For most of 2020, the Port of Los Angeles has been struggling to deal with the problem of container surplus. Now that there has been a dramatic turning point, the Port of Los Angeles has also experienced a shortage of containers.
According to the latest statistics from Container xChange, a professional organization in the container monitoring field, the Container Availability Index for 40-foot containers in the Port of Los Angeles has dropped to 0.29.
Container xChange’s marketing director explained: “In the 49th week of 2020, the port’s availability index value for 20-foot containers and 40-foot containers plummeted to 0.27. Compared with the average index from week 1 to week 8 of 2020, these two Both containers dropped by 57%."
It is understood that when the container availability index is 0.5, it represents market balance. If it is less than 0.5, it represents a shortage of containers.
This means that the Port of Los Angeles has a serious shortage of containers.
In the previous Port of Los Angeles, due to the large increase in import volume and the epidemic factor, the port was congested on a large scale, and the efficiency of container turnover was very slow. At the peak, 10,000-15,000 containers were stranded at the terminal, and normal operations were severely affected.
According to a research report jointly issued by Container xChange and FraunhoferCML, a maritime logistics research organization, in the third quarter of 2020, there will be approximately 1.5 million containers in the United States with a turnover time of more than 115 days, while the normal average time should be less than 80 days.
Previously, due to the large backlog of containers in the Port of Los Angeles affecting the supply chain, liner companies conducted large-scale empty container deployment to ensure the normal operation of trans-Pacific routes.
As empty containers continue to be shipped back to the Asian market, the situation at the Port of Los Angeles has undergone a dramatic turn.
The industry also analyzes that the current shortage of containers in the Port of Los Angeles is related to the serious port congestion, the imbalance of market supply and demand, and the labor shortage caused by the outbreak of the Los Angeles Port.
Container xChange CEO Johannes Schlingmeier previously stated that since the summer of 2020, the U.S. container transportation supply chain has been under pressure, and the Port of Los Angeles is facing labor shortages caused by the outbreak of the new crown pneumonia epidemic.
Lars Jensen, CEO of Sea Intelligence, an industry consulting firm, believes: "The main reason for the lack of containers is port congestion."
Regarding when the container shortage will be resolved, Container xChange predicts: "In the next few weeks, as every link in the trans-Pacific route supply chain will face tremendous pressure, container supply will fluctuate further."
Nerijus Poskus, vice president of shipping at Flexport in the United States, believes that the shortage of containers may improve in the second half of 2021.
Lars Jensen said that the lack of containers in the Port of Los Angeles should be resolved before the summer of 2021.
He further explained: "After the international financial crisis in 2008, we also experienced a shortage of containers. The shortage of containers in 2010 took about 3 months from the appearance to the resolution. If we put it now Under the same background, it means that the current lack of containers in the Port of Los Angeles may also be resolved soon."
In the container transportation business, we call a container, an exporter, a consignee, and a destination port, and the goods that meet these "four ones" conditions are called FCL, and we call a container, exporter, and consignee. As long as one of the three items in the port of destination is two or more export goods, it is defined as LCL cargo.
The transportation cost of LCL and FCL is very different in terms of procedures, time and cost. The two are by no means "1+1=2, 1+2=3". Similar to the simple relationship between addend and sum, it is a series of strange "inequalities" such as "1+1>2, 1+2>3".
The customs clearance procedures for LCL cargo are more complicated than FCL cargo, and it takes longer
First, the whole container of goods exactly meets the minimum unit of customs inspection, sealing, and release of the exporting and importing countries. For a batch of goods, as long as the documents submitted by the exporter and importer are reasonable, legal and intact, the export customs and import customs will handle it. After the relevant procedures and relevant taxes and fees are collected, customs clearance will be released soon. The LCL cargo will not be so simple and fast. As long as the goods in the container have a single shipment document that is faulty, the export customs will not release the goods. This is because the export customs must seal the exported containers before allowing the loaded containers to leave the country. Therefore, in the same container, the failure of any one of the goods to clear customs will inevitably affect the timely export and transportation of other goods.
Second, LCL cargo is far less extensive and flexible than FCL cargo. It requires additional solicitation by the transportation company and a reasonable combination of some conditions such as the port of shipment, port of destination, delivery date, variety, volume, and weight of the cargo. They are all suitable for exporting goods in the same container. These requirements are very difficult to implement and require a long time. If the transport company consigned by the cargo owner is not strong enough, then the time for cargo transportation will be delayed even longer.
Third, under normal circumstances, FCL cargo can be shipped directly at inland ports, while LCL cargo is only suitable for delivery at developed coastal ports due to relatively few inland sources and relatively more coastal sources. This will undoubtedly add a lot of extra trouble to the exporter. According to the relevant regulations of the Chinese government, exported goods must pass the inspection of the Commodity Inspection Bureau in the place of production and the place of export declaration. If the goods are declared for export within the scope of the province (autonomous region, municipality directly under the Central Government) where the goods are produced, only one commodity inspection is required for a batch of goods. Otherwise, if it is a customs declaration in another place, a batch of legally inspected export commodities must pass two inspections before the customs will release it.
LCL cargo is more expensive than FCL
Under normal circumstances, the freight and miscellaneous costs of FCL transportation in sea freight generally include three items: freight, transportation surcharges and port miscellaneous charges. The freight and transportation surcharges for LCL and FCL should be the same. The difference in cost is only in the assembling of the transported goods at the port of shipment and the unpacking at the port of destination.
It stands to reason that these two costs should not be very high. However, due to the huge differences in the level of labor costs between countries and regions in the world, exporters have little or no knowledge of the specific differences. The original LCL cargo ratio The freight cost of the whole container is very reasonable by adding a certain percentage of LCL, unpacking and storage fees on the basis of the overall consistency. However, in order to earn higher profits, carriers often use "fuzzy The method of "learning" does not specify what items will be charged in the quotation, but only generally according to the destination port to which the type of goods are shipped, and the amount of each freight ton is charged, and the port miscellaneous charges are reported temporarily. What's more, the carrier has no obligation to explain, and the shipper has no room for bargaining. The amount of charge depends on the specific circumstances.
In addition, it should be noted that in import and export commodity trade, the larger the quantity and total value of each transaction, the lower the transaction cost. Conversely, the smaller the quantity and total value, the higher the transaction cost.
Compared with FCL cargo, the quantity and total value of LCL cargo are generally smaller. Therefore, from this perspective, the transaction cost of LCL cargo must be higher than FCL cargo. This is because the cost and mailing fee of the finished sample, the communication fee such as fax and telephone, the notification fee of the letter of credit, the customs declaration fee of the import and export goods, the certificate of origin, etc. are all based on the number of copies rather than the business. The size of the amount to be charged. When these business expenses are finally allocated to transaction costs, the unit costs with a large transaction volume will have a small share, and the unit costs with a small transaction volume will have a large share. We should be aware of this.
The volume of containers in the Asian-American trans-Pacific trade has reached its limit. Large-scale port congestion in the ports of Los Angeles and Long Beach is forcing carriers to take extreme measures. Today, ship voyages are cancelled not because of insufficient demand, but because ships are waiting for berths at anchorages; as more and more container ships arrive every day, the backlog of Southern California ports has reached a record level of 67 ships. This is the first time a ship has berthed outside the San Pedro Bay anchorage in 17 years, and the congestion is expected to continue until at least mid-to-late February.
When the ship is delayed due to long waiting in the port, the carrier will usually add "recovery vessels" to replace and maintain the weekly voyage. But now there are no more "recovery vessels" left. Hapag-Lloyd said, "Since our fleet has been fully deployed and has exceeded its capacity, unfortunately this is not an option at this time."
Therefore, Hapag-Lloyd cancelled 19 voyages in February. "It needs to be emphasized that the ships will not be idle at any time, and we have set sail as much as possible," the company emphasized.
Urgent need to resume suspended voyages
"The reliability of the sailing schedule is too poor. At this time, we should not'withdraw the capacity and stop sailing', but'need to resume the voyage as planned.'" said Simon Sundboell, founder of eeSea.
Due to the decrease in export volume during the Lunar New Year holiday, carriers usually suspend their flights at this time of the year. In order to deal with the backlog of export goods at Chinese ports, carriers initially chose to guarantee voyages during the Spring Festival. However, the congestion in the ports of Los Angeles and Long Beach caused the carrier to have no vessels to deploy. This means that the congestion problem in Asia will take longer to resolve.
Real-time blank sailing data display provided by eeSea platform. As of last week, compared with January, the Asian-American route has dropped by 11% from January. Although the demand for goods continues to rise.
Monthly planned voyages on the Asia-American route (Chart: eeSea)
In a webinar hosted by the freight forwarder Flexport last week, Lars Jensen, CEO of Seaintelligence Consulting, explained: “When all the ships are waiting outside the port to berth, they can’t return to the voyage, so they can’t start what they should have set off. Voyage. Suspension is not an option but a necessity."
San Pedro Bay is congested
At any time since the beginning of this year, no less than 30 container ships have been anchored at the San Pedro Bay berth near the ports of Los Angeles and Long Beach.
According to Southern California Maritime Information on January 31, all anchorages in Los Angeles/Long Beach and all emergency anchorages near Huntington are full! There are 67 container ships in the port area, setting a new record. More than 10 containers will arrive from January 1st to January 2nd. The average waiting time for berthing has already exceeded 7 days.
San Pedro Bay container ship location
In addition, due to the storm and bad weather last week, many of these ships had to leave the anchorage and go to sea. Kip Louttit, executive director of the Ocean Exchange, said that in such a long period of time, with so many ships and such harsh sea winds and sea conditions, what could be more complicated than this.
Port congestion is caused by a large number of incoming cargo and dockers infected with COVID. A spokesperson for the ILWU dockworkers union said that the number of members of the union who tested positive has increased to 803, a 16% increase from 694 on January 17.
Nerijus Poskus, head of global shipping at Flexport, said: “They are unable to provide timely services to ships, which leads to 10-14 days or even longer waiting times, depending on the terminal.” He added: “ As of last week, there are Nearly 300,000 20-foot TEUs are waiting to be unloaded."
According to the data from the Los Angeles Port signal platform as of the 29th local time in the United States: 17 ships are at anchor with an average anchoring time of 7.3 days; 13 ships are waiting to be pre-anchored.
Jensen said: "As long as there is such a waiting time, it is equivalent to canceling all the services of the five transpacific shipping companies." "The impact is huge."
Global shipping on-time rate has severely declined
The reliability of the on-time rate of global shipping has dropped to about 50%, while the normal level is 70%-80%. Receiving a box on time is not much better than flipping a coin. To be worse in reality, blank voyages are not considered in the schedule reliability data. It also does not consider "rolled" cargo-pushing to the next voyage.
Ocean Insights aggregates the freight volume data of the world's top liner companies in the world's top ports. According to published data, the share of ships that did not sail as originally planned rose to 37% in December. This is a significant increase from 29% in July and 25% in December 2019.
(Chart data: Ocean Insights)
An importer transporting goods from China via Los Angeles said: “The shipping time that normally took 28 days has now been increased by 60 days. The container shipped in November last year has not yet reached its final destination.” All of this, American consumers should See the increasing shortage of goods on the shelves. In turn, this will further boost import demand in 2021.
The dawn of hope is here
One of the main reasons for the current shortage of capacity is the shortage of containers. But there is also a silver lining. The Container x-Change container availability index tracking shows that the availability of 40-foot high containers (40HCs) is still extremely low. However, the availability of 20-foot dry containers (20DC) and 40-foot standard dry containers (40DC) this month has increased significantly this month.
David Amezquita, head of data tracking and analysis at Container xChange, asserted that the index "finally shows a positive trend." The company added that the upcoming Chinese New Year may "finally become a turning point."
Index levels below 0.5 are considered shortages. In the third week of January, Shanghai’s 20DC index rose to 0.34, while the 40DC index rose to 0.37. The 40HCs index was still very low at 0.11.
When is it expected to return to normal?
Jensen expressed his belief that the challenge of container equipment will be solved soon. Chinese factories have been busy producing new equipment. "What is happening now is exactly the same as what we saw in 2010 after the financial crisis. If you look at 2010, you will be delighted to find that it took about three months from the appearance of the problem to its resolution. According to the situation, this should be resolved before the Chinese New Year.
"This port congestion has a lot to do with the ability to restore empty containers to a balanced state. This may cause delays in resolving congestion."
As more and more containers are manufactured and put into operation, liner companies should also work hard to resume normal voyages. Jensen said: "The carrier seems to be planning to use the time after the Chinese New Year to return the vessel to its original plan." "If this works and solves the port congestion problem, we can restore [service reliability] within a few months To normal levels. But this is just an optimistic view."
Volume continues to climb this week
Although major container ports across the United States have experienced a certain degree of congestion, with the arrival of imported goods from Asia, Southern California ports are experiencing the most serious congestion. According to data from the Los Angeles port signal platform, the number of imported standard containers per week has increased to 150,000 to 160,000 TEU; while the neighboring Port of Long Beach shows that the number of imported standard containers per week is 90,000 to 100,000 TEU, and the total volume of imports and exports and empty containers Nearly 200,000 per week.
Analysts who are concerned about the port situation expect that freight volumes will remain stable until at least mid-February, when there may be a slight stagnation, as China's manufacturing and shipment volumes usually decline during and after the Spring Festival holiday. However, many shipping companies hope to use this intermittent period to reduce the backlog. The National Retail Federation, which tracks retailers’ imports, predicts in its annual port tracking data that this quiet period may not arrive until April, and then it will appear briefly as retailers prepare for the summer. Strong rise.
Due to the surge in imports, the ports of Los Angeles and Long Beach, the largest ports in the United States, are continuing to bear the pressure of a large number of containers entering the ports. At the same time, the ports are seriously congested and a large number of ships are waiting to berth.
The large accumulation of container ships near Long Beach and Los Angeles is having a knock-on effect on the entire container industry. It is an uncertain factor when the market will return to normal. At the same time, shipping companies are planning to reduce trans-Pacific services and change demurrage time.
At present, there are 19 ships berthing at the Port of Los Angeles, and 14 ships are waiting outside the terminal for berths. According to Nerijus Poskus, vice president of shipping at Flexport, in the last week, 300,000 TEUs were waiting to be unloaded at the port. This has a great impact on other markets where there is a clear shortage of containers.
Ships waiting in and near the port
"Congestion is unlikely to continue into the second half of 2021, but it will last at least two or three months, or even four months . In the port of Los Angeles and other matters worse, there are 33 ships waiting, there may be 50 ships within a few weeks While waiting, all these additional ships will also enter the United States. Therefore, these containers will not return to Asia soon.” Poskus said on Tuesday.
Recent Import and Export Situation of the Port of Los Angeles
Currently 19 ships are berthing, with an average time of 7.5 days
There are 14 ships waiting to berth
Part of the voyage to the US West was cancelled
According to Lars Jensen, CEO of Seaintelligence Consulting, the large-scale accumulation of ships on the west coast of the United States is having an impact on shipping services. He pointed out that Hapag-Lloyd will announce the cancellation of 21 Asian and North American routes in February this week. Between voyages.
Jensen said it was a decision that had no choice due to delays.
In addition, due to increased congestion at the Los Angeles port, which has affected delivery guarantees, CMA CGM appears to be shutting down its transpacific express service.
According to Alphaliner, the French shipping company has closed its trans-Pacific premium SEA-X service and plans to open a new route between China and the West Coast competing port: Oakland and Seattle.
If the container fails to be shipped out at the Los Angeles terminal before the agreed date, the SEA-X service will provide the shipper with a refund.
Alphaliner pointed out: "Obviously, the serious congestion at the port of Los Angeles makes it difficult for CMA CGM, in fact, almost all shipping companies to guarantee on-time delivery."
It is reported that the SEA-X service operates outside the Ocean Alliance’s trans-Pacific network and has deployed 6 ships with a capacity of 3,700-6,300 teu. Alphaliner learned that three of the ships have been transferred to the new Golden Gate Bridge service. The port call will be Shanghai-Yantian-Oakland-Seattle-Kaohsiung.
The last stop of the SEA-X service will be the CMA CGM Elbe round, which will arrive in Los Angeles on February 13.
The SEA-X service was launched in the second half of last year. The target customers are shippers who are willing to pay extra to avoid traffic congestion in Southern California. However, according to Simon Heaney, senior manager of container research at consulting firm Drewry, this congestion has spread since then and could lead to the complete end of advanced services in the industry.
"Congestion has created demand for high-end products, but the problem has deteriorated so fast that it may be difficult to fulfill the promise and be forced to refund the guaranteed shipping part (at least one carrier will bear a 200% refund )."
Change the free time of demurrage at U.S. ports
From March 1, 2021, Hapag-Lloyd will modify the free time for import demurrage in the United States as follows:
▍U.S. West Coast Port: Los Angeles/Long Beach
▍American West Coast Port: Oakland
▍Port of Jacksonville, USA (Jacksonville):
▍Port Newark：MAHER TERMINAL
Legend:
DOD = Day of Discharge DOD
WD = Working Day for the USA (excludes Sat, Sun, Bank Holiday)
Ships from Asia to Europe have recently undergone some new changes. Some shipping companies have cancelled multiple voyages, some have added new services, and more and more bulk cargo ships are carrying containerized cargo.
According to reports, HMM will put in an additional 5000 TEU cargo ship on the European route from Busan to Hamburg at the end of this month to meet the shipper’s cargo delivery requirements.
In addition, the shipping company China United Shipping (CU Lines) announced its first direct European route, maiden voyage on February 6, will provide independent services to the Nordic region and deploy a series of small feeder ships.
▍The 2M Alliance will cancel several Nordic voyages in the next week or two
The shipping company will cancel multiple flights to Northern Europe during the Spring Festival next month. This is a blow to the troubled cargo owners because they have paid a huge price to secure space in the voyage.
2M alliance partners Maersk and MSC plan to cancel three public voyages from Asia to Northern Europe in the 5th-7th week. One of the ships will be allowed to be postponed until next week, and the existing reservations will be kept. Ocean Alliance member CMA CGM will also skip three loops in the same period.
MSC said, “Due to the slowdown in demand during the Spring Festival and the severe congestion in the entire supply chain, it is necessary to take measures to cancel sailing.”
Maersk advises its customers that in order to cope with severe port congestion and container restrictions, it is necessary to use suspension to improve the reliability of shipping schedules, so as to release these services to restore planned shipping schedule measures.
Suspended voyages: Maersk Herrera on the AE55/Griffin loop scheduled to depart from Shanghai on February 11; Maersk Enshi (AE6/Lion) scheduled to leave Busan on February 13; and departure from Ningbo on February 15 Estelle Maersk (AE7 / Condor).
A shipping company source said that he believes that 2M is more about slowing down the overheated supply chain and alleviating the pressure of congestion in the Nordic containers and ports.
"I can only represent our ships. During the Spring Festival, they are all fully booked." The source said, "In addition, too much cargo has been dumped recently. This cannot be a problem of reduced demand, so I guess , They want to restore a certain timetable by cutting voyages."
Indeed, Simon Sundboell, the founder of the liner database eeSea, said that the reliability of this route is worse than what we have seen in a long time.
He added: "These suspensions are necessary and restoration measures need to be arranged. They are not meant to consume capacity."
At the same time, according to the latest investigation by Container xChange, the serious container shortage crisis is alleviating. Although the container availability index (CAx) in December hit a record low, Shanghai has improved significantly this month.
"In January, the availability of 40-foot-high cubic containers increased by 37.5%, while the standard 40-foot-cubic container even increased to 200%. CAx showed a positive trend for shippers and freight forwarders looking for containers in Shanghai. With the increase in container availability Significant increase and Shanghai is returning to normal levels.” said David Amezquita, head of data insights, adding that similar situations have occurred in other major hubs in China.
▍The empty container release time will be extended from 7 days to 10 days
It is reported that Hapag-Lloyd will take temporary measures in order to optimize the supply of containers and meet customer needs during the upcoming Spring Festival. From now on, the empty container release window in Mainland China will be extended from the current 7 days to 10 days.
The empty container pick-up time at all Chinese ports has been adjusted from 7 days before the estimated sailing date to 10 days, which will take effect from now until January 31, 2021.
From February 1, 2021, it will be further extended to 14 days before the estimated sailing schedule until further notice.
The specific box types at the following special locations will be kept for 10 days and are subject to change without notice.
Shenzhen: 20' Dry
Ningbo: 40' Dry, 40'HC
Shanghai: 40' Dry, 40'HC
▍More and more containerized goods are cancelled and switched to other types of ships
Chartering expert Ahlers said that the rebound in bulk cargo transportation will bring benefits to secondary ports and short sea shipping. The company said: "New opportunities for bulk carriers, multi-purpose ships and ro-ro ships are emerging."
According to reports, last week, freight forwarders increasingly wanted to use multi-purpose ships to avoid a series of delays and cost issues, which disrupted Asia-Europe container trade-in some cases, they gave up boxes, and I chose bulk groceries.
The "crazy" of container trade drives more Asian goods to other modes of transportation
In addition, the de-containerization trend seems to be gaining momentum on intra-Asia routes. On some routes, bulk commodity shippers accustomed to the lowest freight rates suddenly face bills much higher than in previous years.
Ahlers said that in Southeast Asia, cargo that has been shipped in containers for decades is now being transferred to bulk carriers.
Chartering business manager Senthil Nayagam said: “Due to the shortage of containers and high freight rates, goods such as sawn wood and plywood are turning to bulk general cargo ships.”
He said, for example, the cost of exporting plywood from Malaysia to Colombo has increased from US$400/TEU to US$1,025. “Therefore traders hope to transport them in bulk in the next three to four months until the situation improves. "
Another example is the shipment of goods from China to Russia. Mr. Nayagam said that Ahlers' original plan to reach St. Petersburg or use maritime rail services had to be cancelled and switched to other ports and offshore services.
He added: “Freight forwarders are forced to find unconventional options, such as transporting goods to a triple container terminal, and then looking for different short-sea solutions, trying to use smaller coastal bulk cargo vessels to transport the goods to the final destination. Land."
For many industries, transportation costs are not the only consideration in determining mode switching.
Mr. Nayagam said: “Inventory costs, potential fines related to late delivery, and factories' urgent need for raw materials to keep them running are all factors. For example, summer fashion needs to be listed in stores in time.”
"We believe that the container market situation will return to normal again, but it is not yet certain when it will return to normal. At the same time, we will continue to see more and more'traditional container' cargo shifted to other modes of transportation, including bulk cargo."
Container xChange said that the shortage of container equipment that has lasted for several months is expected to end because the container availability index (CAx) is undergoing positive changes.
According to Container xChange analysis, the Chinese New Year may become a turning point , with the 20-foot and 40-foot dry cargo index increasing to 0.34 and 0.37 respectively, indicating that the availability of empty containers is much higher than last month. CAx data comes from millions of containers tracked by Container xChange. Container xChange CEO Johannes Schlingmeier said: “An index of 0.5 indicates market balance, and a value below 0.5 indicates a shortage of containers.” Container xChange pointed out that although the latest data in January was well below 0.5, indicating that there is still a shortage of container equipment, but 20 feet and The 40-foot container data has begun to approach the normal container shortage level in China's main export markets.
David Amezquita, the company's director of data, said:
Compared with December 2020, the availability of 20-foot containers in January 2021 has increased by 37.5%, and the availability of 40-foot containers has increased by 200%, which is a positive trend.
Data from xChange shows that in the past few months, there has been an extreme shortage of containers across China. In Shanghai, which has always been in short supply, the index reached a record low in December 2020, of which the 40-foot container availability index was only 0.13. The company said that as China's container manufacturing plants are running at full capacity to expand production capacity, coupled with the shipping company's efforts to transport empty containers back to China, the Chinese New Year may become an important turning point.
With the substantial increase in container supply, Shanghai Port's container availability index is returning to normal levels. Other ports in China are also undergoing positive changes. Taking Qingdao Port as an example, the availability index of a 20-foot container even reached 0.5. The container availability index of other major Asian hub ports such as Singapore Port, Navassiwa Port and Port Klang also showed the same trend. Compared with December 2020, the availability index of standard containers at the Port of Singapore in January 2021 has increased by 58%, Port Nawahiwa has increased by 35%, and Port Klang has increased by 54%.
There are signs that the container availability index will remain stable in the coming weeks. Until mid-February, the availability of 20-foot boxes will stabilize at around 0.35, and the availability of 40-foot boxes will stabilize at around 0.38.
In the past two months, the cost of transporting goods from China to Europe has more than quadrupled, hitting a record high, due to the pandemic disrupting global trade and the shortage of empty containers.
Data from shippers and importers show that the freight for transporting a 40-foot container from Asia to Northern Europe has risen from approximately US$2,000 in November last year to more than US$9,000.
Lars Jensen, CEO of maritime consulting company SeaIntelligence, said that the reason for the increase in freight rates is the market's competition for limited resources-containers.
In the first half of 2020, due to a sudden slowdown in global trade due to the epidemic blockade, shipping companies have suspended large-scale shipping and thousands of empty containers are stranded in Europe and the United States. In the second half of the year, when Western countries' demand for Asian-made goods rebounded, competition among shippers for available containers pushed up freight rates.
John Butler, Chairman of the World Shipping Council, said, "The freight volume has dropped from a sharp decline to soaring to the highest level in history, and the effective handling capacity of the terminal has exceeded the upper limit."
He added that the congestion in the port has caused freight rates to rise, and shipping companies charge additional fees to compensate for the longer waiting time.
British freight forwarding company Edge Worldwide CEO Philip Edge said that some shipping companies charge US$12,000 per container, much higher than the US$2,000 in October last year.
The British Household Electrical Appliance Manufacturers Association stated in a statement, “According to member companies’ disclosures, shipping costs have increased by more than 300% since 2020. Especially for some commodities, the increase in shipping costs has exceeded the net increase Profit. Therefore, these costs will have to be passed on to the end user."
The owner of a leisure goods importer in Manchester said that the shortage of containers is having a “huge impact” on his business, and some orders placed in November are still waiting to be shipped. "The question is, is it to pay $12,000 now and pass the cost on to the customer, or to wait at the risk of exhausting inventory?"
Economists say that such interruptions and delays are beginning to affect global supply chains. Neil Shearing, chief economist at Capital Economics, said that "transportation pressure is accumulating and may increase further."
A recent survey by IHS Markit found that in December last year, the delivery time of manufacturing suppliers in the Eurozone reached the worst level since the peak of the pandemic lockdown in April. Shipping delays and general commodity shortages were "widely mentioned" by suppliers. .
The companies surveyed stated that they are consuming inventory of raw materials and semi-finished products, resulting in a decline in inventory.
Bert Colijn, senior economist at ING, said that "supply shortages and rising freight rates may slightly curb trade growth."
On the occasion of the Chinese New Year in February, the Asian manufacturing industry slowed down. Shipping companies hope to use this time to solve the problem of increasing backlog orders, which will temporarily cool freight rates.
However, BIMCO chief shipping analyst Peter Sand said that the shortage of containers may continue for a long time in 2021. Although the shipping company has ordered new containers, in his opinion, such a move is "too small and too late."
Lars Jensen also believes that although freight rates may drop slightly, "there are still a lot of goods waiting to be transported."
John Butler pointed out that only when epidemic-related restrictions are reduced and people have more diverse service choices, the pressure on the maritime supply chain can be alleviated, but no one can say when it can be improved.
The air cargo market has ushered in a new year, but there is no sign of cooling. International transportation activities usually weaken after the holiday season, but due to the unusual air transportation mode and the severe shortage of air transportation caused by the new coronavirus pandemic, demand and freight rates remain high.
The logistics company expects that the air cargo volume will not decline before the Spring Festival, because the manufacturer plans to continue operations during the traditional holidays.
The latest comprehensive statistics of World ACD and CLIVE Data Services in December show that compared with 2019, air cargo volume has fallen by only 3.7% to 5% respectively. These data show that the air cargo industry has recovered a lot since it bottomed out in May last year, when demand dropped by nearly 40%.
The demand for air transportation is largely driven by continuous inventory replenishment, the inventory-to-sales ratio of consumer goods is close to the lowest level in history, and a saturated marine container market. Analysts and logistics providers said that the congestion of ports and railways and the shortage of empty containers continue to push up shipping prices and cause serious delays, especially for main routes from Asia, which promotes a further increase in aviation demand.
The goods sought for air transportation include automotive equipment, consumer goods purchased online, and medical supplies related to COVID-19. Airplanes are also used to transport the new crown vaccine, because a large number of vaccines are transported by land, and sometimes only a few containers are needed for each flight, so it is not clear how many ordinary goods they replace. Nevertheless, when the capacity is tight, the vaccine will be given priority to board the plane.
San Francisco-based freight forwarding company Flexport said in a customer advisory update report that the remaining demand for game consoles and smartphone product releases in the fourth quarter will increase capacity constraints by mid-February.
Bruce Chan, vice president of global logistics at investment bank Stifel, said in a monthly comment that shippers are also more inclined to use air operations as an inventory buffer because their forecasting models have been completely overturned by the epidemic. He wrote: “Predicting consumption patterns and when they will stabilize is a huge fear, and the path forward is hardly linear, especially when the new coronavirus reignites and the government further implements blockades and border closures.”
In addition, many Chinese manufacturers announced that they will continue production during the Lunar New Year period from February 12 to 26. Factories are usually closed for 10 days or longer so that workers can celebrate with their families, but because the Chinese government encourages workers to celebrate the New Year on the spot, many factories will continue to operate this year. Flexport said this could create a backlog, as many freighter flights were cancelled a few weeks ago due to the expected full transport. Any backlog will depend on whether the factory continues to produce or take vacations at home.
The demand for air freight is so strong that experts predict that by the end of March the market will return to the level before the epidemic. This trend is in sharp contrast to the passenger traffic of the aviation industry, which is expected to remain sluggish until vaccination becomes more common in the second half of the year. Even then, the recovery of international travel may be slower, which means fewer aircraft for long-distance trade. Aviation industry officials said they don’t expect a full recovery until 2024.
Globally, freight rates are more than twice what they were a year ago, and freight rates from China to Europe and the United States are 2.5 times what they were a year ago. According to data from digital sales platforms, market information services and freight forwarders, the aircraft on these routes are full.
According to World ACD data, the average freight rate soared by 80% in December last year, from US$1.80 per kilogram to US$3.27 per kilogram, the highest year-on-year increase since May last year, but it fell by 10% since January this year.
Freight rates are under tremendous pressure, because although more all-cargo operators have added freighters and flights, global capacity is still about 20% lower than 2019 levels. The main culprit is the insufficient supply of wide-body passenger aircraft on international routes, most of which are still grounded due to the poor travel market. In fact, with the strict implementation of travel restrictions, airlines will reduce flights in the first quarter. For example, Air Canada and WestJet suspended 25% and 30% of their system capacity in the first quarter.
According to data from the International Civil Aviation Organization, the global all-cargo fleet increased by 22.4% to 673 aircraft in 2020. Airlines continue to increase capacity, including improved aircraft from passenger airlines, but this is not enough, because the space shortage is three to four times the decline in demand, and the gap may be even greater in the short term.
In the past month, Qatar Airways has added three Boeing 777 freighters to its fleet, and China Airlines and AirBridgeCargo have each added a factory-built aircraft. Swiss International Air Lines has added Seoul, South Korea and Lima, Peru to its cargo network. The flight from Zurich will be operated by a 777-300 extended-range passenger aircraft dedicated to cargo. The flight from Zurich will be operated by a 777-300 extended-range passenger aircraft dedicated to cargo.
In the past year, many freight forwarders have greatly increased the use of dedicated charter flights to ensure that they can provide transport capacity to their customers. German logistics giant DB Schenker significantly expanded its private aviation network last week. Now it has two routes, connecting Europe, Asia and North America for the first time. The cargo management company controls a total of 43 Boeing 747 or 777 freighter flights every week-equivalent to the space of a 135 wide-body airliner. Munich Airport is the hub for DB Schenker's intercontinental cargo between the United States and Asia.
Equipment shortages, strong demand, and soaring freight rates in Asia and Europe have almost run through the entire Christmas-New Year holiday. Freight forwarders and carriers are almost unlikely to see market conditions ease before the Chinese New Year in February.
According to data from the Baltic Daily Freight Index (FBX), spot prices from China to Northern Europe reached an incredible $7,701 per TEU on January 15 , a year-on-year increase of 268%.
The freight rate from China to the Mediterranean region also drew the same curve, and the rate per FEU7496 USD increased by 203% over the same period last year.
Data from Xeneta, an internationally renowned freight benchmark and market analysis platform, shows that since the end of October 2020, spot freight rates in Asia and Europe have risen almost vertically, from US$1,164 per TEU to US$4,191 on January 2, 2021.
These indexes reflect the total rate of trade payments, and shippers are also reporting that freight forwarders have given them eye-popping prices for Asia-Europe freight. A shipper told reporters that, last week, a freight company reported a one-week Asia-Northern Europe freight rate, which reached US$13,000 to US$16,000 per FEU.
The shipper said: "I know the capacity of this route may be more tight than other routes, but such prices are still too crazy."
From February 12th, China will begin to celebrate the Lunar New Year, and factories are usually closed for three weeks around the Spring Festival. However, since the beginning of this year, there have been various mixed reports from Chinese manufacturers. Some factories will cancel holidays in order to cope with the backlog of orders, and some factories will take longer holidays.
This uncertainty makes the capacity management of carriers more difficult. The sea intelligence agency (sea intelligence) recently stated in a newsletter that during the three-week Spring Festival beginning at the end of January, the carrier has so far announced only seven cancellations of the Asia-Europe route. The shipowners have announced that they will cut their total capacity by 6% to 13%, compared with 40% in January last year.
The newsletter pointed out that shipowners usually announce cancelled flights six to eight weeks before the Spring Festival, putting people under pressure of "time pressing". However, there may be other reasons behind the silence of the shipowner.
A Maersk spokesperson said that although the demand outlook for this year is still limited, the current freight purchase model and the supply of container equipment and ships are only temporary. Maersk expects that demand will "normalize" in the first half of the year, and plans to reduce voyages around the Spring Festival to rebalance the flow of containers. The spokesperson said that stocks in the US and European markets have basically been replenished, and the introduction of vaccines "will also ease this situation."
For the time being, we still see no signs of weakening demand
But obviously not everyone agrees with Maersk's view. Dominique von Orelli, Executive Vice President and Global Head of Ocean Freight at DHL Global Forwarding, said that continued strong demand will keep container freight rates high in the first quarter of this year run. He said that " this extremely strong demand momentum" showed no signs of abating .
Von Aurely said, "During the Spring Festival, freight rates may drop slightly, but the overall upward momentum should continue until March or even the second quarter." He added that any shipment exceeding the agreed minimum quantity commitment (MQC) The volume will increase the price.
"Now if you go to a retail store in Germany and want to buy a sports jacket, or go to IKEA to buy a bed, or go to a furniture dealer to buy a chair, they will give you a lead time of 12 weeks or more because the inventory has been It’s emptied.” The source added, “Most companies are trying to replenish inventory, but at the same time, the strong demand has not been reduced. Therefore, it is still difficult to increase the inventory to the customer’s demand. It will take some time to achieve The state of supply and demand balance, so we predict that demand will not stabilize until March or April."
Rolf Habben Jansen, CEO of Hapag-Lloyd, also holds the same view. He said in the latest market report in late December last year, "Two months ago, I said that (high) demand will continue until the Chinese New Year. The traffic will drop."
He added: "Today, I have to honestly say that we may still have to deal with very high transportation volumes in the future. After all, the bottleneck that cannot ease the current capacity shortage is not only in the logistics link, but also in the production link. There is still a lot of work to be done. I’m afraid it will take some time to solve the bottleneck. China Spring Energy allows us to breathe in two to three weeks. But not everything will be resolved within this time."
Since the peak of the third quarter of 2020, with the high demand in Asia and Europe, China has faced a serious shortage of empty containers. The executive of the European logistics industry said that the problem of tight container supply will continue into the second quarter. He said: "The second quarter is expected to see the relief of the new crown epidemic. By then, there will be more labor supply in warehouses and terminals in Europe and other destinations, which will accelerate the flow of containers."
There are still two or three weeks to go before the Spring Festival holiday. The peak of shipments a year ago has been urgently reached, but the lack of compartments and containers and trailers that continued from last year to this year continues, which makes export and forwarding companies miserable.
Due to the special market situation this year, the epidemic began to rebound in December and entered the new year. Major exporters and freight forwarders have already geared up to plan ahead. Affected by the epidemic, this year is different from the past, but the same is still lack of space. Lack of cabinets and trailers!
It can be described as:
Grabbed a space and lacked boxes;
The box was grabbed and there was no space;
The compartments are all grabbed, and there is no trailer...
Small containers are becoming a key factor affecting the global trade industry chain. At present, in the field of foreign trade, containers, spaces and trailers are the hurdles that cannot be crossed in the international logistics chain, and it has become a consensus that "the one who wins the container wins the world".
Since July last year, my country’s exports have continued to pick up. With the increase in replenishment demand from overseas customers, the export volume has risen sharply. Both the shipping market and the China-Europe freight train market have seen shortages of containers, soaring freight rates, and delayed turnover.
Statistics from the China Container Association show that China's export containers are mainly satisfied in two ways: unloading old containers after unloading at ports, and new containers made by Chinese container manufacturers.
my country can only return one for every 3.5 containers exported. A large number of empty containers are backlogged in the United States, Europe, Australia and other places, and there is a shortage of containers in Asia.
At present, there are dead congestion and slow operations in ports around the world. Containers that can usually be returned within 60 days are now delayed to 100 days, and the cost of renting containers has also increased by about 150%.
Zhang Jun, deputy general manager of Qingdao Port QQCT, once said: Under normal circumstances, if 1,000 containers are needed in the current period, there will usually be 1,200 to 1,300 containers waiting at the port. However, in the current situation where containers are in short supply, there may be only 800 to 900 containers at the terminal. .
According to a survey on China's shipping industry , over 90% of container companies said that the lack of containers will continue for 3 months or more . Therefore, the shortage of containers still exists in the short term, and the freight rate in the container transportation market will continue to be affected by the shortage of empty containers. Container companies need to take effective measures to deal with the shortage of containers.
▍In addition to the hard to find a box, there is also "a cabin hard to find"
Major freight forwarders have launched fierce bidding wars to secure containers and space. According to reports, several shipping companies have already started the first and second rounds of bidding, and the bidder with the highest bid can obtain the right to ensure the cargo loading and transportation this month.
According to foreign media reports, according to the news with the Chinese freight forwarding company, the shipping company is quoting the available space for flights departing from Shanghai, Ningbo, Qingdao and Yantian at the end of January, and the price per 40-foot high container to the UK is less than 16,000 US dollars. , The quotations of Rotterdam, Antwerp and Le Havre are less than $10,500 per 40-foot high cabinet, which is unlikely to succeed.
Most freight forwarders said that after the Chinese New Year holiday starting on February 12, the freight rates from Asia to Europe will fall but will not collapse, especially when shipping companies have rarely cancelled only a few voyages so far this year. under.
In addition to high freight rates, freight forwarders are facing the real challenge of "bursting cabins". The freight forwarder who can't pay the high price can't book the space at all, and the long-term customer's cargo cannot enter the port and board the ship on time.
Due to insufficient space, shipping companies will detain many of the space booked by freight forwarders until the next flight in order to maximize their benefits. For large forwarders, the loss caused by dumping containers may still be within the tolerable range. For those small and medium freight forwarders who rely on a few large customers themselves, the disadvantage of insufficient competitiveness in this case may directly lead to difficulties.
As the "middleman" between the customer and the shipping company, the flood of cabins at the end of the year was enough to make the freight forwarding "messy in the cold wind" gradually.
▍Finally , one thing to mention is to be wary of drivers without tow trucks.
Seeing that the Spring Festival is approaching, the domestic epidemic has become more serious during this period. Many regions across the country have issued the "non-essential non-return home" initiative. So far, 31 provinces and cities have strengthened their prevention efforts.
But for tow truck drivers, they travel at the port all year round, and it is rare to reunite with their families throughout the year, so most drivers will choose to go home! This again makes shipping face a huge problem, and drivers will soon be insufficient!
Although there will be a shortage of drivers during the Spring Festival in the past, this year due to the impact of the epidemic, the shortage of drivers may not only become more serious, but it may also come earlier!
At present, there are a total of 72 medium- and high-risk areas in China, and almost all returnees from medium- and high-risk areas need nucleic acid testing + home isolation.
Take Henan Province, a large populous province, for example. During the Spring Festival, the policy is: for personnel entering Zheng from high-risk areas, their personal health codes are marked as red codes, and the measures of "centralized isolation for 14 days + 2 nucleic acid tests + 1 serum test" will be implemented. Take care of yourself. If the quarantine period expires and there is no abnormality in the test results, a release form will be issued, and the personal health code will be adjusted to a green code for normal and orderly flow. If the detection result is abnormal, the control measures shall be implemented in accordance with relevant regulations.
With such strict control measures, if drivers choose to return to their hometown to reunite with their families, they must start preparations in advance, and they must be quarantined back and forth to extend the time for drivers to return home.
If there are not enough drivers, the efficiency of export trailers will be seriously affected, and the price of land transportation will rise accordingly. During the Spring Festival in previous years, the price of land transportation will probably increase by 20%-50%. This year, it is likely to double or even several times like ocean freight!
