Container lines’ challenges, new building deliveries, capacity removal, and negative rates
The huge containership order book that began to build in late 2020 is about to start emerging into the world fleet, just as demand falls back to pre-pandemic levels and carriers face lower load factors on their key trades. At least for now, it looks as if all this extra tonnage will hit the liner trades at a time of faltering demand.
Carriers are trying to blank sailings to move capacity in line with demand but still have further to go to prevent further rate declines.
Container lines accept below-zero freight rates on some backhaul trades as weak demand and overcapacity take their toll.
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The significant shakeup of container shipping in the wake of 2M divorce
The changes could even catalyze a merger between Hapag-Lloyd and ONE. The dissolution of the 2M alliance could set off a series of shakeups in the container shipping sector not seen since the period following the collapse of Hanjin Shipping.
At the TPM conference in Long Beach, Vespucci Maritime chief executive Lars Jensen said the 2M “divorce” was just the first domino to fall.
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Shipping lines raise the rate and change services to adjust the demand
CMA CGM and Hapag-Lloyd have joined Mediterranean Shipping Co. (MSC) in trying to lift container freight rates on trades connecting India with North America via general rate increases (GRI) due to take effect later this month. However, with demand slumping and capacity abundant, it remains to be seen if the latest carrier GRI attempts will stick, halting a nearly 10-month slide in pricing.
Zim Integrated Shipping Service is winding down an expedited trans-Pacific service from China to the US West Coast after just two years while increasing capacity on a newer service connecting the growing Southeast Asian market with the US East Coast. The container line’s decision to end the Zim eCommerce Xpress (ZEX) service comes as Chinese import volumes weaken while imports from Southeast Asia, particularly Vietnam, expand.
US DOT opens $12.4 million in funding for maritime transportation projects
The US Department of Transportation is making $12.4 million in funding available for projects that aim to improve the country’s marine highways. The fiscal year 2023 funds have been set aside by DOT’s Maritime Administration (MARAD). The DOT will evaluate proposed projects based on how effectively they will move goods and their level of non-federal funding, as well as geographic diversity, particularly how the projects address challenges faced by rural areas, the agency said in a statement.
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Labor negotiations on US west coast cause shippers’ concern
The unresolved west coast labor contract is the primary concern for US retailers as they negotiate new service contracts with ocean carriers and seek to minimize risk in their supply chains. Negotiations between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) have dragged on since May. As a result, the dockworkers have been working without a contract since July. With little progress to show and amid fears of industrial action, the uncertainty has led shippers to divert cargo from the west coast to east and US Gulf coast ports. On the other hand, the International Longshoremen’s Association, representing dockworkers on the east and US Gulf coasts, has already started the local discussion with employers well ahead of the expiration of their master contract in September 2024.
US importers of Asian-made goods are increasingly favoring ports in the Southeast, particularly Savannah, given the lack of a US West Coast longshore labor deal and continued enhancements to increase berth capacity and landside cargo flow. Southeast coast ports — Savannah, Norfolk, Charleston, Wilmington, Jacksonville, Everglades, and Miami — handled 20.9 percent of that total last year, up from 19.8 percent in 2021. On the other hand, West Coast ports saw their market share dip to 56.4 percent from 59.9 percent.
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Singapore faces challenges regarding a green maritime hub
Singapore faces several challenges as the world’s largest bunkering hub as the shipping industry shifts towards decarbonization. While Singapore contributes just 0.11% of global emissions, it lacks a green energy sector and is not well-positioned geographically to generate energy from either wind or solar renewable resources.
Despite being constrained by its small physical size, limited talent supply, and high costs, Singapore consistently ranks among the world’s top maritime centers. So can it also be a leading green maritime hub?
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Topics on shipping lines’ decarbonization
Hapag-Lloyd has signed a multi-year agreement with Shell to supply liquefied natural gas (LNG) to power the dozen 23,500 TEU capacity ships the carrier has on the order that will be deployed on the Asia-Europe trade starting from the second half of 2023. The LNG will be supplied in the Port of Rotterdam, with the mega-ships also calling at Hamburg, Singapore, and Shanghai, Hapag-Lloyd said in a statement.
Mitsui OSK Lines said a dual-fuel vessel had completed the first-ever net-zero voyage fueled by bio-methanol. Cajun Sun (IMO: 9724025), chartered by Waterfront Shipping, a subsidiary of Canadian methanol supplier and distributor Methanex, departed from Geismar, in the US, on 17 January and arrived in Antwerp, Belgium, on 4 February. The 18-day trans-Atlantic voyage emitted net zero greenhouse gas emissions on a life-cycle basis by blending ISCC-certified bio-methanol with natural gas-based methanol.
Shipping can also leverage technology assets to encourage collaboration and information sharing. Shipping can strive to decarbonize the supply chain while at the same time making it more cost-effective, says Torvald Klaveness chief executive Ernst Meyer. He suggests four ways to achieve this: Minimize ballasting as much as possible, minimize laden distance, not race only to wait at ports and maximize cargo intake. The four ways are also the lowest-hanging fruit that does not require any investment, Mr. Meyer said. “Making the supply chain cost-effective is not technology innovation. It is business-model innovation, driven by data and feasibility.”
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New impetus emerges behind smart containers
One lesson learned from the pandemic was that knowing a container’s position was critical to supply chains. As the market normalizes, carriers turn to smart containers for better service. For example, Hapag-Lloyd made a significant step last year when it announced it would embed its entire equipment fleet with tracking devices in a move designed to provide better visibility for its customers on where their containers were. Likewise, Ocean Network Express announced plans to develop and integrate a smart container solution across its global equipment fleet to gain better insights into its containers.
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US startup eyes on street turn tech expansion throughout North America
Qualle, a street turn technology provider, plans to expand from six US cities (Los Angeles, Long Beach, New York, Savannah, Houston, and Memphis) to every North American container gateway by the end of 2023. Street turns occur when an empty import box is filled with an export shipment outside a port or off-dock facility. Street turns are seen as a way to utilize drayage capacity better, reduce traffic in container hubs, and reduce emissions associated with returning empty containers to ports.
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