Container ships are now piling up at anchorages off Chinese ports


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There are more than 60 container ships full of import cargo stranded off Los Angeles and Long Beach, but more than double – 154 on Friday – waiting to be loaded with export cargo off the coast of Shanghai and Ningbo in China, according to eeSea, a company that analyzes the schedules of carriers.

The number of container ships anchored off Shanghai and Ningbo has increased in recent weeks. There are now 242 container ships awaiting mooring across the country.

Whether due to large export volumes, Typhoon Chanthu or COVID, growing congestion in China is another wild card for trans-Pacific trade.

Volatile trade flows

Chinese port congestion slowing the flow of exports is bad news for US importers but could temporarily ease pressure on the ports of Los Angeles and Long Beach.

Vessel positions from Friday (Map: eeSea)

When operations at the Chinese port of Yantian were severely curtailed by a COVID outbreak in June, ships anchored in San Pedro Bay in California declined. The problem for California ports was that the temporary stay was soon followed by a wave of delayed cargoes.

“The devil in these things is the whiplash effects,” eesea founder Simon Sundboell told American Shipper. “What you prefer is more stability, not those swings, and I think what everyone fears is that the swings will become even more volatile. When the system is already so stretched, all these things happen. unexpected events can be a causal factor in congestion. ”

Ships follow the money

A major factor in congestion on both sides of the Pacific Ocean: city side capacity (terminals, trucking, rail, warehousing) is limited, but single sea lane vessel capacity is very flexible.

While the number of ships in the world is limited, operators can move ships to where they make the most money. And the trans-Pacific is now a particularly lucrative business: spot rates, including premiums, can exceed $ 20,000 per forty foot equivalent unit (FEU).

“These assets [ships] are super mobile, ”said Sundboell. “What is happening now is the opposite of what has weighed on the industry over the past 20 years. Five years ago, people were wondering: how can the trans-Pacific tariff go from $ 2,000 to $ 1,500 [per FEU] in just six days? It was because you could take a ship from one place and sail it somewhere else, and all of a sudden there were more ships and a price war and the rates fell.

“Now we see the opposite,” he said. As vessel operators build up more capacity in the trans-Pacific, congestion increases, delays increase, the incentive for shippers to pay premiums is sustained and all-inclusive rates remain at record levels.

A growing number of services

According to eeSea, the number of Far East-West Coast services increased from 48 in January to 67 this month. In contrast, the number of services on this route remained fairly stable last year, at 42-46.

Data for October-December 2021 based on current timetables. Chart: US shipper based on eaSea data

In addition, ships are pulled from other trades to serve as “extra loaders” (ships that make occasional trips). In some cases, several ad hoc vessels make multiple round trips – a hybrid of an additional charger and regular service.

“We are certainly seeing carriers pulling ships from Asia-Middle East and Asia-Africa and putting them into the trans-Pacific trade,” Sundboell said.

“Whether it’s a round trip as an additional shipper or it becomes semi-permanent, I don’t even think carriers know each other right now. They’re just playing the market and if it makes more economic sense to take a ship from the Middle East and put it in the transpacific, they will, whether it’s for a month, three months, or six months. – which is why no one knows what this network will look like in six months.

“Line managers in Copenhagen, Geneva and Marseille study yields per container and costs per container. And not just by container. They watch it by day and by TEU-container [twenty-foot equivalent per]-mile.”

Smaller and smaller transpacific vessels

Yet another factor in increasing trans-Pacific congestion: there are not only more ships, but ships are getting smaller, which means more ships are needed to carry the same TEUs.

According to eeSea, the average capacity of vessels serving Asia-West Coast services was 8,601 TEUs in January and currently stands at 7,125 TEUs, a decrease of 17%.

Data for October-December 2021 based on current timetables. Chart: US shipper based on eaSea data

American Shipper recently analyzed the average size of vessels anchored or adrift off Southern California currently compared to the peak of Q1 anchorage on February 1 and found a similar drop: from 8,060 TEUs to 6,184 EVP, or 24%.

A smaller average vessel size “would definitely slow things down even more,” Sundboell said.

Some operators have added transpacific capacity by buying vessels on the second-hand market or leasing them on the charter market. Most of the vessels available for purchase or charter in 2021 fell into smaller size categories.

The change in capacity of shipping companies compared to other trades also reduces the average size, as cannibalized trades use smaller capacity vessels. “The reason you have smaller ships coming in is that they take them from the Middle East and Africa,” Sundboell said.

How does it end?

Ship operators can put as many ships as they want in the trans-Pacific to chase record spot rates, leaving other trades short. But eventually, the imbalance will self-correct.

“It becomes something that balances out,” Sundboell explained, noting that if ships were withdrawn from other exchanges, the rates of those exchanges would rise to the point of causing ships to return.

“At some point, the rates for the exchanges you leave go up too much or the cost of having the ships at anchor becomes too high. [in terms of lost future cargo]”said Sundboell.

In the first quarter, when the moorings filled up off Los Angeles / Long Beach, carriers were unable to get enough ships back to Asia in time to load cargo, so they had to “empty” (cancel) a high number of crossings, which reduced congestion in the second quarter. .

Given the extreme mooring situations off China and Southern California, a repeat of the clear sailing scenario seems likely in Q4 – a worrying prospect for importers.

Lack of visibility

But even companies like eeSea that track blank crossings can’t say for sure what will happen in Q4.

In the first half of 2020, when carriers cut departures due to the lockdown-induced drop in demand, they announced trip cancellations months in advance, providing an important signal to the market. This year, there is much less notice, as blank starts are caused by congestion, not by a drop in demand over time.

According to Sundboell, “For November, there are only eight blank departures [on Asia-West Coast] and only three in December, but that’s just because the carriers haven’t released them yet. We only enter a blank navigation into our system when it is confirmed by the carrier. “

Before COVID, he said, carriers believed they were bound by long periods of notice for service changes. “But corona gave them a platform to pull capacity on short notice,” Sundboell said. “Now they’re trying to increase their capacity, but they’ve definitely taken the liberty of being both more volatile with their capacity and with the ‘forecast’ of their service.

“And I think that’s what’s causing the frustration among BCOs [beneficial cargo owners; the shippers]. A BCO hates having to get used to the fact that the ship is always 10 days late – or that he won’t even know when it’s arriving. I don’t think that’s what the carriers aim to do, but they’ve certainly found some leeway to change service in the short term that they’ve never had before. “

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