Ocean Freight Update: Panama Canal Capacity Lowered by Draught, Less Containers Lost at Sea, Wind-Powered Ships 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

Climate change is impacting global shipping, now that drought is forcing the Panama Canal Authority to lower the maximum draft of vessel transiting the Canal.

The problem with taking cargo to the East Coast and Gulf Coast gateways is that Panama is experiencing its worst drought since 1950, restricting ships drafts in the canal. The Panama Canal Authority (ACP) warned Monday that water levels could continue to fall and “unfortunately, current estimates indicate that the economic impact is unavoidable.”

The maximum draft for the larger Neopanamax locks has been reduced to 44.5 feet, with expectations for a reduction to 43 feet by August. “A limited number of ships have had to lower their drafts to comply,” said the ACP.

According to Habben Jansen, the current situation in the Panama Canal is worse than in previous droughts. “At the moment, we are not diverting ships,” he said. “But the effect is that you can simply load less boxes on the same ships, which is of course not a good thing.”

Labor unrest, canal woes could complicate ‘normal’ peak season

It’s still rocky waters for shipping companies. Revenues are down compared to last year, although last year was far from a standard year. Container News reports:

Sea-Intelligence said there were indications of a weakness in the market in the second half of 2022, which has manifested fully in the first quarter of 2023.

Revenues declined quite sharply, in the range of 35%-70% year on year, while in terms of earnings before interest and taxes (EBIT), there was a stark difference for the first quarter of 2023 versus the previous two years.

Overall, the first quarter of 2023 EBIT was US$7 billion versus a staggering US$43.93 billion in the first quarter of 2022, and even lower than the US$16.28 billion EBIT of 2021-Q1. “That said, it is still markedly higher than the US$621 million EBIT of the first quarter of 2019,” pointed out a Sea-Intelligence official.

Container lines see important decline in revenues and earnings in 2023 first quarter

Some rates are still going down further, while others are recovering.

Container spot rates from Asia to North Europe remained under pressure this week, while transpacific rates have been boosted by potential supply chain issues linked to US west coast industrial action and Panama Canal draught restrictions.

As peak season orders continue to disappoint, the Freightos Baltic Exchange (FBX) Asia-North Europe component slumped 16% in the past seven days, to $1,195 per 40ft, which compares with $10,599 a year ago.

North Europe rates still falling, while the transpacific spikes

While rates have been decreasing, it is good to see that reliability is still improving, albeit more slowly than before. Let’s hope ocean carriers will pick up steam again in the coming months.

Ocean carrier reliability improved 1.7% in April to 64.2%, up 29.9% YoY, according to Sea-Intelligence’s Global Liner Performance report.

While reliability has improved from historic lows, the strength of the improvement has weakened with each subsequent month, according to the performance report. The average delay for late vessel arrivals was at about 4.34 days compared to 6.41 days in April 2022.

Ocean carrier reliability keeps improving, but momentum is slowing

While import levels are going down in the United States, they are going up in China.

The imports of consumer goods at Shanghai ports reached 326.1 billion yuan (about 45.6 billion U.S. dollars) in the first five months this year, up 17 percent year on year, the local customs said Tuesday, Azernews reports, citing Xinhua.

Shanghai Customs said it had recovered to the level of the same period in 2021, accounting for more than 40 percent of the total imports of consumer goods in the country, which to some extent reflects a rebound in consumption in China’s domestic market.

Shanghai ports post 17 percent growth in consumer goods imports in Jan-May

Container exports from 10 major Asian economies to the United States reached 1,474,872 TEUs in May, based on volumes at ports of origin where container carriers are loaded with shipments, according to statistics compiled by Descartes Datamyne from Automated Commercial Environment (ACE) and bill-of-lading (B/L) data provided by the US Customs and Border Protection (CBP).

Container exports from Asia to the US plunge in May

The United States ports covered by Global Port Tracker handled 10.5 million TEUs of containers in the first half, representing a decrease of 22.3% year-on-year.

Furthermore, Global Port Tracker has not yet forecast the full year, but the third quarter is expected to total 5.97 million TEUs, down 7.9%, and the first nine months of the year should total 16.48 million TEUs, down 17.6%.

US container imports down to pre-pandemic levels

And the final news item we quote this week is another piece of positive news on shipping containers getting lost. Containers ending up in the ocean are polluting, especially when the containers contain dangerous goods. Only a very small percentage of containers get lost at sea, but any one container is one too many.

Worldwide, a total of 661 shipping containers were lost overboard last year. That figure is significantly lower than the annual average of 1,566 containers lost at sea, according to the latest annual report from the World Shipping Council (WSC).

The annual average of containers lost at sea is based on the statistics for the period from 2008 to 2022. The 661 ones lost in 2022 represent only a tiny fraction of the 250 million containers currently shipped each year, with the cargo transported worth more than US$7 trillion.

Fewer containers lost at sea in 2022 

Other interesting news we came across:

Innovation & Sustainability

Let us start off with a piece of very worrying news. It is very very clear that the time to act is now!

Greenhouse gas emissions have reached an all-time high, threatening to push the world into “unprecedented” levels of global heating, scientists have warned.

The world is rapidly running out of “carbon budget”, the amount of carbon dioxide that can be poured into the atmosphere if we are to stay within the vital threshold of 1.5C above pre-industrial temperatures, according to a study published in the journal Earth System Science Data

Global greenhouse gas emissions at all-time high, study finds

It is good to see European ports cooperating to address climate change and make a difference. These are by no means the only ports working hard to lower their carbon footprint.

A newly signed Memorandum of Understanding (MoU) between Ports of Stockholm, Freeport of Riga Authority and Riga Ropax Terminal is expected to be the driving force behind a joint application for European Union (EU) funding to reduce the impact of port activities on the environment and climate in the areas surrounding the passenger terminals in the aforementioned capital cities.

European ports jointly seek EU funding to address environmental challenges

While it is still impossible to power large container ships with batteries, battery technology has advanced a lot over the years. It has spurred many different designs of battery-powered boats. We wrote a blog about alternative ways to power vessels, which you can find here

Cargill has partnered with Kotug International to deploy Kotug’s zero emission E-Pusher and E-Barges, the world’s first fully electric pusher boat and barges to transport cocoa beans from the Port of Amsterdam, the largest cocoa import port in the world, to Cargill’s cocoa factory in Zaandam, the Netherlands.

The boats will run on green energy from the wind farm that Cargill and Vattenfall operate in partnership with Windpark Hanze.

World’s first zero-emission electric pusher tug and barge put into operation

And let’s not forget the power of the wind as a direct force of moving ships.

The concept of using sails for propulsion might seem antiquated in the era of fossil fuels and nuclear power. However, they see a resurgence as a sustainable, renewable means of powering cargo ships. Modern sailing technology has come a long way from the large, manually-operated cloth sails of yore. Today’s versions are often automated, using lightweight, durable materials and sophisticated aerodynamics.

Setting Sail for Sustainability: Wind-powered Ships Lowering the Industry’s Carbon Footprint 

That’s all 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