Asia-Europe facing ‘grim’ container peak season: shipper group

9:38pm 16th September 2021




A dearth of equipment, high demand, and congested ports are choking the supply chain for shippers and retailers in Europe, including at Antwerp (above), according to the CEO of rate benchmarking platform Xeneta.

Peak season on the Asia-Europe trade is heading into an ever-worsening cycle of port delays, record rate levels, declining schedule reliability, and surges in volume that have overwhelmed the inland logistics system.

“Importers and exporters are facing a meltdown of the container shipping market, with rates in the stratosphere, slots up for auction, and service performance in the trash,” James Hookham, director of the Global Shippers’ Forum (GSF), said in a Container Shipping Market Review released Wednesday.

“The prospects for the coming peak season look grim,” Hookham added in the report, which GSF compiled with UK-based economist consultancy MDS Intermodal.

He said the significant effects of the Ever Given’s late-March grounding in the Suez Canal on schedules and port calls in Europe, North Africa, and North America were barely discernible through the second quarter with consistently rising rates, declining service, and ships sailing at close to their maximum capacity.

“What none of the industry metrics show are the huge numbers of shipments that are not being moved — the boxes left on the quay, stacked in the terminal, or stockpiled in export warehouses awaiting a slot,” Hookham noted. “Getting these goods to market will be the difference between economic recovery and empty shelves and consumer price inflation.”

A key factor behind the port congestion at North European hubs is the poor schedule reliability of the carriers. In July, Asia-North Europe on-time performance fell to 22.2 percent compared to 90 percent in July 2020, according to the latest data from Sea-Intelligence Maritime Analysis.

Patrik Berglund, CEO of rate benchmarking platform Xeneta, said landside infrastructure in Europe was being “simply overwhelmed,” with the congestion tying up vessels and their sought-after containers, in an ever-growing cycle of delays.

“With the holiday season logistical rush round the corner things may get worse before they get better, and that’ll have an obvious knock-on effect on rates,” he said in a Xeneta update this week.

“There’s still a dearth of equipment, high demand, and, worryingly, very congested ports that are choking up the supply chain for shippers and retailers,” Berglund said. “For example, in Europe, Maersk is advising customers of wait times up to 10 days at Antwerp, while Hapag-Lloyd reports that voyage delays have tripled in the first half of 2021 compared to the same period in 2020. A round trip between Asia and Europe now takes approximately 100 days to complete.”

According to the Xeneta Shipping Index (XSI), European imports rose by 0.5 percent in August, while exports climbed 3.4 percent, leaving the respective benchmarks up 123 percent and 49.1 percent year on year.

Carriers hold the cards

Average Asia-North Europe rates valid for 30 days or less this week were at $7,310 per TEU, an increase of 787 percent over the same week in pre-pandemic 2019, according to Xeneta. Average long-term contract rates of 90 days or more were up 226 percent on 2019 at $2,434 per TEU.

“While some may have been expecting an adjustment downwards, we’re seeing a further demonstration of the powerful position liner operators find themselves in,” Berglund noted. “They really are holding all the cards, and winning big.”

The market power of the carriers, apart from the record high profitability reported in the first half results, can be seen in the volume under their control. Alphaliner said in its latest weekly newsletter that the members of the three main alliances — 2M, Ocean Alliance, and THE Alliance — control 99.5 percent of all capacity on the Asia-Europe trade. The market share distribution is 36.2 percent for the Ocean Alliance, 36.1 percent for 2M, and 27.2 percent for THE Alliance.

The peak season traditionally ends at Golden Week from Oct. 1–7, a time when carriers traditionally blank capacity in anticipation of widespread factory closures across China. While there is no certainty that factories are planning to close over the period, or that demand will slow, Sea-Intelligence Maritime Analysis reported this week that Asia-North Europe carriers will withdraw 10.5 percent of the total weekly capacity during Golden Week. Carriers will cut 25.4 percent in the following week, followed by capacity withdrawals of 5.9 percent and 5.8 percent, respectively, during the two weeks after that.

“While the Golden Week plus 1 percentage capacity reduction may seem high, it is on the lower end when compared to the previous years,” Sea-Intelligence pointed out in its Sunday Spotlight. “All in all, 12 percent of the total capacity is slated to be blanked in 2021, which is lower than the historical average of 15 percent, and considerably lower than the 2019 and 2020 reductions of 18.8 percent and 20.6 percent.”

By Greg Knowler

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