Trans-Pacific

Slow-steaming has come to the fore of late as ocean carriers seek help in absorbing overcapacity, but analyst Lars Jensen says the common refrain that slower speeds also help to improve schedule reliability doesn’t hold water.

Shippers and port executives say the post-COVID shift of cargo back to Hong Kong is being hampered by the global slump in demand as developed countries grapple with elevated inventories and inflationary pressures.

The port congestion in Asia and North America that compromised vessel on-time performance during the pandemic began to ease last fall with declining cargo volumes, and the reliability improvements have accelerated since.

Ocean carriers are pulling all available capacity management levers to address a supply-demand imbalance that is set to widen significantly through 2024.

Although the container shipping order book is the highest it has been in many years and demand remains subdued, the ground is shifting under the ocean market in new and unfamiliar ways, writes Peter Tirschwell.

Price is once again on the side of shippers, with excess ocean capacity allowing them to extract lower rates from service providers.

While indicators may point to a “normal” container shipping market in the wake of the pandemic, it is important to remember that disruptions large and small are all part of that normality, writes analyst Lars Jensen.

The Israel-based carrier is adding larger ships powered by liquefied natural gas to the Asia-US East Coast trade to capture sustained demand and lower unit costs.

A deteriorating container shipping market made the first quarter one to forget for the Israel-based carrier, but its full-year outlook remains positive.

A decrease in US housing construction from the fever pitch seen during the COVID-19 pandemic is reducing demand for imports of furniture, appliances and other household goods.

With a proposed baseball stadium at the terminal location off the table, the Port of Oakland is considering options to expand maritime support activities at the 50-acre site to complement overall growth at the port.

With import volumes sharply lower than last year, trans-Pacific carriers are more willing to consider requests for fixed-rate pricing and inland transportation bookings in 2023-24 service contracts, sources say.

Asian imports into the US last month reached their highest level since October 2022 as freight rates rose, but further import gains look unlikely as shippers take a wait-and-see approach to consumer demand.

The South Korea-based liner became the latest carrier to illustrate the post-pandemic crash in container shipping, posting a 91% drop in net profit for the first quarter.

The Taiwan-based carrier is the latest container shipping line to have its extreme profitability of recent years slashed by a slowdown in demand and excess capacity.

Toy and game manufacturers front-loaded traditional holiday merchandise in 2022, resulting in an exceptional first half of the year followed by a weak fourth quarter that coincided with a broader decline in consumer spending.

Last year’s dip in electronics imports is a sign that US consumers were holding back on some discretionary purchases after two years of heightened spending during the COVID-19 pandemic.

Consumer spending in the coming months will be compromised somewhat by high inflation, while retailers are being conservative in placing purchase orders with factories in Asia because of bloated inventories, according to the Global Port Tracker.

Better vessel reliability helped fuel a return to growth in US agriculture exports in the second half of 2022, but those green shoots could be ripped up at the root if service doesn’t continue to improve.

While the executive expects some level of demand rebound in the second half, he hedged that the summer season may not be as healthy as a typical year given uncertainties in the economy and consumer sentiment.

With cargo volumes dropping in most of the global trade lanes, supply chain bottlenecks that had contributed to deteriorating vessel schedule reliability in 2021-22 are no longer a major problem this year.

The now-bankrupt retailer alleges the ocean carrier failed to provide the full vessel space it contracted for, then charged much-higher premiums to ensure its cargo wasn’t rolled.

Fundamentally, current data on ocean freight rates supports the notion that the market has, overall, reached a low point and is about to rebound slightly to be brought back in line with long-term trends, writes analyst Lars Jensen.

Highlighting the fall in demand, total liftings at Cosco Shipping Lines and OOCL fell more than 10 percent in the first quarter, to 5.5 million TEU.

High inventories, falling consumption in key markets and an influx of capacity from recovering supply chains pulled down fiscal year earnings at Ocean Network Express.

Cargoes “unboxed” during the pandemic market are sliding back to container carriers on the hunt for volumes to fill their ships, while excess containers on MPV ships have disappeared.

When it became apparent the carriers’ recent GRI had succeeded in bumping up spot rates by several hundred dollars, sources say customers moved to sign their contracts out of concern that rates would only go higher the longer they waited.

A period of record profitability for ocean carriers is coming to a stark end, and amid a worsening supply-demand balance, the industry will find it increasingly difficult to raise rate levels, according to the maritime consultancy.

Vancouver’s proposed Robert Banks Terminal 2 cleared a major federal environmental hurdle this week, putting the focus on who will construct and build the facility with a planned annual capacity of 2.4 million TEU.

The stickiness of the mid-April rate increase suggests that the first green shoots of US demand are beginning to emerge on the trans-Pacific.

Despite the sharp decline in ocean freight rates, current market fundamentals point to carriers, to some degree, becoming better at pricing and yield management than they were prior to the pandemic, writes analyst Lars Jensen.

Forwarders said the capacity increase is due to carriers no longer skipping or blanking calls at Japanese ports following the normalization of demand and the easing of port congestion in the US.

Members of ILWU Local 13 have been “red-tagging” cargo-handling equipment at Los Angeles–Long Beach’s three automated terminals, which designates the equipment as unsafe and forces an inspection, sources say.

The carrier executive says despite a slow start to 2023, a return to seasonal shipping patterns in August and September could follow a mid-summer lull in import demand.

After the flurry of April contracting action and a rush of cargo to avoid new GRIs, carriers in May will show the industry the extent of their capacity control for their second half of the year, writes Executive Editor Mark Szakonyi.

How successful ocean carriers are in securing general rate increases comes down to the health of so-called green shoots of demand and the effectiveness of increased blanking of capacity.

The company’s revenue for the 2023 first quarter is one of the ocean shipping market’s very first indications of how the plunge in rates will affect carriers’ bottom lines.

The normalization of container shipping markets on the major trade lanes out of Asia will slash carrier profits this year, but falling rate levels will also yield significant savings for shippers.

While it may be easy to understand the desire to fix container shipping’s perceived problems with government intervention, no amount of reform would have prevented the shortage of capacity or record freight rates during the pandemic disruption, writes analyst Lars Jensen.

A series of challenges lies ahead for the container shipping industry, but the effects of slowing demand and a surplus of capacity will be softened by a record financial performance in 2022.