By Martina Li in Taiwan The Loadstar

RusCon, the container multimodal arm of Russian logistics company Delo Group, has teamed with Mountain Air Shipping, a Dubai-based container shipping company, to launch a liner service linking Turkey with the Baltic Sea port of St Petersburg.

The service will operate monthly and turn in 36 days, with a transit time of 15-17 days between Ambarli and St Petersburg.

Until this month, Mountain Air was headed by Alexander Isurin, who joined the company in October from TransContainer , where he was president.

Mr Isurin was at TransContainer from March 2020 to September 2022. Prior to that, he was FESCO president from February 2016 to February 2020.

The collaboration between RusCon and Mountain Air, may have been facilitated by Mr Isurin whose connection with Delo Group’s intermodal freight unit, TransContainer may have smoothed the partnership.

Delo claims to have moved more than 100,000 teu last year, using 14 chartered ships.

The news comes as other newcomer operators, unperturbed by sanctions, are expanding their Russian offerings to St Petersburg, and have been buying and chartering ships to fulfil demand, according to Linerlytica’s latest report.

On 30 March, Russian operator Transit Line launched a direct China to St Petersburg service with the 2,193 teu Xin Long Yun 86 , the largest ship it has operated so far. Only one sailing has been advertised so far.

Linerlytica noted that carriers active in the Russian market had been dominating ship purchases for this region. Safetrans Logistics, which began China-Russia liner services in February, has ventured into ship owning with the purchase of the 2003-built 4,253 teu CMA CGM Algeciras, renaming it SFT Turkey.

In the past fortnight, Yangpu New New Shipping, part of China-based Torgmoll Group, has acquired the 1997-built 3,834 teu Zhong Gu Liao Ning from compatriot C Logistics, renaming it Xin He Lu 2, and the 2007-built 3,534 teu Northern Debonair (renamed Newnew Star) from Northern Shipping for $14.18m, bring the number of ships acquired by the group this year to eight.

Hong Kong-incorporated OVP Shipping has acquired the 1998-built 2,464 teu Buxhansa from NSB Niederelbe, and renamed it OVP Aries. It is OVP’s second purchase, after the 2003-built 2,824 teu OVP Taurus (ex-AS Carinthia) last month.

OVP, originally an LNG tank shipping business established in 2020, began container shipping operations connecting Vladivostok and Novorossiysk with China last June and, in February, began offering connections to St Petersburg through slot purchases on Safetrans’s service.

Photo: VesselFinderBy Mike Wackett The Loadstar

 07/06/2023

Ocean carriers constantly reassess network coverage to cope with the impact of demand fluctuations but, post-pandemic, this has translated into widely different trading patterns for the top-ranked lines.

A survey by Alphaliner reveals that, compared with a year ago, most of the top ten carriers have reduced their fleets trading between Asia and North America – MSC in particular having cut the percentage of its tonnage deployed on the transpacific from 16% to just 9%.

The consultant noted that MSC deployed the majority, 23%, of its massive five-million teu capacity on the Asia-Europe route, while next, in terms of capacity operated, is across its Middle East and Indian subcontinent loops, at 14%, followed closely by African services at 13%.

“Furthermore, the transatlantic fleet of MSC (10%) and its activities to and from Latin America (12%) are now more important than its transpacific operations,” said Alphaliner, adding that MSC was also the ocean carrier with the highest proportion of its fleet deployed on intra-European trades (7%).

Meanwhile, current 2M partner Maersk’s trading profile for Asia to Europe, 22% of its 4.1m teu fleet, is similar, but in contrast it still deploys 18% of its tonnage on the transpacific. The Danish liner also dedicates 18% of its capacity to Latin American trades as a result of its takeover of South American trade specialist Hamburg Süd.

Elsewhere, Alphaliner said, Latin America trades had overtaken Asia-Europe as the mainstay for Hapag-Lloyd, following the merger with CSAV and its investment in new neo-panamax 13,000 teu ships.

Indeed, during the Hamburg-based carrier’s first-quarter results presentation last month, CEO Rolf Habben Jansen said the services were proving “more robust” than other regions and running “choc-a-bloc full”.

Looking at the total containership fleet, Alphaliner said 21% of all liner capacity, including the largest 24,000 teu vessels, was deployed between Asia and Europe, with Asia-North America second with 18%.

However, the comparison is somewhat skewed by the much shorter transit from Asia to the US west coast, thus those loops require less tonnage.

Nevertheless, if container spot and contract rates on the Asia-Europe and transpacific tradelanes settle at just above breakeven levels, more carriers may decide to rethink their exposure to east-west routes and look in the direction of Latin America, Africa and the Middle East, or endeavour to seek out niche trades.

Taiwanese carrier Wan Hai is one such that has reduced its coverage across international routes in favour of boosting activity in intra-Asia. Always a strong player in the sector, the 11^th-ranked carrier, which slipped into the red in Q1, has renewed its focus there.

According to Alphaliner data, Wan Hai’s intra-Asia liftings are now some 65% of its total volumes, having contracted to 57% after the line took advantage of strong demand on the transpacific to increase its coverage.

Article-Container export dwell time at Chinese ports falls 62%

Port of LA

Dwell times for export containers at China’s ports have fallen to under five days while import dwell times have risen in recent weeks.

Gary Howard | Jun 05, 2023 Seatrade

According to data from FourKites, ocean dwell times – the difference between gate times and vessel departure/arrival times – fell to 4.8 days for China’s exports, a figure which has held steady since March. Import dwell times have been slowly rising since the start of March, reaching 5.2 days.

FourKites said it tracked a 44% decline in the volume of shipments to the US from China between April 2022 and April 2023, along with falling transit times.

Related: APM Terminals ceasing operations at the Port of Itajaí

Using a 60-day rolling average, days in transit for ocean shipments from China to the US was 35.6 days for April, falling from a peak of 55.4 days in March 2022. The trend of falling transit times may soon hit headwinds though, as average transit speeds reached a low in March 2023 and have risen sharply since, likely reflecting reduced sailing speeds to manage capacity.

Glenn Koepke, GM of Network Collaboration at FourKites, said: “As the global economy has softened, ocean capacity is plentiful, though there is still significant activity in global supply chains. Shippers are weighing their options and determining what their inbound networks need to look like, including where global supply should come from.

Related: Dockworkers disrupt US West Coast ports as contract talks drag on

“China will always be a dominant player in global trade – however, we have seen many shippers look to Southeast Asia, India, and LATAM as alternatives while still keeping Chinese suppliers for the local market. Shippers, forwarders and BCOs know that we are one event away from chaos, so while supply chains are seeing easing demand and logistics professionals are relieved to have a slight mental break, volume will pick back up as we head into peak season of Q3 and Q4.

Koepke expects global container volumes will rise in the third and fourth quarter, but lower than seen in 2022 “which should equate to an easing of delays and available capacity heading into peak trade seasons.”

Broader trends include container lines cutting capacity and cancelling sailings to maintain profitability, and the huge potential trade changes should China take action in the war in Ukraine.

Copyright © 2023. All rights reserved.  Seatrade, a trading name of Informa Markets (UK) Limited.

 Sam Chambers June 16, 2023 Splash247.com

Beijing is readying a stimulus package to boost its stuttering economy following the central bank’s interest rate cuts earlier this week. How much of a boost the increased spending will be to the deflated global dry bulk scene remains to be seen. 

JPMorgan Chase, UBS and Standard Chartered all trimmed their 2023 gross domestic product growth forecasts to 5.5% or lower this week after official figures for retail sales growth and fixed asset investment slowed in May and undershot expectations. 

“While we expect China to introduce additional policy support to safeguard a continued economic recovery, we think the likelihood of a big stimulus is low,” economists at Standard Chartered cautioned in a note to clients yesterday. 

The scale and scope of any stimulus remains a secret with UBS pointing to a Politburo meeting in July as a likely time for measures to be announced, including how to resuscitate the ailing real estate sector.  

Over the past 10 years, China has accounted for about half of the growth in seaborne dry bulk trade. A large part of the growth from China can be attributed to the high investments in the real estate sector, something that has been battered in the last 18 months.

The International Monetary Fund currently projects the Chinese economy to grow by 4% from 2022 to 2027. However, much of this growth is expected to come from private consumption and not fixed investments, such as real estate. Investments in the real estate sector experienced – for the first time since 1997 – negative growth of 10% in 2022, as a result of the ongoing real estate crisis.

“Little seems to indicate that government stimuli will lift the real estate sector. The rebound in the Chinese economy may therefore not benefit capesize and iron ore carriers to any great extent, although they carried around 90% of total iron ore volumes to China in 2022,” a recent report from Danish Ship Finance argued.

Analysts at investment bank Jeffferies lowered their estimates and targets for listed dry bulk firms 10 days ago, citing the weaker China steel outlook.

“So far in 2023, charter rates have averaged similarly to those seen in the tough years pre-2021. China’s re-opening has led to higher steel production and iron ore imports, but a sustained recovery seems farther away given the correction in steel prices recently. An expected China stimulus could be a positive near-term trigger, however,” Jefferies noted in a report issued on June 6.

Analysts at shipbroker Arrow noted yesterday that over the past few weeks, the souring economic outlook from China has very quickly fed into the dry bulk spot market.

“The sentiment and selling pressure is flowing from the macro environment into the chartering market via the FFA market,” Arrow explained. 

This poor sentiment in the chartering market is evident in Arrow’s Dry Bulk Sentiment Index (see below), which is around the lowest level on record since the index was created at the start of 2021. This index is built using daily chartering reports, analysing the positivity/negativity of the language used.

“Weakening China-related commodities, property stocks selling off, economic data disappointing all combined to generate poor sentiment, whilst FFA market activity perhaps accelerated this trend. The spot market moved much faster than we expected,” Arrow admitted. 

“2023’s recovery in China’s industrial sector has clearly continued to stall and youth unemployment in China also continues to set new records,” a new report from dry bulk advisory Commodore Research observed. 

“Speak to dry bulk owners, and there is a morose temperament setting in, the market has failed to fire, despite seemingly benign supply fundamentals – the rest of the year could prove a damp squib, hence the decision by big names such as Swire Bulk and Pacific Basin to start closing regional offices. As ever, when it comes to dry bulk, all eyes are on China,” a report carried in the May issue of Splash Extra noted. 

 Sam Chambers May 16, 2023 Splash 247.com

Dubai-listed logistics company Aramex has signed a joint venture agreement with Abu Dhabi’s fast expanding AD Ports Group to create a non-vessel owning common carrier (NVOCC).

The new entity, in which Aramex will have a 49% stake, will provide ocean-bound container cargo services, with a target of 10,000 containers in the short-term, with further growth over the medium to long term.

AD Ports has been very busy expanding its revenue streams in recent months, forming logistics tie-ups with a number of Central Asian nations, entering the tanker sector, bolstering its dry bulk fleet, alongside a host of new port concession agreements. 

 Sam Chambers May 29, 2023 Splash 247.com

Container shipping has been relying on one of its top tricks in its playbook to rein in the worst of the markets by going super slow. 

According to Clarksons Research, the container fleet moved at all-time slow speeds in Q1, with analysis from BIMCO suggesting that ships could go slower still. 

During the covid pandemic liner operators increased the average sailing speed by up to 4% due to strong demand and widespread port congestion. Today, the situation is very different and in the first quarter of 2023 the average sailing speed slowed to 13.8 knots, down 4% year-on-year, with BIMCO suggesting this speed could drop by 10% before 2025.

Jan Tiedemann, an analyst with Alphaliner, confirmed that liner services had been slowing down, partly to absorb capacity that would otherwise be surplus. Nevertheless, in recent weeks, in line with falling bunker prices, there has been a slight uptick in the average speed of the global liner fleet, according to the latest data from Alphaliner.

Over the entire world box fleet in the last two years, average speeds went down by about one knot, according to Alphaliner data. 

“That does not sound like much, but from a 16.5 knot global average, that is about 6% slower meaning, you need X% more tonnage to carry the same cargo volume,” Tiedemann told Splash. 

“The slowing down of services is a well-used tool in the carriers’ toolbox. For the past couple of decades we have seen this used whenever there is either structural overcapacity or high fuel prices – or both. Presently the industry is facing both issues,” explained Lars Jensen, the founder of container consultancy Vespucci Maritime.

Significant amounts of new capacity are being delivered into a market with sluggish demand growth. 

At the same time, Jensen pointed out that new environmental regulations as well as coming carbon taxes have the same impact as increasing fuel prices.

The record avalanche of newbuilds coming from yards in Asia are being injected into services, which are moving slower and slower. 

Maersk and MSC, for instance, announced this month they would be injecting nine additional vessels into the Asia-Europe trade, while at the same time adding that these services would be moving up to three days slower than before, thus absorbing all the new capacity. 

With liners expecting challenging conditions to persist for a significant amount of time thanks to sluggish demand, and an extraordinary orderbook to deliver, carriers have been adjusting their fleets to go slower. South Korea’s HMM, for instance, announced last month a decision to replace the propellers of six containerships with more efficient ones specially designed for slow steaming. 

The transition to new fuels such as LNG, methanol and ammonia also favours slow speeds, since these fuels will be much more expensive than current ones, observed Tiedemann from Alphaliner.

“This shifts the capital cost / bunker cost balance, so that it makes sense to deploy extra ships but save fuel,” he explained.  

Following record profits throughout the pandemic, liner shipping’s fortunes have been on the slide for the last 11 months. Israel’s ZIM and Taiwan’s Wan Hai became the first large liners to post a quarterly loss since 2020 this month. Overall, however, the slow streaming kept the red tide at bay for most carriers with John McCown, the head of Blue Alpha Capital, reporting on Friday that the container shipping industry made a net income of $13bn in Q1. 

 Sam Chambers May 25, 2023 Splash247.com

Stagnating trade and a ballooning surplus of shipping containers, following easing of pandemic era supply chain constraints, has led to a collapse in newbuild container output, which is forecast by UK consultants Drewry to slump to its lowest level in 14 years.

Drewry estimates that global box production contracted 71% year-on-year to 306,000 teu in the first quarter of 2023, the lowest level since the same period of 2010. While some recovery is anticipated through the remainder of the year, full-year output is not expected to exceed 1.8m teu, the lowest level since the recession-ravaged year of 2009, according to Drewry’s Container Equipment Forecaster.

Currently, several factories in China are either closed or operating on significantly reduced working hours, with full-scale production expected to commence in June. Meanwhile, commercial production at two new plants in Vietnam is not expected to start before Q3 this year with output scaled back from original expectations. The Hoa Phat Group factory in Cai Mep and the joint venture plant between Ace Engineering and Seojin Systems in Haiphong together will have the capacity to produce 600,000 teu a year by 2026.

Meanwhile, this year has seen record returns of containers to leasing companies, while carriers have been busily disposing of ageing and surplus boxes in their owned fleets. Currently, the priority for most container owners is to adjust their equipment pools to better match current trading and vessel supply parameters, and to remove ageing or damaged boxes that have accumulated as a consequence of supply chain congestion over the period of the pandemic.

Drewry expects such retirements to match last year at around 2.8m teu in 2023. Despite high levels of disposals into the secondary market, used dry freight container prices have held up well and are expected to remain steady through the year.

As a consequence, the global fleet of containers is forecast to contract 2% this year to 49.9m teu, representing the first fall in 14 years. The global container shipping trade is expected to remain weak, expanding just 1% in 2023, but a recovery in cargo demand is anticipated in subsequent years as the global economy gathers momentum.

This together with an expanding vessel fleet will drive increased demand for newbuild shipping containers, with output forecast to more than double next year, according to Drewry’s latest assessments. This will return the global shipping container fleet to modest growth, which is forecast to expand at an average annual rate of 2.9% over the period to 2027.

in International Shipping News 22/04/2023

“Change is afoot in China,” according to Wood Mackenzie principal economist for the Asia Pacific region, Yanting Zhou. With economic growth slowing, rising political tensions between China and the US, and global supply chain restructuring, ‘disruption’ is batting at China’s external markets.

“The new government has much to do to accelerate the recovery of the Chinese economy,” Zhou said. As it shuns US trade and investment in favour of neighbouring Asian economies, China must boost its domestic consumption.

In a research note, Wood Mackenzie analysed strategies and policies for the new government as it deals with four major changes in the Chinese economy.

The first change refers to the new government and new policies. At the March 2023 National People’s Congress, Xi Jinping was re-elected president and Li Qiang became China’s new premier. “Although the top leader is unchanged and the long-term strategy of ‘dual circulation’ persists, we expect there to be changes to the government’s short- to medium-term policies to support the recovery of the Chinese economy,” Zhou said.

Second is the reopening of the economy. The government has set a “lower-than-expected” gross domestic product growth target of 5% for 2023. “While we think this target is somewhat conservative, it could also mean that China will face more challenges in recovery and that government support will be below expectations.”

Wood Mackenzie forecasts GDP growth of 5.5% this year, although it concedes that if China really pushes to make up ground lost during the pandemic, 7% growth is “not impossible”. It anticipates GDP growth of 5.1% in 2024.

China’s ‘zero-Covid’ policy hit its economy hard. GDP dropped to 3% in 2022, which affected energy demand with oil consumption and LNG imports dropping. On the flipside, low-cost domestic coal production increased.

External changes

The third change is the shifting external markets. Wood Mackenzie notes that China’s exports are expected to decline in 2023, in line with the global economic slowdown. Data on exports from the first two months of the year confirmed the downward trend: they fell 6.8% compared with the same period in 2022. Also, the souring US-China relationship will come into play, while the wider global supply chain is seeking to diversify from China for cost, security and political reasons.

Wood Mackenzie notes that China has reacted by redirecting trade and investment to the Belt and Road countries. “The country has been promoting the Regional Comprehensive Economic Partnership (RCEP), which came into effect on January 1, 2022,” Zhou said. “China has also been reducing import tariffs in line with RCEP requirements and its eight free trade agreements with countries across Latin America, Asia and Europe.”

Wood Mackenzie notes that the Peterson Institute for International Economics calculated that China’s import tariffs for the rest of world had dropped from 8% in early 2018 to 6.5% by the end of 2022, while taxes for the US had increased from 8% to 21.2%.

However, the analyst notes that beyond the short term, China’s competitiveness will be challenged. “Its cost advantage, especially for middle- and low-end products, is already eroding,” Zhou said. “Consequently, growing domestic demand has become more important ‒ and China has ground to recoup. At the end of 2022, the economy was 3% below where we expected it to be based on its pre-Covid trajectory.”

The final change is the shift from quantity-driven growth to quality-driven growth highlighted by Premier Li. This hopes to address demographic changes, where China’s population fell for the first time in 2022, alongside a slowdown in urbanisation. “To achieve this, however, the government needs a new set of policy tools to support consumption,” Zhou said. “A systematic consumption revival plan is needed.”

While the government has made boosting domestic consumption a priority, specific measures have been thin on the ground. Wood Mackenzie reports that some local governments are providing consumption incentives, for example on auto purchases and coupons for home appliances. However, these are criticised as measures that “merely bring forward future demand and rarely create additional demand”.

“The real challenge for the new government is to raise the population’s willingness to consume and reduce China’s ultra-high saving rates by providing more security to Chinese households,” Zhou said.

Impact on commodities

In its Horizons: The Great Reopening report, Wood Mackenzie examined what the end of China’s ‘zero-Covid’ strategy means for global energy and natural resources. It described the analysed scenarios as “bullish for all commodities”, where finely balanced markets for oil, LNG and coal are leveraged to a super-charge a Chinese bounce.

In the analyst’s China high-growth scenario, increased construction activity would result in China’s oil demand growing by 1.4 million barrels per day (bpd) on the year – about 400,000 bpd higher than its base case. “This additional China demand in a year with very strong global growth tightens the market further,” the report said. Chinese demand for diesel/gas oil and petrochemical feedstocks is also stronger in its high-growth scenario, offset by lower exports of gasoline, jet and diesel/gasoil.

While Chinese LNG imports fell by 16 million tonnes or 20% in 2022, gas demand is now rebounding. “We expect more than 30 billion cubic metres (bcm) (9%) of demand growth, supported by stronger GDP growth and lower prices. However, booming domestic production (up 14 bcm) and continued growth in Russian pipeline imports (up 7 bcm) will constrain LNG imports to 71 Mt (97 bcm) in 2023.” This is 7.4 million tonnes (10 bcm) more than in 2022 and well below the 80 million tonnes imported in 2021.

Meanwhile, Wood Mackenzie predicts a “potential record-breaking year” for global coal demand in 2023. “Our base case sees significant growth in China’s coal demand in 2023: 85 million tonnes (4%) in the power sector and 17 million tonnes (1%) in the non-power sector,” it said. However, with domestic supply expected to increase by 85 million tonnes, the analyst expects only 17 million tonnes of import increases this year. That said, in its high growth scenario, China sets a record for global coal demand, exceeding 2019 demand of 8,512 million tonnes. Most would be sourced domestically, but China would still need an additional 49 million tonnes of seaborne coal, including 40 million tonnes of thermal under that scenario.
Source: Baltic Exchange

06 Apr 2023 By Caixin Global

Two of China’s largest container truck yards near the major port city of Ningbo in Zhejiang province have been filled with nearly 3,000 idle vehicles with no cargo to haul since early March, and the situation could get even worse with the delivery of new vessels. Could overcapacity in the industry lead to a price war?

This file photo taken on 3 January 2023 shows shipping containers stacked at Nanjing port, Jiangsu province, China. (AFP)

(By Caixin journalists Li Rongqian, Qi Zhanning and Kelsey Cheng)

Since early March, two of China’s largest container truck yards near the major port city of Ningbo in Zhejiang province have been filled with nearly 3,000 idle vehicles with no cargo to haul.

Traffic at the Hengpu and Beilun parking lots, which primarily serve the port, has dropped dramatically over the last two years, several truck drivers told Caixin. During the shipping boom in 2021, some drivers would make 27 cargo deliveries per month on average, they said. Now, they’re happy if they can do two a week.

The change only becomes more apparent in the port, where there are so many idle cargo containers that workers have nearly run out of places to stack them. “This area is almost full now, and many of the empty containers are being moved out,” one terminal operator told Caixin.

A combination of factors has led to these mountains of metal boxes piling up at Chinese ports — the low cost of storing containers in China, a surge in their supply during the pandemic export boom, and the immense number of them returning home once the boom faded, Yu Jianhua, head of the General Administration of Customs, said at a 21 March press briefing.

The container pile-up in China is one of the more visible symptoms of the problems in the shipping industry caused by a downshift in foreign trade amid weakened consumer demand and slowing global growth. The situation could get even worse with the delivery of new vessels, leaving analysts concerned that the overcapacity in the industry could lead to a price war that will weigh heavily on the bottom line of some freight carriers.

For China, the problem is with its exports, whose growth began slowing in mid-2021 due to shrinking demand from its major trade partners and the recovery of supply chains elsewhere that has met some of the demand for goods.

Demand sinks

In Shanghai, more 40-foot containers have come into the port than have departed each week since the beginning of the year, according to monitoring platform Container xChange.

Container xChange’s Container Availability Index (CAx) has remained elevated at more than 0.6 compared with readings over the last three years in ports across China, including those in Ningbo and Tianjin, according to a report the platform put out in early February. A reading over 0.5 means that more containers have entered a port than departed over a given period.

Globally, about 6% of container capacity is idle, with a large number of ships filled with empty containers sitting anchored at sea, a person working at a large freight forwarder previously told Caixin in February.

For China, the problem is with its exports, whose growth began slowing in mid-2021 due to shrinking demand from its major trade partners and the recovery of supply chains elsewhere that has met some of the demand for goods.

In the first two months of this year, China’s goods exports fell 6.8% in dollar terms from the same period of 2022, customs data show. While that figure beat estimates and narrowed from December’s 9.9% year-on-year decline, it’s far from a sign that a trade recovery is around the corner.

Exports to the US slid 21.8% year-on-year and those to the EU fell 12.2%. In the US, high inflation cut into household purchasing power, while packed warehouses have forced retailers to cancel orders. In Europe, rocketing energy prices have spurred inflation that has discouraged consumers from opening their wallets.

The slowdown in demand has led to a collapse of ocean freight rates, which are primarily determined by changes in ship utilisation, according to Sea-Intelligence, a research firm. The China Containerized Freight Index, which tracks spot and contractual freight rates leaving major Chinese container ports on 12 shipping routes, began falling in August. The index, released by the Shanghai Shipping Exchange, declined 8.5% month-on-month in February following a steeper 11.2% drop in January.

As of 30 March, the cost of sending a container from Shanghai to New York was down 78% from a year earlier, while the figure for Shanghai to Los Angeles had plunged 81%, according to data published by Drewry Shipping Consultants Ltd., a maritime research consultancy.

Recipe for a glut

In less than two years, the ocean freight market went from one extreme to the other, as resources including ships, containers, trucks and warehouses went from shortage to glut, said Zhang Huafeng, Los Angeles chief representative at Transfar Shipping Pte. Ltd.

The speed of that shift has only made things worse. During the boom of 2021, ocean carriers ordered a record number of shipping containers while retiring fewer aging ones, Drewry Shipping said in a July report. In 2021, the global supply of containers grew by 13% — three times the previous trend — to almost 50 million twenty-foot equivalent units, or TEUs, a standard for cargo capacity in the shipping industry.

Ship owners have found themselves in a predicament that is similar to that of container buyers. When freight rates were surging during the export boom, they spent a lot of their profits on new ships.

However, new container demand has been falling since the fourth quarter in 2021, said one worker at a large container manufacturer, who told Caixin that inventory has been piling up at his factory and others.

The situation is only going to get worse as new ships get delivered, Zhang said.

Ship owners have found themselves in a predicament that is similar to that of container buyers. When freight rates were surging during the export boom, they spent a lot of their profits on new ships.

That has led to some 2.6 million TEUs worth of newly built capacity expected to hit the water in 2023, Drewry analysts said in an October report. “By over-ordering in the boom years, carriers have set themselves an enormous challenge to shuffle and make capacity magically disappear,” they said.

As freight rates have dropped, some carriers have been trying a number of measures to reduce their capacity such idling vessels and cancelling voyages, said DHL Global Forwarding in a late January report.

A total of 366 container ships were left inactive as of 13 February, according to DHL in a 14 March report, citing figures from shipping research firm Alphaliner. That figure is equivalent to 6.2% of the global fleet and up from 5.7% two weeks earlier.

“A choice to allow overcapacity to persist is also a choice to allow for low utilisation, and thus to allow for freight rates to continue to drop. This is a behaviour we know by a different word: A price war.” — Sea-Intelligence CEO Alan Murphy

However, these measures may not be enough because more shipping capacity is in the pipeline.

Some carriers did not adjust their business to the drop-off in demand last year, Container xChange said in a February report this year. “This can only be seen as a choice on the part of the carriers,” Sea-Intelligence CEO Alan Murphy was quoted as saying. “A choice to allow overcapacity to persist is also a choice to allow for low utilisation, and thus to allow for freight rates to continue to drop. This is a behaviour we know by a different word: A price war.” 

Container xChange saw margins tightening for freight forwarders and traders and predicted a period of market consolidation on the horizon.

Some industry observers were also worried that the market downturn could trigger a price war similar to the one that occurred in 2015-2016, which led to the bankruptcy of South Korea’s Hanjin Shipping Co. Ltd., once the world’s seventh largest container shipper.

New players, who entered the market when freight rates were high during the pandemic, could get squeezed out, leading to a further consolidation of the container shipping sector, Xu Kai, chief of the Shipping Informatization Research Department at the Shanghai International Shipping Institute (SISI), told Caixin.

However, major shipping companies are better positioned to fend off any price war that might occur over the next few years, due to their larger shipping capacity and greater economies of scale, said Wu Di, an associate professor at Dalian Maritime University’s College of Transportation Engineering.

Hope on the horizon?

However, some analysts see things getting better as China’s export outlook recovers.

The world economy is recovering, wrote Li Zongguang, chief economist at China Renaissance Holdings Ltd in an opinion piece last month. In February, the global manufacturing purchasing managers’ index (PMI) rose to 50 — a dividing line between expansion and contraction. But China’s official manufacturing PMI survey, new export orders started growing in February again for the first time in nearly two years, with the reading reaching 52.4, he said.

Xu at SISI also believes that global trade demand is set to recover in 2023, and the turmoil seen in the shipping industry will not worsen. Global inflation and interest rate hikes will not intensify, while product inventories in the US and Europe will gradually be consumed, leading to a steady recovery in Chinese exports, he said.

“Compared with the second half of 2022, the shipping market in 2023 will improve,” Dalian Maritime University’s Wu said. According to him, the recovery could be expected in the third quarter of this year, when exports usually tend to rise in anticipation of the Christmas season.

 Sam Chambers April 20, 2023 Splash247.com

Global trade patterns are being remoulded at a fast clip, with reshoring now clearly diminishing China’s dominance in the transpacific box trades.

Covid, a more strident China, tensions along the Taiwan Strait, and the war in Ukraine have all played their part in many companies looking for alternative places to source their goods lately.

Data from Oslo-based freight rates platform Xeneta published today shows the immense growth of Vietnam as a growing source for manufacturing goods bound for the US.

Focusing on the US, the last five years have seen a rise of 26% in containerised imports from Asia. However, of the 12 major economies in the region, China tied with Singapore in recording the lowest growth in these exports, with a 7% increase, according to Xeneta. Hong Kong was the only one of the economies not to grow volumes at all. Vietnam, meanwhile, saw a growth rate of 156% of containerised trade into the US between 2017 and 2022.

A similar trend emerges in terms of the share of imported volumes. In 2022, 56% of all containerised imports into the US from Asia came from China. The apparent strength of this figure clouds the reality that this share has actually fallen by 10 percentage points from 2017. Vietnam, on the other hand, has almost doubled its share, from 6% in 2017 to 11% in 2022.

The International Monetary Fund found that investments by foreign companies into China fell to their lowest level in close to two decades in the second half of 2022. They collapsed by 73% year-on-year, down to $42.5bn. Putting this into context, between the second half of 2020 and first half of 2022, foreign investments averaged $160bn in each half year.

By way of contrast, Vietnam has seen FDIs grow by 61.2% year-on-year across the first three months of 2023, including a 62.1% increase in the number of new foreign-invested projects. The processing and manufacturing sectors attracted the most investment here, accounting for around 75% of the total.

Into this year, the data to the US looks similar, while also highlighting the growth of new markets for Chinese exporters keen to fill the gap left by the Americans.

March saw a clear drop in exports from China to the US, with $3.6bn less trade than the year before. However, despite this significant fall, China’s total exports managed a year-on-year growth rate of 15% in March thanks to booming trade with Russia and countries in south Asia.

Emily Stausbøll, a market analyst at Xeneta, commented: “It takes time to build new production bases and make port infrastructure investments, as we’re seeing in, for example, Vietnam, Cambodia and Singapore, so the impact of investments today won’t be fully appreciated until tomorrow. This implies that the changing trade patterns we’re seeing now could just be the beginning of a far greater realignment.”

A recent study released by global consulting firm Kearney found that as many as 96% of American CEOs are evaluating reshoring as a strategy, an increase of 18% on 2022. Most already have committed to reshoring, or are already reshored.

“We seem to be heading toward a sustained reshoring movement,” said Omar Troncoso, a partner in Kearney’s consumer and retail practice. “Reshoring is becoming both a cause and an effect of companies significantly rethinking how they construct and operate a supply chain that will carry them forward into the next decade.”

Xeneta’s Stausbøll concluded: “Moving forwards, the evidence suggests we’ll see more trade and investment decisions based on geopolitics rather than, say, availability or price. How this progresses, and the speed of change, will be dependent on a range of uncertain factors – not least the escalating tension around Taiwan. So far, Europe has maintained its share of imports from China, with key leaders taking a more conciliatory approach than the US, but another major geopolitical event could transform that.”