Ocean Freight Update: Canal Congestion, Demand and Rates Still Down, Record Capacity, EU ETS, and more…

What’s happening on and around our oceans?

This is our weekly ocean freight update, highlighting interesting news and background articles we came across this week. We focus on general ocean freight news, innovation, and sustainability. With the current challenges around the Panama Canal, we are also adding a section on the Panama Canal situation.

The Panama Canal

Container shipping feels the effects of the Panama Canal Authority’s measures because of the draught. Bulk shipping is also impacted. An alternative route for containers across the South American continent would alleviate the pressure on the Panama Canal and enable more non-containerized freight to move through the canal. Panama is not the only region impacted by drought. In Brazil, there are issues with shipping traffic up and down the Amazon River.

The number of vessels waiting in the Panama region rose substantially in August 2023 due to a significant backlog caused by the restrictions. The maximum time a vessel took to cross the passage was 10 days on average in August 2023, up from 3 days during the same period last year. Some vessels also took 16 days for the transit.

The Panama Canal is a crucial choke point for various trade routes in the dry bulk market. While ample trade flows within Latin America through the canal (such as coal from Colombia to Chile and Peru), ships on long-haul routes like USG-China also use this passage.

Panama drought and its impact on bulk shipping

French ocean carrier CMA CGM reported that the Amazon River’s navigability conditions are not improving and as a result, has revised the Low Water Surcharge (LWS) on any cargo from/to Manaus, Brazil.

CMA CGM revises low water surcharge in Brazil

General Ocean Freight News

Shipping companies are in for a rough final quarter of this year. On most routes, container volume has decreased. Rates are still down, while capacity has been growing at the fastest pace ever. Not only are there more ships, but they are getting larger as well, causing a shift in where they are used. On a slightly brighter note, the bunker prices are going down again for the first time in a month.

Oceangoing containers to and from Japan’s six major ports totaled 1.13 million TEUs in July, which slid 8.7% from the corresponding month of the previous year and have registered a year-on-year decrease for four consecutive months. 

Japan’s container volumes decrease for four consecutive months

Asia-Europe spot rates are being hit by a one-two punch of weak demand and record-breaking capacity growth.

“Global container-ship capacity [has been] growing at an average rate of over 190,000 TEUs [twenty-foot equivalents] a month since April, after accounting for new ship deliveries and capacity upgrades and deducting scrapped capacity and other deletions,” Linerlytica reported on Monday.

Container shipping has a Europe problem and it’s getting worse

With nearly a container newbuilding scheduled to deliver daily for the rest of the year, brokers Braemar have warned this week it remains difficult to anticipate where the demand should be coming from to overcome the current supply situation. 

According to analysis from Asia-based consultancy Linerlytica, the pace of the growth of the box fleet at the moment is the fastest on record – and is set to continue for the next two years with the sight of newbuilds being forced to idle becoming commonplace. 

Boxship capacity growing at fastest pace on record

More and more Neo-Panamax container ships in the 13,000 to 16,550 TEU capacity range are being cascaded into North-South trades as more Megamax ships in the 23,000 to 24,000 TEU range are delivered and alloted to Asia-Europe lanes, said Alphaliner today (27 September).

Vessel upsizing pushes more Neo-Panamax units to mid-haul lanes

The Marine Bunker Exchange (MABUX) indices turned into a decline for the first time in the last four weeks. The 380 HSFO index fell by US$3.07, the VLSFO index lost US$6.22 and the MGO index decreased by US$11.86.

Bunker prices return to downward trend after a month

More recommended reading material on ocean freight:

Sustainability and Innovation

As mentioned, the number of newbuilds has grown like never before in the past year. It is good that the number of ships being built that use greener fuels like methanol and LNG has also been increasing. On the other hand, recent research has shown a big difference between players in the industry when it comes to decarbonization. 

Also in the news is the new EU Emission Trading Scheme (ETS), which has companies looking into what it exactly means for their organizations, as opinions on it vary, and China is launching a new container size. Didn’t we have enough sizes already?

And Polish startup Nevomo is developing technology enabling maglev trains to operate on regular rails!

Japan Suiso Energy (JSE) and three Japanese shipping companies, Kawasaki Kisen Kaisha (K LINE), Mitsui O.S.K. Lines (MOL), and Nippon Yusen Kabushiki Kaisha (NYK), have agreed to join JSE Ocean (JSE Ocean), a subsidiary of JSE.

In this project, JSE will establish the world’s first large-scale hydrogen liquefaction and transportation technology, involving an initial 30,000 tons of hydrogen per year before upscaling.

Japanese shipping firms partner to establish global liquefied hydrogen supply chain

A new survey by the Global Centre for Maritime Decarbonisation (GCMD) and Boston Consulting Group (BCG) shows that most shipowners and operators see decarbonisation as a must, but data shows that major differences appear in their approach and urgency. The same can be said when it comes to adopting green fuels.

The new report noted that many shipowners and operators recognize the need to reduce GHG emissions with 73% of respondents viewing getting to net-zero operations as a strategic priority while 77% already have concrete decarbonisation targets, including 54% who have set net-zero targets.

New decarbonisation survey identifies gulf between frontrunners and conservatives

French mainline operator CMA CGM has ordered more new vessels, putting pen to paper for eight 9,200 teu methanol-propelled containerships at Shanghai Waigaoqiao Shipbuilding (SWS) in China.

CMA CGM orders another eight methanol-fuelled containerships

A hotly debated topic regarding the extension of the EU Emission Trading Scheme (“EU ETS”) to include maritime emissions, is who should be responsible for submitting emissions allowances on the relevant submission date (the “submission date”) to the relevant administering authority (“ETS obligations”), in particular in instances where a shipowner has delegated the responsibility to comply with the ISM Code to a manager.

EU ETS – Who is liable to the authorities: Shipowners or managers?

However, in a sign that there remains considerable uncertainty about the level of ETS surcharges likely to be added to shippers’ bills, Maersk Line and Hapag-Lloyd last week each issued guidance, but which differed wildly on the expected level of the additional costs.

While Hapag-Lloyd estimated that a container shipped from Asia to North Europe would incur €12 per teu in ETS surcharges and €31 for a reefer, Maersk advised that the same journey would cost customers an additional €70 per teu and €105 per reefer.

Maersk and Hapag-Lloyd offer their guides to 2024 ETS surcharges

China has debuted a new-sized container, albeit one that is unlikely to take to sea.

China Railway Group’s 50 foot containers will be used on the nation’s intermodal express trains. 

For ships, 20 ft and 40 ft containers are standard. No cellular ship can take more than 45 ft in length, and then only on deck in stows above the top of the lashing platforms. 

China debuts new container size

While our maglev-based transportation solution will transport containers on its own tracks, Nevomo wants to leverage existing infrastructure. The company is developing a maglev train that can operate on standard tracks with a speed of up to 340 miles per hour. This creates a hybrid railway system where both maglev and regular trains can be operated. This approach makes the implementation of a maglev train much simpler, as the infrastructure is already there.

European Start-up Develops Maglev Train for Standard Tracks

Other recommended reading material on sustainability and innovation:

Photo by Barrett Ward on Unsplash

About the author:

Martijn Graat

Martijn Graat is Zergratran’s Head of Content. He writes about trends and innovations in supply chain and logistics, and anything related to Zergratran