Limited capacity on shipping lines leads to record rates, delays

Cargo owners’ hopes of relief from record sea freight rates are quickly fading as surging demand for Chinese-made goods ahead of the festive season threatens to overwhelm container shipping operations.

Shipowners, accustomed to years of overcapacity, had largely withheld orders for new ships over the past year as the pandemic upended supply chains. Lockdowns to control the spread of the coronavirus sent trade plummeting in early 2020, but a sharp rebound in consumer demand began last summer and accelerated in 2021.

“Before Covid and based on available capacity and limited new orders, demand and supply would have reached equilibrium this year and freight rates on major trade routes are expected to increase gradually,” a senior executive said. a major Korean shipyard. “But Covid has shaken up supply chains, freight rates have skyrocketed and now everyone is looking at adding more ships.”

Daily fares from China to the US West Coast have risen 66% since January and more than 400% since the start of 2020, according to the Freightos Baltic Index. Spot rates from Asia to Northern Europe are respectively up 92% and 480% over the same periods.

“Covid has been the biggest boost ever for container ships, with a supercycle set to continue,” said Jonathan Roach, container analyst at London-based Braemar ACM Shipbroking. “Rates have gone ballistic and it doesn’t look like that’s going to change until next year.”

Demand for space on container ships is mainly driven by retailers such as Walmart Inc. and Inc. which have rushed to restock after a year of pandemic-related supply chain disruptions. The high demand is causing bottlenecks in ports around the world and pushing up the prices of raw materials and manufactured goods.

“We’re running out of summer sandals and bikinis and we’ll probably run out of boots and coats when winter sets in,” said Anna Moore, manager of a clothing and accessories store at The Westchester, a mall in White Plains, NY. “Shipping costs have tripled since last year, but the goods arrive up to 45 days late.”

The rush to restock depleted stocks has made cargo space hard to come by and spurred big profits at operators including AP Moller-Maersk A/S, CMA CGM SA and Hapag-Lloyd AG. Bursting with money, many shipping companies are moving to refresh and expand their fleets.

In the first five months of this year, 208 container ships worth $16.3 billion were added to the global order book, compared to 120 ships worth $8.8 billion for the whole last year and 114 ships worth $6.9 billion in 2019, according to London. marine data provider VesselsValue.

Ships on order will add a total load capacity of more than five million containers, measured in 20-foot equivalent units, a standard shipping industry measurement. This is the highest number of orders since 2009.

But the bulk of new ships won’t be delivered until 2023. Roach estimates demand for container shipping will grow 8% this year, nearly double the growth rate for new capacity.

“With tight capacity, there will be more pressure on freight rates,” said Nils Haupt, spokesman for Germany-based Hapag-Lloyd. “The pressure is immense with the start of peak season. It hasn’t let up since the third quarter of last year and we’re seeing retailers ordering year-end products earlier this year.”

Bottlenecks at major ports such as Shanghai, Rotterdam in the Netherlands and Los Angeles and Long Beach in California have affected schedule reliability and on-water capacity due to long waits to unload and load the goods.

Data from Danish company Sea-Intelligence ApS shows that in the first five months of this year, more than 400 ships on trans-Pacific trade routes and 140 between Asia and Europe were over two hours late. weeks. This compares to 388 and 69 vessels on the same routes, respectively, for the combined years of 2012 to 2020.

“Over the past few months, schedule reliability has been largely consistent, albeit at an extremely low 35% to 40%, compared to a long-term average of around 75%,” Sea- said. Intelligence in a report this month.

This story was published from a news agency feed with no text edits

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