Limited shipping line capacity leads to record rates and delays

Hopes of freight owners for relief from record ocean freight rates are quickly fading as growing demand for Chinese-made goods ahead of the holiday shopping season threatens to overwhelm container shipping operations.

Shipowners, accustomed to years of overcapacity, had largely refrained from ordering new vessels over the past year as the pandemic disrupted supply chains. Closures to control the spread of the coronavirus caused trade to plummet in early 2020, but a sharp rebound in consumer demand started last summer and accelerated in 2021.

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

Daily fares from China to the west coast of the United States have increased 66% since January and more than 400% since early 2020, according to the Freightos Baltic Index. Spot rates from Asia to Northern Europe are up 92% and 480%, respectively, 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. “The rates have become ballistic and it doesn’t look like that will change until next year.”

Demand for space on container ships is mainly driven by retailers such as Walmart Inc.

and Amazon.com Inc.

who rushed to restock after a year of supply chain disruptions linked to the pandemic. Strong 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 likely run out of boots and coats when winter sets in,” said Anna Moore, manager of a clothing and accessories store at The Westchester. , a White Plains, NY mall “Shipping costs have tripled since last year, but goods are arriving up to 45 days late. “

The rush to replenish depleted stocks made cargo space difficult to find and generated significant profit gains at operators such as AP Moller-Maersk A / S, CMA CGM SA and Hapag-Lloyd AG

. Full of cash, many shipping companies travel to refresh and expand their fleets.

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

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The ships ordered will add a carrying capacity totaling more than five million containers, measured in units equivalent to 20 feet, a standard measurement in the shipping industry. This is the highest number of orders since 2009.

But the bulk of the new ships will not be delivered until 2023. Roach estimates that the demand for container transport will increase by 8% this year, almost double the growth rate of new capacity.

“With limited capacity, there will be more pressure on freight rates,” said Nils Haupt, spokesperson for Hapag-Lloyd, based in Germany. “The pressure is immense with the start of the high season. It hasn’t stopped since the third quarter of last year and we’re seeing retailers ordering holiday party supplies earlier this year. “

On average, 30 container ships a day are stranded outside the ports of Los Angeles and Long Beach, just waiting to deliver their cargo. The backlog is part of a global supply chain mess spurred by the pandemic that means consumers could see delivery delays for weeks. Composite photo: Adam Falk / The Wall Street Journal (Video of 12/4/21)

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

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

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

Write to Costas Paris at [email protected]

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