The beginning of peak shipping season, coupled with the longer transits to avoid the Red Sea, and bad weather in Asia, have hit the flow of trade on key routes. Ocean carriers are skipping ports or decreasing their time at port, and not picking up empty containers, in an effort to keep vessels on track for delivery.

The supply chain cost issues come at a time when consumer goods for back to school and the holidays are set to be moved on the water.

“From the Far East into the U.S. West Coast, it is likely spot rates will surpass the level seen at the height of the Red Sea crisis earlier this year, which demonstrates how dramatic the recent increases have been,” said Emily Stausbøll, senior shipping analyst at Xeneta.

Xeneta ocean freight rates show the rallying spot market and the widening spread between spot and long-term rates. “The bigger the spread between long and short term rates, the greater the risk of cargo being rolled, which we know is already happening,” she said.

Spot rates had fallen after the sharp rise triggered by Red Sea tensions in early 2024, but since the end of April they began spiking by as much as $1,500, on average, on routes to the U.S. coasts, and now some of the highest contract rates charged by shippers are over double the rates of just a month ago.

Stausbøll said this will bring back memories of the chaos caused by lack of available capacity during the Covid-19 pandemic. “Similarly to back then, some freight forwarders are now being pushed to premium rates to secure space guarantees,” she said.

Early Xeneta data suggests rates will increase further at the start of June.
DHL has been warning about a container crunch since January because of the longer routes needed to avoid the Red Sea since the Houthi attacks began. Containers are out on the water longer and as a result not available to be reloaded. The availability of containers has been slowed even further by the bad weather impacting port operations in China, Malaysia, and Singapore.

Fear of new post-pandemic supply-chain cost record: This latest round of soaring ocean freight rates comes after a previous high earlier in the year during which an “elevator floor” characterized by Levine of $3,000-$5,000 a container was set. At that time, prices were double when compared to a year ago.

Logistics price increases are ultimately passed onto the consumer and the dizzying freight rates during the pandemic were among factors cited by the Federal Reserve as a cause of inflation. In a series of customer alerts, logistics providers are warning shippers around the world, such as major retailers, of the container shortage.

“Carriers are facing serious equipment shortage nowadays due to the long-term congestion, blank sailings, demand increase caused by South America tariff implementation and so on,” warned Orient Star Group in a note to clients. “Plenty of shipments are delayed by equipment shortage which lead to heavy backlogs, and as a result, space shall get much tighter in the market. We’re trying our best to encourage the shippers to arrange empty container pick ups as early as possible to occupy the resource well in advance.”

A new round of general rate increases on June 1 has Orient Star Group characterizing the additional $1,000 charge as carriers getting a bit “greedy” under the sudden increased demand.

MSC, the world’s largest ocean freight company, announced new rates of $8,000 to $10,000 for 40-foot containers to the U.S. West Coast.

“Regardless of what headlines about the economy might say, consumers are shopping and retailers are making sure they have merchandise on hand to meet demand,” said Jonathan Gold, vice president for supply chain and customs policy at NRF.

To read the entire CNBC article go to:

Smart containers have grown in popularity in recent years, a trend that was exacerbated by the advent of the covid epidemic and the resulting supply chain disruption, which highlighted the need for improved cargo visibility to deal with lengthier and more volatile transit times.

A container becomes “smart” when fitted with a telematics device that provides real-time tracking and monitoring, enabling operators to increase turnaround time of their containers and so improve equipment availability. It also allows beneficial cargo owners (BCOs) to understand the location and status of their cargo so that they can better control their supply chains.

Drewry estimates that by the end of 2022, around 5.6% of the global container equipment fleet was fitted with smart technology devices, following growth of 57% through the year; an acceleration from the 32% gain recorded the previous year. Already over half of both the maritime reefer and land based intermodal container fleets are smart-enabled, the former up from a third last year, according to Drewry estimates.

Drewry forecasted that the number of smart containers in the global fleet will accelerate over the next five years, to reach over 10m units, representing as much as 30% of worldwide box inventories. 

“As technological innovation lowers the cost of devices and enhances their value to both transport operators and BCOs, uptake is expected to hasten,” Drewry noted.

Smart fleet acceleration will be driven by strong uptake in the dry container fleet, where Drewry sees current penetration as little as 0.7%. Several carriers, including Hapag-Lloyd and Japan’s ONE, have publicly committed to equipping their entire dry box fleet with smart devices, the former as soon as next year. Drewry said it believes these moves will force other leading carriers to follow suit. 

Source:

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, 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.

Source:

While there was a shortage of containers at the height of the COVID-19 pandemic, the global economy is now facing the opposite problem: too many containers.

On top of falling freight rates, data shows container depots — used to house containers after they are unloaded — are now filling up or full.
It points to more signs of falling global demand and an impending economic slowdown.

Traders and shippers say the decline in global consumer demand is not a sign the global economy is normalizing after a frantic post-lock down consumption rush, but a downward shift in consumption appetites.

What has happened now is that the cargo is ‘on time’ again and hence you’ll see a slowdown in new ordering…

“There is just not enough depot space to accommodate all the containers,” online container logistics platform Container xChange chief executive Christian Roeloffs said in an industry update recently. “With the further release of container inventory into the market, for example from the disposal of leasing fleets, there will be added pressure on depots in the coming months.”

Italian container depot owner Sogese chief executive Andrea Monti told Container xChange that the peak season of goods shipments — as Christmas looms — “technically did not happen this year.” Retailers are cautious about the high level of inventory they have on hand, Monti said.

To combat full and overflowing depots, ports such as the Port of Houston have started levying fees for empty containers sitting in terminals for more than seven days, according to global claims management provider Sedgwick’s national marine manager, Darin Miller.

“Often left sitting for weeks on end, the sheer number of containers on ships or at ports, leaves us with insufficient depot space which only exacerbates our ongoing supply chain crisis as it impacts container repositioning and movement,” Miller said.

Source:

Global schedule reliability seems to have broken the trend seen since the start of this year, with schedule reliability increasing by 3.6 percentage points in June 2022 to 40.0%. This also marked the first time since the start of the pandemic that schedule reliability improved Y/Y. The average delay for LATE vessel arrivals has been dropping sharply so far this year but remained unchanged M/M at 6.24 days in June. The delay figure is now firmly below the 7-day mark, and an improvement over the respective 2021 figure.

With schedule reliability of 49.5%, Maersk was the most reliable carrier in June 2022, followed by Hamburg SĂźd with 41.4%. There were 10 carriers with schedule reliability of 30%-40% and only two with schedule reliability of 20%-30%. In June 2022, once again, a lot of the carriers were very close to each other in terms of schedule reliability, with 10 carriers within 7 percentage points of each other. Wan Hai had the lowest schedule reliability in June 2022 of 24.8%. On a Y/Y level, nine of the top-14 carriers recorded an improvement in schedule reliability in June 2022, with Evergreen recording the only double-digit improvement of 16.2 percentage points.