Redeploying vessels to transpacific trade lane from regional services
The increase in capacity on the transpacific alone was larger than total fleet growth in 2021. As a result, carriers are moving tonnage, particularly from intra-Asia services, to fill the gaps. Although fleet capacity increased by 4.5% during 2021, figures from Alphaliner show that shipping companies deployed over a fifth of the 25m teu in service to Asia-North America services from 17.5% at the start of 2021.
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Outlook for port congestions and container demand in 2022
Container lines maintained the bulk of their scheduled services over the Chinese New Year. The annual holiday usually marks a slowdown in shipping from China as factories close down and lines blank sailings to meet lower demand. An extended shutdown at the beginning of the pandemic led to record blankings in 2020. But the reversed trend in 2021 made lines struggle to find the capacity to meet surging levels of exports. According to Clarksons, port congestion will likely impact supply chains throughout 2022.
According to Container xChange chief executive Johannes Schlingmeier, there are many uncertainties during the next few months. One potential upside is that if we have reduced output from China in February, container lines could put vessel schedules in slightly better order. It could improve the equipment availability situation globally and especially in China. Of course, the counterpoint to this is that we could see large backlogs of cargo building up in China, which could be a factor at the end of the first quarter of this year and into the second quarter.
Drewry lowered its estimate for world port throughput growth in 2022 from 5.2% to 4.6% as the market faces mounting headwinds of inflation, supply chain bottlenecks, and the Omicron variant’s spread. As a result, full-year growth for 2021 also decreased from 8.2% to 6.5%. Nevertheless, container lines will continue to see another year of revenue growth of over 15% in 2022, as they expect sales to break through the $500bn mark for the first time.
Inflation, higher interest rates, and a gradual shift back to a more “normal” balance in consumer spending between goods and services will reduce import volumes in the second half of 2022, in turn relieving pressure on ports and inland supply chains.
Outlook for container freight rates
Any recovery in container shipping will take time and will not go back to where it once was. But there exist several threats that could delay that recovery further.
The progression of the pandemic and cyber attacks are two of the critical threats that could pause any recovery to the container shipping market and disrupt supply chains.
“In the happy scenario, with no additional shocks to the system, we could hope for a reversal towards normal operations towards the end of the year and hope for a normalization of freight rates halfway through 2023,” Vespucci Maritime chief executive Lars Jensen said in a webinar.
But he warned that shippers should not make plans based on that scenario.
“There are two huge risks right now,” he said. “One is shutdowns in China because of the coronavirus. So you could have Shanghai closed tomorrow, and that is very much still on the cards.”
The second was the high risks of cyber attacks on critical infrastructure because of the Russia-Ukraine conflict.
Even if none of those scenarios played out, any “normalization” of freight rates would be at a level “substantially higher” than in the past and would remain there.
The ocean shipping sector should prepare now for the market bumps that are entirely predictable – and understand there will be some disruptions that are not so easily forecast, writes JOC analyst Lars Jensen.
Even if congestion and delays are resolved, box shipping faces structural changes. Covid-19 and decarbonization will elevate rates for years to come. As a result, shippers should expect no return to pre-crisis freight rate levels in the next decade and will have to factor price inflation into their shipping cost calculations.
Measures on US export issues
CMA CGM teamed up with the port of Los Angeles and US dairy product exporters to address supply chain issues hampering US exports. It hopes that by working with CMA CGM, Los Angeles, and other ports, it can develop market-driven solutions that will create new business, help alleviate the empty container problem and expedite the flow of US goods.
The Port of Oakland and the US Department of Agriculture (USDA) will jointly fund to develop a temporary 22-acre waterfront container yard for agricultural exports. It will be inside the port’s unused Howard Terminal and open in March.
Measures on empty containers issues in US and China
Carriers calling on the ports of Los Angeles and Long Beach agreed to begin hauling empty containers from competing lines back to Asia. It is an important new weapon for marine terminals as they look to solve a significant source of the historic congestion that has gripped the US’ largest gateway. That comes as a wave of sweeper ships have been making a severe dent in thinning the volume of empty boxes in LA-LB in recent months, with expectations that those sweepers will continue to call for the foreseeable future.
Los Angeles and Long Beach ports are considering an innovative but complex plan to reduce the number of empty containers contributing to terminal congestion by incentivizing shipping lines to increase the volume of containers they pick up during each call.
Shanghai International Port Group (SIPG) and Mediterranean Shipping Co (MSC) agreed to co-invest and establish an empty container dispatching center at the port of Shanghai.
Green lobby backs Shanghai and Los Angeles shipping corridor plan
Environmentalists welcomed a plan by the ports of Los Angeles and Shanghai to create a green shipping corridor on the transpacific trade. The two ports will work with industry partners to reduce greenhouse gas emissions from cargo movement throughout the 2020s. The proposal, drawn up in collaboration with the C40 Cities climate network, includes a goal to begin transitioning to zero-carbon fueled ships by 2030 to cut emissions from one of the world’s busiest cargo routes.
In a statement, the partnership said it would develop a Green Shipping Corridor Implementation Plan by the end of 2022 to create a “green shipping corridor” to decarbonize goods movement between the largest ports in the US and China.
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Industry partnerships see a growth market for decarbonization advice
The Maersk Mc-Kinney Møller Center for Zero-Carbon Shipping, Maersk Broker Advisory Services, and McKinsey & Co launched a data-based advisory service for small and mid-sized shipping companies. It will advise on green retrofits, the timing of scrapping older ships, and alternative fuels for newbuilds.
Separately, Maersk Tankers, Mitsui, and Cargill have unveiled their Njord optimization product, which offers to assess a ship’s emissions and find ways to lower them through energy-saving technologies, as well as financing.
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Shipping emissions rose 4.9% in 2021
CO2 emissions rose to 833million tonnes despite intensifying regulatory landscape and reduction targets. As a result, global shipping’s carbon dioxide emissions posted year-on-year gains of 4.9% in 2021 and were higher than 2019, according to Simpson Spence & Young (SSY). The rise in emissions over 2021 represents “an inconvenient truth” for the International Maritime Organization, the shipbroker said in its annual industry outlook.
Emissions increased most for the gas carrier fleet, followed by containership and bulk carrier emissions. The global tanker fleet also lifted CO2 output as global oil demand recovered towards the end of the year, SSY said.
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