Ocean Freight Update: Canals, Rates Down, Too Many Containers, Greener Ports, 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.

General ocean freight news

Drought is impacting the Panama Canal. Canals, like the Panama Canal and the Suez Canal, are important shipping routes, and we need them. The fact is that climate change will have an impact on them. Our CEO, Byron Bennett, joined Christop Scheithe on the Joy of Logistics Podcast to discuss the importance of efficient shipping routes and a zero-emission alternative for shipping containers between the Atlantic and the Pacific.

Byron tells Christoph about the potential impact our project will have. Addressing the most significant marine trade bottleneck, it could significantly improve the efficiency of global trade. The project has already received several awards for its innovative and sustainable approach.

Byron Bennett on the Joy of Logistics Podcast on a Future Panama Canal Alternative

In the meantime, China is digging a new 80-mile canal through Sout West China.

The $10.3bn Pinglu Canal, scheduled to open by the end of 2026, will allow ships to travel from far inland and reach the Beibu Gulf near the border with Vietnam via the Qinjiang River.

Among the design feats of the new waterway, the canal will feature the world’s largest inland water-saving ship lock.

Canal construction underway in Southwest China

Back to the news on the ocean freight market. Contracted rates are still down, and spot rates are as well, although some see the positive side. The impact can be seen in different areas. Shipping companies are letting their ships steam and record-breaking low speeds. While demand is slowing down, shipping companies are still looking for more ships, albeit smaller ones. What they are also looking at is shrinking their equipment pools. 

We came across several interesting articles reporting on these developments.

BIMCO, chief shipping analyst, Niels Rasmussen, looks at the fact that despite a 70-80% fall in freight rates, and worsening of the supply/demand balance, liner operators have been able to keep rates higher than pre-pandemic levels.

“The Shanghai Containerized Freight Index and the China Containerized Freight Index have dropped by respectively 81% and 72% since January last year. Yet, they remain higher than in 2019 despite a worsening supply/demand balance,” commented Niels Rasmussen.

Container spot rates remain high despite weaker supply/demand balance

The ocean freight industry saw a slump in global long-term rates of unprecedented proportions in May, as the contracted cost of shipping containers dived by 27.5%, according to the index developed by freight rate platform Xeneta. 

The fall in the Xeneta Shipping Index (XSI) marks the ninth consecutive month of rate drops, and is the largest-ever monthly fall recorded on the five-year-old XSI.

Box contract rates plunge

Carriers faced with huge storage bills from depots, for their mountains of empty container stocks around the world, are looking to retire ageing owned containers to the second-hand market and return as much equipment as possible back to leasing companies.

But both strategies are taxing the skills of their equipment controllers as the second-hand market is itself swamped with surplus equipment, while the leasing companies enjoy an average for unexpired lease agreements of about five years.

While chronic port congestion soaked up an estimated 15% more tonnage during the high demand periods of 2021 and the first half of 2022, a vicious circle of landside congestion, full depots and oversubscribed empty stacking areas on terminals stymied the repositioning flow of containers back to Asia.

Box lines look to slash their bloated equipment pools

Large carriers are fighting over a diminishing pool of second-hand box ships, with the latest Alphaliner research pointing to no orders, but abundant acquisitions in the 700-999 teu feeder-size range.

Alphaliner found major carriers were acquiring vessels second-hand from non-operating owners: 675 over the past three years.

Major box lines still fighting over diminishing supply of smaller ships

Other interesting news stories:

Innovation & Sustainability

Not only shipping companies are working on becoming more sustainable. Many ports are doing the same. We look forward to connecting with other ports with a sustainability focus. The zero-emission ports of our PILA project in Northern Colombia will help reduce the negative impact of global shipping on our climate.

The World Port Climate Action Program (WPCAP) will be extended with a new focus on shore power, new fuels and green shipping corridors.

This was agreed by the CEOs and leaders of 12 leading ports at a meeting in Rotterdam on the occasion of the first five years of the program. WPCAP members praised the program for its important contribution to the adoption of sustainability standards in the shipping industry.

Port leaders extend Climate Action Program for greener shipping

The shipping industry is steaming in the right direction, slowly reducing emissions. We are looking forward to helping further reduce that.

The latest estimates from Clarksons suggest that shipping’s emissions on a tank-to-wake basis will contribute 2.1% and 822m tonnes of global CO2 output in 2023, down marginally on 2022’s figures of 2.3% and 845m tonnes as slower speeds impact. 

To put these figures in context, overall transportation contributes around 21% of global CO2, according to Clarksons with the largest polluter being power generation at around 39% (see charts below).

Moreover, while other transport sectors have seen emissions grow in recent years, shipping has managed to keep reducing its carbon footprint. 

Shipping emissions continue to drop ahead of MEPC 80

Other interesting news on sustainability and innovation:

That’s it for this week!

About the author:

Martijn Graat

Martijn is Zergratran’s Head of Content. He writes about the latest trends and innovations in logistics and anything related to Zergratran