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13th Listopad 2020

General Newsroom

Fracht morski:

Further to our last customer advisory; we would like to give clients an update on the rapidly changing situation with Ocean Freight.

Azja - Europa Handel / ogólny przegląd rynku

The biggest trade lane of Asia to North Europe continues to be significantly challenging, more so than ever before. The surging demand for cargo coupled with capacity constraints, equipment shortages and port and vessel delays, has brought about some of the most difficult conditions that the industry has seen in many years.

Industry press recently described the current situation as “a perfect storm to end all storms”.

The current issues are affecting every customer large or small, and the below provides further context.

Carriers Capacity Situation

The three Asia to North Europe Alliances continue to micro-manage capacity in November and this is expected to continue into December.

In anticipation of a reduction in volume after Golden Week the three alliances have cancelled a total of 12 major sailings to North Europe.

The reality is that there has been no easing of volumes, and demand into November has been very strong. We now have a situation where demand is outstripping the vessels available, which in turn is fuelling a rapid series of rate increases and surcharges with the carriers.

As a result of the carrier’s actions, all Asia-North Europe carriers now have backlogs of cargo, and reports in the press claim that some carriers have been rolling as much as 40% of their shipments.

This glut of cargo is causing significant service issues, however the lack of capacity and equipment in the market it is also giving the carriers reason to increase their rates.

Extra capacity is being put back into the market, however this is largely being offset and impacted by unexpected port congestion in the West Coast of America. This is now severely delaying some of the vessels arriving into China that are then destined for Europe.

The net effect is that the extra loaders that have been put on, are as good as cancelled out by ‘technical void sailings ‘.

Due to container equipment imbalance (explained further below), we are also seeing some of the Asia-North Europe carriers taking measures to reduce their commitment to the UK market.

This means less fast vessel capacity for UK bound cargo, which is likely to keep up pressure on freight rates.

Examples of this are –

Ocean Alliance carriers – In November, they will switch the rotation of FAL1 and FAL3 Loops so that the larger FAL1 vessels favour the European mainland rather than the UK.

One Ocean Alliance carrier – Evergreen Line, has taken the drastic step of temporarily not accepting any bookings for the UK at present, due to their serious equipment imbalance. This is also driving the current critical space issue, as all UK importers scramble to work with other carriers.

The Alliance carriers – Their main UK product is the FE2 Loop to Southampton, which remains on a longer transit time in order to suit the European calls first. The FE4 loop that was originally suspended now operates randomly depending on demand, but the Southampton call has just been switched with Rotterdam, making Southampton the last call in Europe and significantly longer in transit.

2M Carriers – Have kept their prime AE2/SWAN Loop suspended until further notice. This was a service with their biggest vessels into Felixstowe. The contingency arrangement is a temporary product called AE55/Griffin, which is using smaller vessels and calls at European ports prior to coming to Felixstowe.

These facts explain how the carriers have made efforts to reduce their commitment to the UK market, and why we are seeing a very tight space situation that appears unlikely to ease until after Chinese New Year.

Impact on Freight Costs

Lack of capacity is driving a rapid increase in freight costs, with shipping lines applying regular General Rate Increases (GRI) or Peak Season Surcharges (PSS).

The shipping lines have already announced additional increased surcharges for the middle-end of November, with further increases expected in December. We will obviously communicate with customers if & when this needs to be applied.

Some carriers have also introduced the concept of a ‘priority service’, to offer and provide some form of guarantee. This however only moves containers further up the list but there is no guarantee of space and / or sailing.
Two carriers have set this extra cost at levels of either USD 1000 per container or USD $500/ TEU (in addition to the freight rate and other applicable charges). Despite this being paid by some shippers, the lack of equipment in the market means that this does not provide certainty.

Vessel Schedule Issues

Trade from Asia to Europe and Asia to the USA is up on last year. The increased volumes are causing difficulties for ports in many parts of the world, as many are also working with reduced productivity due to Covid-19 restrictions. With high volumes this has meant that vessels are facing longer port stays which causes knock-on delays for the carriers. Delays at ports are now common at most China Main ports as well as the transhipment hubs of Tanjung Pelepas, Singapore and Colombo. The same issue is affecting European ports, and the UK is facing some serious challenges handling the increased volume at a time of more stringent Covid-19 measures.

Container Equipment Shortages

The equipment shortages abate; the industry is facing a very serious shortage of empty containers in China and Asia generally, as well as in the Indian-sub-continent. This is delaying bookings in some cases, as carriers struggle to find containers to match demand.

Dramatic swings in trade caused by Covid-19 have contributed greatly to this problem. Cancelled vessels has resulted in the lack of a means to transport the empty equipment out of the UK and Europe and back to Asia.

The carriers are repositioning equipment as quickly as possible, but this is likely to continue to be a problem over the next couple of months. In the meantime, we are supporting customers and shippers as much as possible by offering the alternatives of working with different carriers, different container sizes or different pick up points for empties.

UK Port Congestion

Higher than anticipated volumes have affected all the UK Main Ports. Many now have a reduced workforce due to Covid-19, and the safety measures being applied mean that around 4 hours are lost each day with deep cleaning.

Empty containers have added to port congestion problems, as most ports have a limited storage facility and have set aside a limited amount of equipment and manpower to manage this part of the business. This week, Felixstowe port was storing 64,000 TEU, when they normally store 25,000 TEU. They are also holding onto several thousand TEUs of long stay PPE equipment.

The port of Felixstowe is now at capacity and this is affecting productivity, they are now informing some of the shipping lines not to take empty containers back to the port. We are now seeing this begin to happen at Southampton and London Gateway, and other off-dock depots are rapidly filling up. We are in some cases having to divert empty containers to alternative drop off points and ports at extra cost and will discuss with customers as and when necessary.

UK Port Congestion Surcharge

Carriers frustrated by the current congestion and infrastructure constraints in UK ports have either already applied or announced congestion surcharges for cargo arriving in the UK. The congestion charge varies from USD 150 to USD 200 per TEU. Customers will be consulted, and information shared when these surcharges will be applied.

Booking / Lead Times

The ETA given by the shipping lines at booking stage should only be used as a guideline. Based on the current market situation we are now recommending adding a minimum of 14-21 days to your lead-times and expect service disruption between now and Chinese New Year.

FCL Transport

The high volumes of cargo, late changes to vessel arrivals and general port productivity are continuing to impact our arrangements with UK transport. We ask customers to continue to be patient and work with us during this difficult period, we will continue to do everything possible to accommodate delivery arrangements and work around the various challenges that are affecting the industry.

We appreciate that the current lockdown might cause the need for storage for some customers. A reminder to customers that we have limited amount of off-dock storage space but will look to assist clients where possible.

Off Dock Storage

We appreciate that the current lockdown might cause the need for storage for some customers. A reminder to customers that we have limited amount of off-dock storage space but will look to assist clients where possible.

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