Westbound sea freight market update

Demand for imports from Asia and the Indian subcontinent (ISC) continues to outstrip shipping line capacity, in a sign that with inventories low, second-half volumes are unlikely to let up, keeping pressure on a global supply chain infrastructure that is already buckling.

The UK’s primary container ports will be expecting a spike in imports from China, as the backlog of cargo that had built up in Yantian during the COVID-19 outbreak in May and June arrives, to add to traditional peak season volume that runs from August to October. This is also being experienced throughout Europe, The Americas and most major trading regions and is not unique to our little island – which is where the problem lies as global logistics is now an inter-related network which has ripples everywhere regardless of the source of the ‘problem’.

Peak season demand is further complicated, by massive backlogs of unshipped containers in China and the ISC, with Yantian arguably experiencing the worst backlog, though vessels are also backed up in Shanghai and Ningbo. It would seem the ‘worlds factory’ has broken its despatch bays.

An estimated 14,000 TEU of export containers are stuck at the main Bangladeshi port of Chittagong, owing to the capacity crunch involving feeder vessels and congestion feeding back from global ports, with some containers waiting to ship for up to 30 days.

Equipment shortages, congestion and berthing delays in Chittagong, have forced some carriers to halt or slow bookings from Bangladesh and rates are likely to be impacted by the instability in ports globally.

Lines have not stopped taking bookings from Chittagong, but there is caution, in the absence of confirmation of space allocation on mother vessels at transhipment ports.

All the major shipping lines have very limited space from Indian ports, with waiting period to secure bookings increasing drastically over the past few weeks and contractual bookings not being honoured.

The lines quite simply don’t have the space to meet all their bookings and are either not quoting, are trying to sell space for a premium, or have kept higher rates on selected routes to discourage new bookings.

CMA-CGM has announced the blanking of their Europe Pakistan India Consortium, EPIC and EPIC2, sailings from Western India for week 29, and weeks 28 and 29 respectively.

We have worked closely with strategic partner shipping lines for decades and despite our good working relationships and the lines best efforts to support us, we still have to accept some cargo being rolled, and have no choice but to accept blanked sailings, though our commercial team typically find space for rolled, or blanked containers, on the next available vessel.

In a worrying move for the three shipping alliances last week, the Biden administration called for the Federal Maritime Commission to crack down on excessive detention and demurrage charges. The President’s order characterised the ocean freight industry as a highly concentrated, foreign-owned, anticompetitive sector which can disadvantage American exporters and importers. 

It is expected this move will be replicated in other countries, as the repercussions of high freight and logistics costs escalate inflation, which now looks unavoidable, filtering into the cost of raw materials, consumer products and throughout the supply chain.

The White House order comes against a backdrop of skyrocketing freight rates, but the World Shipping Council, which represents the carriers, refuted the concept that the rate spike is connected to concentrated market share, noting that all available vessel capacity is deployed, ports are saturated with cargo and importers struggling to turn around containers.

It pointed to recent developments that indicate the functioning of a competitive ocean freight market, like new entrants, new services and massive vessel orders to increase supply.

Last week, the European Commission confirmed that it is “closely monitoring” the shipping industry and is looking into “any scope for intervention that can facilitate return to normal operations.”

Metro negotiate rate and volume agreements with a wide range of carriers across all three alliances, which means we can react quickly to market changes and offer shippers alternative services, in line with their deadlines.

Our fixed validity contracts provide supply chain security and peace of mind, but with space and equipment in such short supply, we recommend a minimum of four weeks visibility and booking window, to secure space on the vessel and get the right equipment positioned.