europe will take about 28 to 35 days in transit. Vessels leaving the same port going to Sydney will take about 15 to 20 days.

An FCL shipment can be delivered to the buyer within one to two weeks after the cargo arrives at the destination port, depending on the location of the final destination. For example, when shipping to the United States, the transit time for inner states such as Wyoming or Minnesota will take longer than states located near coastal ports.

Rates

While sea freight rates are not as dynamic as air freight rates, the cost to ship containers can fluctuate seasonally and during global events, such as COVID-19. Usually, shipping lines change their prices monthly, depending on each routes demand. The peak season for sea shipments is generally before the Christmas season, starting at around September and right before the Chinese New Year, which usually falls on a January or February.

Below are the approximate rates for a 20’ container Shanghai, China, to common destinations:

  • Shanghai to Los Angeles: $2,000 to $2,200
  • Shanghai to New York: $2,500 to $2,700
  • Shanghai to UK: $900 to $1,100
  • Shanghai to Sydney or Melbourne: $1,150 to $1,350

Below are the approximate rates for a 40’ container Shanghai, China, to common destinations:

  • Shanghai to Los Angeles: $2,500 to $2,850
  • Shanghai to New York: $3,000 to $3,350
  • Shanghai to UK: $1,400 to $1,750
  • Shanghai to Sydney or Melbourne: $2,250 to $2,450

A 40’ and 40’HC containers will typically cost around $500 to $650 more than the 20’ container for the same routes. However, when shipping to Australia, the price increases to around is $1,100 more for a 40’ container.  Standard 40’ and high cube containers usually cost around the same.

By only looking at the cost of the 20’ container versus the 40’, we can easily say that the buyer will get bigger savings on the larger container. For instance, for a Shanghai to Los Angeles route, the buyer will be paying $60/CBM for a 20’ full container (33CBM), compared to $37/CBM for a 40’ full container (67 CBM). That’s almost a 40% savings per CBM for a full container.

There are times where the per CBM cost of LCL can seem cheaper than the FCL cost; however, additional charges must also be considered as well.  LCL consolidators can offer a lower CBM rate, but inflate local charges to each consignee. Local fees are calculated for every container; however, an LCL consolidator might charge the full price of the local charges to all consignees, and use the inflated fees to cover the CBM rate.

LCL consolidators can earn a lot of money from local charges, but they also need to absorb unused space in the containers they book. Because this is a gamble for consolidators, pricing tends to increase due to their risk.

If you are shipping your products from China, click here to request a shipping quotation, and we will help you identify the ideal shipping method for your next shipment.

FCL vs. LCL which is Better?

FCL and LCL both have pros and cons. FCL gave birth to the LCL industry because of the demand to ship a smaller volume of cargo by sea, without the need to pay for the full container space. Understanding the differences between the two ocean freight agreements will give the buyer a better knowledge of which is the best method to be used depending on the situation and volume of the shipment.

/ By TJ China Freight / Shipping

4 Things You Should Know About Shipping LCL

Shipping your cargo via LCL (Less Than Container Load) service could be the answer for your business… In this issue we will explain what to expect before your freight arrives.

 

1. This container transportation method groups smaller volumes of cargo from different shippers into a single container so that shipping costs for the full container are split among the customers. You need to be aware, though, that if  the container is placed on any of the multiple government agency holds, you are also subject to share all of the costs involved with the exams, holds, or any storage that may occur as a result. This is regardless of the reason for the hold or exam.

2. LCL shipments involve several different transportation providers and warehouse facilities, each of which will have their own fees and documentation requirements:

ORIGIN CFS (Origin consolidation warehouse) This warehouse receives your shipment and prepares for loading into the container with other shipments.

1ST DESTINATION CFS (Destination deconsolidation warehouse) This warehouse receives, unloads and segregates the multiple shipments within the full container for their final distribution throughout the U.S.

FINAL CFS (Final Destination warehouse) This warehouse typically is in another city and/or state from the 1st destination CFS and receives the goods for ultimate delivery to the customer.

3. The transit time on LCL cargo is generally longer than that of full container shipments due to the routing and extra handling involved at the aforementioned warehouses:

Once the container arrives in the U.S., it may take a week or more to move off the port to the 1ST DESTINATION CFS.

Once the container has been stripped and segregated, it may take another week before cargo is loaded out for delivery from the 1st DESTINATION CFS to the FINAL CFS.

Depending on the distance from the 1st DESTINATION CFS to the FINAL CFS, transit times can vary from a few days to a week or more. Upon receipt at the FINAL CFS, it may be a few days after receiving all Government releases for the cargo to become available for pick up.

4. LCL cargo also has a higher risk for loss or damage due to the number of different warehouses involved with handling your cargo.

Time and money are probably the most important considerations when deciding on the best shipping method for your business. Of course you want it to be as simple as possible too.

TJ China Freight can answer any questions or concerns regarding which shipping method meets your needs.

Contact us at +86-18928445749 or email us at info@tj-logistics.com.cn
, and we’ll be glad to help.

/ By TJ China Freight / Shipping

Is it a good thing for shippers to have significantly reduced shipping company suspensions during the Spring Festival this year?

Due to the continued strong demand for shipping on major routes, the number of container shipping companies suspended around the Spring Festival appears to be much smaller than in previous years. China's manufacturing industry will temporarily suspend work during the Spring Festival every year, and the corresponding shipping logistics will also slow down accordingly. Currently, the Spring Festival is less than six weeks away.

 

Is it a good thing for shippers to have significantly reduced shipping company suspensions during the Spring Festival this year?

 

 

Sea-Intelligence, a shipping consulting company, said that in "normal years", Chinese factories have reduced production and trade due to the Lunar New Year holiday, and some shipping companies have adopted a suspension strategy to balance capacity and demand. However, in the recent period, due to the increase in freight rates for trans-Pacific and Asia-Europe cargo flows, shipping companies’ practices seem to be different from previous years.

 

Sea-Intelligence CEO Alan Murphy said that under the influence of many uncertain factors, it is difficult for the market to make consistent predictions on manufacturing production during the Spring Festival in 2021. Shipping companies also have greater difficulty in planning capacity allocation.

 

Is it a good thing for shippers to have significantly reduced shipping company suspensions during the Spring Festival this year?

 

 

As of January 1, on the trans-Pacific route, the shipping companies had only announced 5 suspension voyages, while during the three-week Chinese New Year (weeks 7-9), the Asia-Europe route had only 7 suspension voyages. One. In the same period of 2020, the number of suspended voyages reached 88. If the impact of the epidemic is excluded, the number will reach 73, an increase of 10 over the same period in 2019.

 

If you analyze the voyage deployment of the Asia-North American West Coast trade route four weeks before the Chinese New Year in 2021 to three weeks after the Chinese New Year, and compare it with the same period in 2016-2020, it can be seen that the number of suspended flights in 2021 has not been significantly reduced.

 

Currently, the number of suspended voyages during the Spring Festival in 2021 is much lower than in previous years. If it reaches the capacity reduction level of previous years, the shipping company will need to suspend 37-41 voyages on the Asia-NAWC route and 12-15 voyages on the east coast of Asia-North America.

 

Similarly, the Asia-Northern Europe route must cancel 14-17 more voyages, and the Asia-Mediterranean route must cancel another 4-6 voyages. In Alan Murphy's view, it is difficult to predict the optimal deployment of voyages, but it is clear that the number of planned suspensions of shipping companies will be much less than in previous years.

 

He added that if the level of previous years is to be reached, a large number of suspended voyages must be announced soon. "

 

Is it a good thing for shippers to have significantly reduced shipping company suspensions during the Spring Festival this year?

 

 

In addition, an analysis on freight rates and demand pointed out that at the end of 2020, the freight rates on the Asia-US route will continue to rise.

Freightos said that the continuous surge in demand, including shipping pressure before the Spring Festival, is enough to push up the freight rates of trans-Pacific routes.

 

In the first week of January, the Shanghai Container Freight Index showed that the freight rate from Shanghai to the United States dropped slightly and the freight rate remained at a relatively high level. Among them, the average freight rate from Shanghai to the West Coast of the United States was still above US$4,000/FEU. , The average freight rate from Shanghai to the east coast of the United States is still above US$4,700/FEU. At the same time, the return freight rate increased by 36% to 703 US dollars/FEU and 25% to 769 US dollars/FEU respectively. The main reason for this was the increase in costs caused by the shipping companies to dispatch empty containers.

 

Is it a good thing for shippers to have significantly reduced shipping company suspensions during the Spring Festival this year?
(Source: Shanghai Shipping Exchange)

The freight rates of Asia-Europe and Asia-Mediterranean routes have increased by 30% in the first week of 2021. Freightos pointed out that the basic freight rates (excluding surcharges) of the two routes have risen to an unfeasible $7,000/FEU, which has tripled compared to the end of October and tripled over the same period last year.

 

Freightos added that because demand has not significantly decreased, analysts expect that congestion, delays, equipment shortages, and high rates may continue beyond the Spring Festival and continue into the second quarter of 2021.

 

Freightos Chief Marketing Officer Eytan Buchman said that for cargo owners, there can be expectations. During the Spring Festival, the number of suspensions announced by shipping companies is much lower than normal, which may indicate that they will use this time to ease the number of empty containers. The problem of imbalance. "

/ By TJ China Freight / Shipping

In the spring of 2021, will the shipping companies charge wildly?

The 2020 epidemic has brought tremendous changes to the shipping market. In the first quarter of 2021, this change is expected to continue; both shipowners and shippers may strive to convert long-term leases into short-term leases.

The beginning of each year is the peak period for annual lease negotiations. Many market participants believe that in 2021, many trade routes will maintain high freight rates. Therefore, the negotiated price in early 2021 may hit a record high.

David Bennett, the head of Globe Express Services in the United States, said in his December cargo outlook report: “Don’t tell the other party that 2021 is an ordinary year.”

 

In the spring of 2021, will the shipping companies charge wildly?

 

 

Negotiation time

Most of the annual charter prices for major routes are negotiated in March and April. The source said that if the spot market returns to normal, ship operators will negotiate ahead of time. However, it is clear that shippers/forwarders prefer to wait until the spot market freight rate drops before negotiating.

Las Jenson, CEO of SeaIntelligence, said: "I don't think any shipper is willing to negotiate on the Lunar New Year. At least it is absolutely impossible on trans-Pacific routes."

Generally speaking, the price of the annual lease is negotiated according to the current spot market conditions. Therefore, due to the current good market situation in the consolidation market and the high freight rate, if the contract is signed now, it is likely to appear in the next few months. Because the spot price drops to a level lower than the contract price, the shipper/forwarder bears greater losses.

Market observers predict that due to the surge in freight rates in the second half of 2020 and the confidence of shipping alliances in their own capacity management capabilities, the freight rates proposed by carriers on major trade routes may be higher.

A North American counterpart said: “The freight rates on all major routes will increase in 2020. The days when the freight rate on the west coast of North America was US$1,500/FEU are gone. The carrier will increase the freight rate on the Trans-Pacific route in 2021. The starting price may be as high as US$2500/FEU."

An annual lease can sometimes be replaced by rolling contracts of three to six months, but this is mainly to protect the shipowner and allow the carrier to modify the contract terms when the rent/freight rises, so the shipper/forwarder It is best not to hope with this.

Bennett said: "I think the contract period of a short-term lease and a long-term lease will be different."

The spot market has a growing trend

Currently, the spot market only accounts for less than half of the main routes. However, because some shippers hope to take advantage of the possible downward trend in spot market prices after the Lunar New Year to obtain contracts with lower prices, it is expected that the proportion of the spot market will increase in 2021, showing a mid-to-long term relative to the contracted freight volume. The momentum of growth.

However, some shippers may strive to sign long-term leases (multi-year) to hedge against further increases in freight rates and prevent such situations from happening again in 2020. In the third and fourth quarters of 2020, the spot market aroused strong condemnation from some customers with long-term leases. Some shippers stated that their cargo was abandoned by shipowners who prefer spot cargo and stranded in the docks of North Asian ports. on.

Bennett said: "We expect greater volatility in 2021, so we remind everyone to ensure sufficient cash."

A colleague said: "If the carrier can make a lot of money through long-term leases, then the spot market may not be favored by them. In short, if the long-term leases have already given the carrier huge profits, then they There is no need to attack the spot market."

When a lower-priced lease is signed, the shipper/forwarder will make a profit, but if the spot market freight rate soars, then this shipper’s cargo may also be the first to be abandoned by the shipowner at the port. Therefore, for It can not only guarantee the safe transportation of goods, but also have the opportunity to obtain lower freight rates in the spot market, so some shippers may choose to enter the spot market in 2021.

/ By TJ China Freight / Shipping

The container freight rate from North Asia to the UK hits a record high

On January 4, the freight rate from North Asia to the United Kingdom hit a record high. The reason was that demand continued to rise and the continued shortage of equipment plagued the market. Carriers had no choice but to increase freight rates to maintain profit margins.

 

The Platts Class 11 container rate from North Asia to the UK reached USD 10,000/FEU, an increase of 285% from November 30. These strong rates are expected to continue until the end of the quarter.

 

"This is the result of a combination of surge in demand and endless congestion. It will continue until February of the Chinese New Year." said a British freight forwarder.

 

Market participants are eager to avoid repeating the mistakes of the 2020 Lunar New Year holiday, because the 2020 coronavirus-related lockdown has caused a very slow recovery in China’s export demand, and for most of the past year, the container market has faced a huge Challenges.

 

Demand during the Chinese holiday period has recovered, which has inspired people to quickly resume work to deal with the backlog of orders, but although the situation is improving, there are some opinions in the market that worry that these optimism may be short-lived.

 

Nonetheless, the freight forwarder said that containers booked at lower prices have not yet been loaded onto the ship.

 

"I just cancelled 60 containers; they are destined to go to Europe." said a freight forwarder.

 

 

The container freight rate from North Asia to the UK hits a record high

 

 

By the end of 2020, the increase in freight rates in the UK is greater than that in Northern Europe, because companies seek to stock up on goods before the UK leaves the EU Customs Union without reaching an agreement.

 

Uncertainty in future trade relations and concerns about border delays due to customs inspections have led to increased demand for goods. Coupled with the change in consumer spending habits, shifting from services to consumer goods, seasonal demand before Christmas, and replenishment of enterprises after the closure of the country due to national blockades, it is difficult for ports to cope with the increase in quantity. This sentiment has continued into a new year full of congestion, and these situations are still the concerns of many operators.

 

Felixstowe is the largest container port in the UK. The first problem facing the port is the increase in traffic and subsequent delays. With the increase in demand, the storage capacity of the port has been reduced in recent months because the government has stored PPE (Personal Protective Equipment) in the port. However, according to a statement issued by the Port of Felixstowe on December 13, the volume of PPE containers "has been greatly reduced since reaching the peak."

 

Flight delays in Felixstowe caused some carriers to modify their schedules outside the port. Maersk and MSC now come to Liverpool through their transatlantic services TA2 and NEUATL2 respectively. Those carriers still calling at Felixstowe have been charged a congestion charge; Hapag-Lloyd currently charges $175/TEU for all cargo passing through the port from Asia.

 

A freight forwarder said that this may just be the beginning of the British disaster. They said: "Large carriers may no longer provide services to the UK, but only feeder vessels can provide services to British ports."

 

Carriers need to relocate empty containers, which also results in some containers no longer accepting export bookings for containers loaded from Europe in the foreseeable future, which puts pressure on exporters in the UK and Europe.

 

On January 4, PCR2—from the North Continent to North Asia—increased from US$1,250/FEU a month ago to US$2,450/FEU.

 

An airline source said: "These are theoretical figures, no one is taking reservations."

/ By TJ China Freight / Shipping

Liner companies give up freight revenue and do their best to reduce the accumulation of empty containers

Shipping Australia stated that in order to reduce the backlog of empty containers at the port, liner companies directly incurred expenses and abandoned cargo operations , indicating that liner companies have provided great support for maintaining the normal operation of the Australian supply chain.

Liner companies give up freight revenue and do their best to reduce the accumulation of empty containers

The accumulation of empty containers has always been a problem faced by major ports in the world. In Sydney, weather and other factors have exacerbated this problem, affecting the exchange of import and export containers by liner companies. In order to alleviate this problem, liner companies are increasing the number of ships at the port and paying additional ship operations and port fees for this.

New South Wales Minister of Transport and Roads Andrew Constance noted that the number of empty containers exported recently reached a record level . More than 78,000 empty containers were exported in October 2020, and more than 75,000 empty containers were exported in November. The average export volume of empty containers in the first 12 months was about 64,000.

In order to reduce the accumulation of empty containers at the port, the liner company was forced to reduce the export of heavy containers:

●At present, a liner company has successfully reduced its empty container inventory from 13,000 TEU to 5,000 TEU;

● Another liner company reduced its empty container inventory from 25,000 TEU to 16,000 TEU;

●Some companies have completely emptied the empty container inventory in New South Wales;

●A ship on the route from Northeast Asia to New Zealand has been transferred to Sydney Harbour to deliver empty containers;

●The two ships will cross Melbourne and stop at Sydney and Brisbane only to transport empty containers;

●A ship normally deployed on the Singapore-Fremantle route will stop service and transfer to the Singapore-Sydney-Singapore route to load empty containers. The ship has already picked up empty containers twice before;

●A liner company deploys two ships specifically for transporting empty containers during the peak season-one with a capacity of about 2200TEU and the other with a capacity of about 2800TEU;

● Another liner company has transported more than 12,000 FEU and more than 9,000 TEU. This company also temporarily deployed a ship to load 2,114 empty containers;

●In November last year, a liner company dispatched an empty ship to transport 1,384 empty containers, and it took 7 days to wait for the berth. Public data shows that in late November, the rent of a 2500TEU container ship was $15,500/day, and the rental price of 8,500TEU was $36,000/day, in addition to other costs such as crew wages and fuel.

In order to alleviate Australia's logistics supply chain difficulties, liner companies have undertaken a heavy financial burden . For example, the round-trip journey from Singapore to Sydney exceeds 9,500 nautical miles, and it takes at least 16 days to travel at a speed of 24 knots per hour (not including port time). Including crew wages, fuel costs, insurance fees, lubricating oil fees, storage fees, crew replenishment, chartering fees, tugboat fees, pilotage fees, mooring fees, port fees, etc., a 4250TEU ship needs 150 per voyage. Ten thousand Australian dollars. And this voyage loaded all empty containers, without any freight income.

According to the Shanghai Export Container Freight Index, the current freight rate of the Singapore-Fremantle route is US$2,431/TEU. It is roughly estimated that the opportunity cost of this voyage exceeds US$10 million.

There is no doubt that in order to reduce the accumulation of empty containers, these liner companies are paying a lot of money and giving up a lot of freight revenue. Faced with unprecedented demand growth, liner companies are doing their best to relieve the backlog of empty containers to ensure the normal flow of international shipping containers in the supply chain. At present, the accumulation of empty containers at the port is improving.

/ By TJ China Freight / Shipping

Poor packaging of containerized goods causes more than $6 billion in losses to the supply chain each year

Poorly packaged containers, coupled with the shipper’s misunderstanding of the dangers of certain non-dangerous goods, may cause more than $6 billion in losses to the supply chain each year.

The well-known freight and transportation insurance company TT Club stated that “analysis consistently shows that two-thirds of accidents related to cargo damage are caused or exacerbated by bad practices when packing cargo into containers.”

And explained: "This misconduct in the supply chain has caused millions of dollars in losses, including the death of seafarers and major delays caused by container ship fires. Based on known data, all such incidents are estimated to cause economic losses of more than 6 billion US dollars each year. ."

Poor packaging of containerized goods causes more than $6 billion in losses to the supply chain each year

TT Club Loss Prevention Manager Michael Yarwood added: “The danger is not limited to chemical cargoes such as paints, cosmetics, cleaning products, fertilizers, herbicides and aerosols.

"A wide variety of consumer products and parts used in the manufacture of industrial products, household white goods and automobiles, if handled improperly during transportation, could cause major disasters."

"The list is long, and often surprising-barbecue charcoal, battery-powered electronics, fireworks, hand sanitizer, wool, cotton, plant fibers, marble, granite and other building materials, fish meal, seed cakes, etc."

He said: "Enterprises involved in purchasing, importing, storing, supplying or selling such goods should ensure that their procurement and logistics standards reach the highest level."

Poor packaging of containerized goods causes more than $6 billion in losses to the supply chain each year

He urged shippers to refer to the "Code of Practice for Cargo Transport Unit Packaging" ("CTU Code") jointly published by the International Maritime Organization, the International Labour Organization and the United Nations Economic Commission, which is the industry's closest regulation on container packaging.

Mr. Yarwood said: “It provides comprehensive information on all aspects of packaging and securing goods in freight containers and other modes of transportation under sea and land transportation. It can not only guide the personnel responsible for packaging and securing the goods, but also guide the collection Cargo and unpacking personnel."

He added: "This also solves the crucial issue of correctly describing and declaring goods, including any specific information about the handling of dangerous goods."

He said: "In addition to the serious health and safety risks already described above, poorly packaged containers may also cause damage to adjacent cargo in the event of an accident and cause significant consequences to the shipper."

/ By TJ China Freight / Shipping

The latest forecasts of the four major ship transport markets

ld economy is picking up, but its speed and strength are not as good as expected, making the market as a whole cautious.

The latest forecasts of the four major ship transport markets

Summary

The various uncertainties brought about by the new crown pneumonia epidemic, the trade war and oil price fluctuations are factors that everyone is still paying attention to.

Although there has been an increase in new orders for ships, especially in the field of container ships and tankers, the overall global order volume is declining, and the order volume is likely to bottom out by the end of 2021.

With the increase in newbuilding orders, the utilization rate of shipyards has risen sharply. Supporting this phenomenon is the liberalized financial support of central governments around the world to ensure the operation of economic activities and the demand for shipping after the epidemic.

Dry bulk carrier

The latest forecasts of the four major ship transport markets

The rental of Cape dry bulk carriers climbed to a quarterly peak of nearly USD 34,000/day in October 2020, and then fell to a low level of around USD 10,000/day in mid-December.

 

Due to the uncertainty of regulatory policies, the newbuilding activities of dry bulk carriers have slowed down significantly in the past few years. We expect that the number of new ship orders will not rebound until early 2022.

The current newbuilding order to fleet ratio is close to 6%, which is the lowest level since the beginning of 2002.

 

The gradual phase-out of retrofitted VLOCs has affected the recent ship recycling market, but as the market shrinks, the ship recycling business is expected to decline.

 

It is expected that the IMO greenhouse gas emission reduction target that will take effect in 2023 may have a significant impact on capacity supply.

 

We infer that the rent of the Cape of Good Hope will increase. By 2023, the average rent for Capesize bulk carriers will reach US$30,000/day.

 

Tanker

The latest forecasts of the four major ship transport markets

Oil-producing countries still face the challenge of low oil prices, especially the impact of low demand caused by the COVID-19 pandemic.

 

Transportation and industrial demand in Eastern countries are approaching their pre-epidemic levels, while Western countries are being affected by the escalation of anti-epidemic measures, which may continue into the new year.

 

Oil tanker earnings have been sluggish in the second half of 2020. We expect rents to increase in 2021 , but rents in the first half of the year may still face some challenges; in 2022 and 2023, tanker rents will continue to strengthen.

 

It is expected that the IMO greenhouse gas emission reduction target that will take effect in 2023 may have a significant impact on capacity supply.

 

Our calculation of ton nautical miles shows that in 2020, the tanker market has declined. However, strong growth should resume in 2021 and 2022 . The rebound in this market is the result of the return of logistics to normal after the new crown pneumonia epidemic and the consequent increase in demand for transportation fuel.

 

The return of growth in industrial activity and consumer demand is the cornerstone of active economic development. Oil inventories at sea and on land have fallen from high levels, and the threat to import demand has also decreased accordingly.

 

Container Ship

The latest forecasts of the four major ship transport markets

The freight rate of container ships is currently at the highest level since 2015.

 

It is expected that in 2021 the European Union’s 750 billion euro recovery fund will boost the economy, and the implementation of vaccines will be another layer of guarantee to support the European economic recovery.

 

In 2021, the container shipping market will usher in a recovery. The demand for container nautical miles is expected to increase by about 6.5%, and it is expected to increase by 4% in 2022.

 

The recent increase in new ship orders will bring the delivery of ultra-large container ships (ULCV) to nearly 600,000 TEUs in 2023.

 

In 2020, the total amount of container ship dismantling will account for about 0.5% of the fleet, but as revenue increases, it is expected that ship dismantling activities will decrease in 2021-2022. We expect that in 2023, as the new IMO greenhouse gas emission reduction regulations come into effect, the amount of ship dismantlement will increase slightly.

 

After the economic crisis in 2008, many old container ships were optimized to adapt to low-speed navigation. These ships have already met the requirements of IMO.

 

It is expected that the supply of container ship capacity will increase in the next two years, but the capacity growth will be lower than in 2020.

 

The revenue of container ships is expected to weaken in 2021 and will resume rapid growth in 2022-2023.

 

Liquefied petroleum gas ship

The latest forecasts of the four major ship transport markets

Rising crude oil prices once again make LPG a more attractive petrochemical feedstock supply. Driven by approximately 10.5% growth in U.S. exports (mainly to Asia), very large liquefied petroleum gas carriers (VLGC) will have a huge profit in the fourth quarter of 2020, reaching up to 2.5 million US dollars. The increased delays in the navigation of the Panama Canal have also provided support for revenue.

 

In addition, the increase in ammonia production in Algeria and Trinidad has also increased the demand for ammonia transportation by gas ships.

 

Due to increased industrial activity in Europe, butadiene exports from Europe are weak. The revenue of handy type ships is maintained at about 650,000 US dollars per month, while the revenue of 10,000 cubic meters of liquefied petroleum gas/ethylene ships (LPG/E) is about 425,000 US dollars per month.

 

The main engine that uses propane as fuel is becoming the "new favorite" for new-built ships of very large liquefied gas ships (VLGC) and medium-sized liquefied gas ships (MGC).

 

With the global recovery from the epidemic in 2021 and the increase in oil production in the Middle East, it is expected that more LPG exports will be exported. U.S. exports of liquefied petroleum gas in 2021 are expected to be the same as in 2020, and will rise again in 2022 and 2023.

 

In 2021, the volume growth of VLGC seems to be somewhat weak, but it is likely to increase with the steady increase in capacity.

In addition to liquefied petroleum gas, large liquid gas carriers (LGC) and MGC ships may provide more support for the expanding ammonia trade. Rising crude oil prices will stimulate the use of liquefied petroleum gas as a raw material for ethylene production in Europe and Asia.

 

As the United States continues to export ethylene (mainly to Asia), and the recovery of propylene trade (which may also come from the Atlantic market), the demand for petrochemical gas transportation is expected to remain high.

 

Shipbreaking activities are expected to slow down in the near future, and new ship construction activities are expected to pick up from 2022.