U.S. maritime media Marine Link recently pointed out that U.S. consumer demand for goods shows no signs of slowing down, and container freight rates shipped from East Asia and China to the two coasts of the United States are expected to start rising again. According to a survey conducted by Container Xchange, a container leasing and trading platform for 800 logistics industry practitioners around the world, 65% of the practitioners firmly believe that the global supply chain situation will not improve in 2022, and it is estimated that it will be the same as in 2021, or even worse.
Looking at yesterday's (February 10) WCI index, Drury's latest edition of the World Container Index Composite Index fell slightly by 0.2% to $9359.10/FEU, but still 80% higher than the same period in 2021. Shanghai-New York freight rates rose 2% to $13,437/FEU. Shanghai-Los Angeles decreased 1% to $10,437/FEU. There is no change in the shipping costs of Shanghai-Genoa and Shanghai-Rotterdam.
Lack of containers, lack of ships, logistics supply chain congestion, is a common problem in advanced countries in Europe and the United States, port and inland transportation and other infrastructure is old and insufficient, will make the container shipping market in 2022 the shortage of supply and demand will be worse.
Marine Link analysis noted that the National Retail Federation (NRF), in its monthly global port tracking report compiled jointly with Hackett Associates, said that U.S. port throughput will return to normal growth later this year, while remaining high until then.
Jonathan Gold, NRF's vice president of supply chain and customs policy, said, "While the holidays are over, supply chain challenges continue. Although the sharp growth of imports has stabilized, the number of imports is still at a high level. Gold also noted that the emergence and rapid spread of the Omicron variant virus is an uncertain factor that could affect the number of laborers in the supply chain on the one hand, and may again drive more imports if consumers stay at home and spend their money on retail goods.
Supply chain pressures and port congestion will continue into 2023
U.S. media analysis pointed out that supply chain chaos and port congestion may continue until 2023. Alphaliner recently said: "The adjustment of the consolidation market forecast has been repeatedly postponed (the initial forecast for the market downturn is after the Golden Week holiday in China in October 2020, then after the Lunar New Year in 2021, then in mid-2021, then at the end of last year, then after the Lunar New Year in 2022)."
There is now a growing consensus that the current supply chain chaos will continue at least throughout 2022. As the Lunar New Year 2022 passes, container rates, vessel charter rates and port congestion remain at or near all-time highs, and turnarounds are being pushed to 2023.
Confidence in the duration of the shipping boom has propelled the container ship buying and selling market to record levels.
Alphaliner said: "After shipowners seem willing to pay almost any price to secure capacity, the number of container ship transactions reached an all-time high in 2021. Its report said a total of 572 container ship transactions were generated last year, equivalent to 1.93 million TEU, 26% higher than the annual record set in 2017. Meanwhile, rents in the ship charter market have risen to record highs in 2022.
Evidence of confidence in 2023 is that MSC has not stopped expanding its fleet after replacing Maersk as the world's largest liner carrier in January.
MsC will reportedly extend its lease for five years at $50,000 per day for the 6493TEU "MSC Bosporus" wheel, which did not begin extending leases until December of this year.
Alphaliner also reported that MSC has also extended charter term contracts for several Danaos-owned 8500 to 9500 TEU vessels, some of which will take effect next year. Danaos confirmed it has extended some leases with a latest expiry date of April 2023.
In addition, MSC recently purchased 4 container ships from Changjin Merchant Ships for US$350 million, which is equivalent to 7 times the purchase price of Changjin Merchant Ships in that year.
DNB analyst Jorgen Lian said there will be a large number of new ships entering the market in 2023 and 2024, and if congestion is not alleviated before these new ships are delivered, it will increase the capacity waiting in line at port by 15%.
Xavier Destriau, chief financial officer of Star Shipping, has said the likelihood of excess capacity caused by newbuilding deliveries in 2023 is low, in part because ground congestion, particularly in the United States, will continue to adversely affect fleet efficiency. Supply chain congestion in the U.S. is likely to persist, with ground bottlenecks partially offsetting the net increase in capacity from increased ship orders.
Mattson CEO Matthew Cox said last month that the trend of cross-Pacific congestion and consumption growth is expected to continue at least until the peak season in October, while demand for Mason's services in China will remain unchanged for much of the year.
The Biden administration and the port continue to focus on how to mitigate the supply chain crisis. The question is whether significant progress is likely to be made before U.S. import demand falls sharply. Phil Levy, chief economist at Flexport, said in a recent interview that rising demand is driving the trend.
If the theory of sustained demand is correct, and if the U.S. doesn't see a downturn in demand falling in 2022, the argument that supply chain pressures and port congestion will continue into 2023 seem increasingly credible. This, in turn, means that shippers of goods face higher shipping costs and longer transit times.
How hard is it to alleviate the pressure on port congestion? About 80 percent of the disruptions were related to congestion at North American ports
Judah Levine, head of research at online freight market and platform provider Freightos, said restrictions on the outbreak near china's Ningbo port, which had been worrisome in the last week of January, had been largely lifted. However, as is often the case during this outbreak, the outbreak has improved in one region and new cases have emerged in another. Levine said new measures have been taken after new outbreaks were detected at ports in Shenzhen and Tianjin, although logistics operations have not yet been significantly affected. Levine also noted that congestion at U.S. ports has improved slightly but is not noticeable.
As of Feb. 9, data from the Southern California Shipping Exchange showed that 85 ships were currently anchored outside the ports of Los Angeles and Long Beach, 20 fewer than the 105 on Jan. 6. In the same period last year, the number of waiting berthing was only about 30.
Notably, on February 1, 2021, there were 40 container ships waiting for berths at the ports of Los Angeles and Long Beach, which handle 40 percent of U.S. imports. A year later, in early February 2022, there were 101 ships waiting to berth. Last year, from the beginning of February to the third week of June, there were 30 fewer queues of ships, after which seasonal imports ruthlessly pushed up the queues until the year-end holiday.
In order to reach the same data in 2022 as the starting point before the peak season in late June last year, the number of vessel queues must be reduced at a rate of three times that of last year in the next 15 weeks. However, given that there is still a large backlog and the impact of the epidemic and unstable demand, the prospect of clearing the queues by 2023 looks increasingly unrealistic.
However, Mario Cordero, executive director of the Port of Long Beach, said in a briefing on the 9th that the unpredictability of the epidemic and the historical import volume are challenging factors. As Peter Tirschwell, head of research in the field of maritime transport and trade at IHSMarkit, a recurring problem since the pandemic is that the overall maritime system is difficult to recover after a shock, and then the next shock will come.
According to the Port of Los Angeles, its port yard utilization rate is 90%, which seriously affects the operational efficiency of the terminal and also leads to traffic congestion in the port area.
Through its Seaexplorer platform, Dexun publishes the Supply Chain Disruption Index to measure the operational efficiency of the global container shipping network. The index provides insight into the impact of the current situation on global trade and provides in-depth analysis and trend forwards.
At the end of January, the size of the 11.6 million TEU wait days reflected in the indicator was a sustained high. In the nine specific ports (Prince Rupert, Vancouver/Seattle, Oakland, Los Angeles/Long Beach, New York, Savannah, Hong Kong, Shanghai/Ningbo, and Rotterdam/Antwerp), the number of normal waiting days should be less than 1 million TEU. The analysis shows that about 80 percent of these disruptions are related to congestion at North American ports.
Due to congestion and waiting times, the transit time from the port of Dalian to antwerp, the main European port, increased from 68 days in December to 88 days in January. Analysis by logistics platform Project44 shows that in contrast, January 2021 was 65 days.
Transit times from Dalian to the port of Felixstowe in the east of the UK increased from 81 days in December to 85 days in January, compared to 65 days in January 2020.
Josh Brazil of the project44 platform said it would take several years to restore pre-pandemic supply chain stability.
Can the summer window occur? Peak season arriving early?
Gene Seroka, executive director of the Port of Los Angeles, said Feb. 9 that this summer's peak in demand could come sooner than usual. "Most retailers say they will replenish inventory in the second quarter of 2022 to keep inventory at a safer level, so that there will be an opportunity to enter a peak season earlier than normal in early June or early July." He said.
Seroka agrees with Maersk CEO Søren Skou that shipping should begin to gradually return to normal in the second half of this year. On February 9, Maersk expects the first half of 2022 to be quite strong, and the backlog of ships will begin to decrease in the second half of the year. This shift will reduce the pressure on container capacity.
However, this outlook also depends on a large unknown, that is, whether U.S. consumer demand for goods will continue when the epidemic subsides and service spending returns to normal. After all, about 80% of the world's trade in goods is carried out by sea. Multiple stimulus packages introduced by the U.S. government have boosted spending power. This resulted in a nearly 20% increase in U.S. container imports in 2021 compared to 2019. In this situation, the lack of capacity exacerbates the crisis in the container supply chain.
A number of industry experts said that compared with factors such as equipment and labor shortages, the port of Cyprus problem is more positively correlated with domestic demand in the United States, and for future development, it mainly depends on demand and epidemic trends.
On the demand side, unless U.S. demand plummets and U.S. demand must be sluggish for two months or more, the problem will ease over time, with the passage of time, the import of goods will decrease, and the amount of congestion will become less and less.
But even now, in terms of the epidemic, new disruption factors such as the Olmikron strain may further disrupt the shipping system and make containers "hard to find". Peter Tirschwell, head of research in the maritime and trade sector at IHSMarkit, said that at least in the first half of 2022, the maritime industry is still unlikely to return to its pre-pandemic state.