Asia-Europe

Container shipping networks from Asia to North Europe and the Mediterranean are being reshaped as carriers redeploy capacity to compensate for the additional transit time needed to sail around southern Africa.

Terminals in Europe say ocean carrier schedules have been disrupted by the ship diversions around southern Africa, but there is still no sign of the port bottlenecks that were expected when the rerouting began.

The huge order book due to be delivered through 2024 is helping ocean supply chains withstand the Red Sea crisis, experts say, but another shock would cause a “pandemic-type crisis.”

The seasonal rise in air freight demand out of China ahead of the holiday has been strong, but analysts say the Red Sea effect on rising volumes remains unclear.

The South Korean port is the latest to establish its credentials as a sustainable fuel hub as competition between global gateways intensifies.

While shippers are using terms in their contracts to push back against the higher costs linked to the Red Sea and Panama Canal disruptions, carriers are also looking to void those terms altogether.

The green methanol feeder service will initially cover Baltic and Scandinavian ports operating out of the Port of Rotterdam.

Longer voyages around southern Africa have created an instant tonnage shortage and will make it difficult for carriers to maintain weekly sailing schedules, says Jeremy Nixon.

An executive for the carrier said he expects liners and shippers will eventually adjust to the lengthier transits around southern Africa but acknowledged it will take time before rate volatility subsides.

Longer transit times caused ships to miss their arrival slots last month in ports across North Europe and the Mediterranean, and carriers have warned shippers to prepare for further disruption to their supply chains.

The Mediterranean and Middle East are the two regions most affected by the need for carriers to divert around southern Africa to avoid militant attacks in and around the Red Sea.

The South Korean government is guaranteeing a certain amount of vessel capacity for small and medium shippers on services to Europe and the Mediterranean, while Vietnam is also taking steps to mitigate the impact of the Suez diversions.

Shipper demand for more environmentally friendly ocean transport is building slowly, but longer voyages around Africa stand to add significantly more CO2 emissions per TEU to Asia-Europe cargo.

But the analyst noted the expected effect on equipment shortages, port congestion and ship schedules will be far less than that experienced during the pandemic as the supply chain reorganizes itself around the longer transit times.

While the available capacity offered by air and rail is nowhere near that of ocean, the modes give cargo owners an alternative transport option for their more urgent shipments.

With no certainty on how long the Red Sea disruptions will last, carriers say they are unable to consider all the factors required to set and negotiate long-term rate levels.

Europe’s second-largest container port reported a decline in annual throughput for last year, but the drop was expected given the bearish market fundamentals in place.

The Cosco subsidiary’s operational update did not provide profit and loss figures but gives an indication of the impact plunging rate levels will have on ocean shipping’s annual results.

The mini-peak season ahead of China’s factory holiday is causing short-term challenges for container shipping, but analysts say conditions should ease after Lunar New Year.

Some analysts are reassessing their outlook for the container shipping industry as the Red Sea crisis absorbs capacity and pushes rate levels higher on the Europe and US East Coast trade lanes out of Asia.

Difficulties in finding vessel capacity and empty containers as ship voyages are extended will join rising rate levels on the growing list of supply chain issues faced by shippers.

The strong e-commerce demand from the US that kept trans-Pacific air cargo rates rising through the fourth quarter quickly fell off after the end-of-year holidays.

There remains little clarity on carrier plans to resume Red Sea transits following Sunday’s dramatic action by the US Navy to repel an attack on a Maersk container ship.

The carrier’s decision to suspend Red Sea sailings for at least 48 hours following two attacks this weekend shows that even as naval forces ramp up patrols in the region, safety is far from guaranteed.

Most of the surcharges and GRI hikes will take effect from Jan. 1, with at least one ocean carrier hinting of further increases to come later in January.

Maersk's decision to resume sailings through the Red Sea reveals confidence on the part of the carrier with they have been told by naval coalition forces about their capabilities and willingness to act in defense of shipping.

The anticipated costs to shippers of the Red Sea crisis are becoming clearer, with spot rates up sharply and rate hikes and surcharges announced by ocean carriers.

Five of the world’s top 10 ocean carriers have so far announced diversions away from the Red Sea, and their language suggests there is growing acceptance that this crisis will be open-ended.

While moves to send ships around Africa in response to the Red Sea attacks may be driven by safety concerns, the rate hikes that will accompany the emergency action will be welcomed by carriers in the loss-making trade lane.

Expectations that the US Navy will step up maritime protection in the Red Sea following an increasing number of attacks on commercial shipping hasn’t stopped carriers from routing services away from the Suez Canal.

Several vessels heading south for the danger zone off the coast of Yemen are making U-turns and will likely take the far longer route around the African continent via the Cape of Good Hope.

While carriers have been revising their ETS surcharges with carbon pricing on the markets becoming clearer ahead of the implementation date, the price differences have shippers and analysts scratching their heads.

While the preferred approach by carriers is to calculate exposure to the ETS and recover costs per container in a separate surcharge, that will not be possible for Chinese exports to Europe under Shanghai Shipping Exchange regulations.

There has been no sign of a slowdown in the carrier’s acquisition activities as it uses its cash-rich position to expand its footprint in key port and logistics markets.

Three commercial ships were hit by rockets fired from Yemen over the weekend in a deteriorating security situation that has seen at least two ocean carriers introduce war risk surcharges on routes to and from Israel.

Although the incoming capacity will outstrip demand on the major trades over the next two years, the capacity overhang that has been touted in many corners of the shipping sector is being overstated, says an industry analyst.

The westbound trades out of Asia are heading into tender season with carriers attempting to lift rate levels before locking in long-term contracts being eroded by surplus capacity.

On its own, the growth in container volumes on Asia to Europe trade lanes in the third quarter was impressive, but it compares with the steep slowdown in imports last year by overstocked retailers.

Carriers are reporting some successes in convincing shippers to use their emissions-reduction services, but acceptance of premium — and costly — green products remains a hard sell in a market where rate levels are at record lows.

Yang Ming said the imbalance between vessel supply and cargo demand, high inflation and geopolitical risks will be among the factors pressuring the ocean market into 2024.