World Maritime News
Challenges shipping lines face
Trans-Pacific carriers are rapidly accelerating the number of blank sailings amid declining US demand for imports from Asia, inventory corrections by retailers, and fears of an economic recession next year. According to Sea-Intelligence, the accelerated blankings come after US imports in September and October “can at best be described as a complete collapse in demand growth.” In addition, carriers are announcing additional blanked sailings every couple of weeks to stop or slow the decline in spot rates in the eastbound trans-Pacific.
There has been a surge in blank sailings as demand and freight rates slide. But compared to 2019, the capacity deployed is still growing. Container carriers still need to do more to reduce capacity on major east-west trade lanes if they are to stem the collapse in freight rates as demand falls. According to figures from Sea-Intelligence, even if there are many blank sailings in November and December, underlying capacity remains high and is above comparable levels in 2019.
Inflation and slowing economic growth are lowering the demand for shipping containers. However, a large number of ships ordered in the boom times will soon flood the market in what, for now, is a weak backdrop for such vessels. Container lines will face difficulties next year due to a flood of new capacity entering the market at a time when macroeconomic headwinds are likely to make demand growth anemic.
Shipping lines look to invest in ports
Easing operational challenges, lower demand and rising costs are all signs of a renormalization of the container market that is likely to continue into the coming quarters, according to Hapag-Lloyd’s chief executive. The company would continue to improve its service quality by building resilience in its network. In the past quarter, it announced two important terminal business acquisitions and will continue to invest in terminals if the right opportunities arise.
In a regulatory filing on November 4 with the Taiwan Stock Exchange, Evergreen said it is acquiring all of the shares of CCT that three subsidiary companies now hold for a total of $268 million. While essentially an accounting move, the acquisition gives Evergreen a direct role in the terminal’s management instead of those decisions having to go through three separate boards.
Topics on ports in North America
Officials declared no vessels were backed up at the San Pedro Bay ports on November 21 for the first day since October 2020. The mounting congestion and protracted labor negotiations between west coast dockworkers and their employers led many shippers to divert their cargo to east and gulf coast ports, shifting much of the backlogs to their anchorages and terminals instead. As US import volumes slow, those backlogs are also easing but are still far from resolved. Lloyd’s List Intelligence data show that Virginia, Savannah, and Houston ports had 40 containerships at anchor on November 22.
Canada is reviewing the port system for the first time in more than two decades after disruption tied to the COVID-19 pandemic has exposed its fragility. Recent pleas from forwarders and their shipper customers for federal action to relieve western port congestion, fueled by backlogs at key inland hubs such as Toronto and Montreal, underscores the urgency.
China’s logistics sector raises the alarm over the Guangzhou lockdown
Guangzhou in southern China reported over 2,300 new COVID-19 cases on November 8, pushing infection numbers to a record. According to local authorities, the city has been facing “the most complicated and parlous condition” of virus control since the onset of the pandemic three years ago. On the logistics side, industry experts warned strict preventive measures have already forced some warehouse facilities to close, as risks of further spread of the restrictions may cause broader disruptions.
Read more: Lloyd’s List
Cabotage waiver at Indian ports accelerates cargo gains
Container carriers offering regular direct calls at Indian ports are upbeat about their ability to carry more volumes on the strength of cargo aggregation, thanks to a liberalized national cabotage policy enacted in 2018. Under the modified cabotage mechanism, foreign-flag carriers face minimal regulations over the movement of export-import containers meant for transshipment and empty boxes for repositioning between Indian ports. As a result, in a new report filed with the Indian Ministry of Shipping, the Container Shipping Lines Association (CSLA) said the amount of containerized cargo converted by carriers from transshipment to direct loadings has accelerated in recent months.
Read more: JOC
Shippers’ behaviors amid declining rates
The global market has ‘clearly changed’ as liftings and freight rates head further down. The end of the downward trend remains unclear. The latest container volume figures from Container Trades Statistics highlight the ongoing collapse in demand in the sector. The release of market pressure is easing congestion in both ports and supply chains. The challenge for all market watchers is understanding where the next floor is and when normalization will occur.
Shippers are shelving their contract duties and turning to spot markets for vessel spaces as container freight markets soften further. It is warned that a ‘hard landing’ in freight markets would occur if carriers should take no further action to control vessel capacity.
Spot freight rates are continuing to slide as demand falls back. As a result, shippers are using the excess capacity to seek ‘retribution’ for high rates paid during the pandemic.
Topics on future fuels
According to safety and environmental experts, the projected increase in ammonia used as shipping fuel and cargo will require a more robust regulatory and safety framework. A new study warned that spills of ammonia as a shipping fuel could negatively impact specific habitats and species. It urged the industry to rapidly develop mitigation and spill management measures in line with the planned increase in usage.
According to an academic paper that analyzed the influence of FuelEU Maritime regulations on alternative fuel uptake, while they would initiate investment in renewable fuels, greater adoption will occur later, probably after 2040. At that time, only employing fuels produced from renewable energy sources will enable limiting greenhouse gas energy intensity on vessels. However, before then, a shift to fossil fuels like LNG and LPG will likely occur due to not involving significant capital investments, the more secure availability of these fuels, and the higher level of readiness of the port infrastructure for these fuels.
Shipping lines’ reactions to decarbonization
According to analysts at Drewry, shippers should prepare for a collective $14bn in costs as container lines have already said they will pass through the cost of decarbonization and new environmental regulations.
Shipowners’ appetite for methanol-fueled ships is increasing, while a surge in large LNG carriers has also helped lift the market share of greener orders. According to data from China’s shipbuilding association, the uptake of dual-fuel technologies in new building orders has increased significantly this year. The move signals increased efforts by the shipping industry to meet the pressing need for decarbonizing the sector.
COP27 and shipping decarbonization of IMO
Two leading industry representatives who joined the COP27 climate summit in Egypt expressed their opinions. They argued that shipping has a window of opportunity to engage with countries, communities, and policymakers to raise the ambition and shape the policy. The opportunity is now, and we must seize this.
The current focus on securing carbon pricing and a 2050 zero emissions target from the IMO is the wrong priority — we should be looking at what happens between now and 2030. The outcome of the COP27 climate talks was inadequate on many levels. But the COP27 may have unlocked funding blockers within the International Maritime Organization and accelerated progress toward a global carbon price for shipping. However, waiting for a global carbon price to emerge may be a high-risk strategy for the shipping industry because it could add billions of dollars to the ultimate decarbonization transition cost.
Freight payment providers evolving from auditing to analytics
In recent years freight payment providers have focused on data cleansing and systems integrations to help shippers make better use of data for supply chain decision-making. Demand for business analytics and consultative services provided by freight audit and payment vendors is increasing as shippers seek to turn the data from audited and paid invoices into strategic supply chain intelligence. That’s a significant shift in mindset for vendors from focusing strictly on ensuring accurate freight invoices to informing downstream decision-making, which shippers have been waiting on for years.
Read more: JOC