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
Like we wrote earlier, the implications of the canal’s congestion are far-reaching. The number of ships waiting to transit the Canal has risen to as high as 200 in the past weeks. And as you will read in the various news stories quoted below, the problem will continue for ten more months. Ten!
Shippers that have calculated dry ice for a set number of days run the risk of products spoiling before arrival as a result of delays. The beginning of August backed up 160 vessels and delayed some ships by as much as 21 days.Running on Ice: Panama Canal the latest wrench in the supply chain
The Panama Canal Authority (ACP) says it will extend water restrictions for at least another 10 months in an effort to conserve water if rainfall patterns do not vary significantly from projections.
Water levels in Gatun Lake, which feeds the canal, are at a four-year low. A canal lock uses 50 million gallons of water when a single vessel traverses the canal.
Current restrictions have reduced the number of daily vessel transits from 34-36 a day to 32.Panama Canal Authority extends water restrictions
According to Intermodal’s Research Analyst, Ms. Chara Georgousi, “within the last week, the drought-related disruptions at the Panama Canal have led to increased shipping costs and delays, particularly for vessels using this crucial waterway. The reduced weight limits and fewer daily crossings have resulted in queues of ships waiting to pass through, leading to congestion and longer wait times. This congestion has caused shipping prices to surge, affecting trade routes that rely heavily on the Panama Canal”.A Supply Chain Issue: Panama Canal and Its Fight Against Climate Change
The Panama Canal is a critical trade link for U.S. shippers heading to Gulf and East Coast ports. The U.S. is the largest user of the Panama Canal, with total U.S. commodity export and import containers representing about 73% of Panama Canal traffic. Forty percent of all U.S. container traffic travels through the canal every year, about $270 billion in cargo. U.S. energy and agriculture also use this waterway to transfer goods.Viewpoint: It’s time for shippers using Panama Canal to make decisions
LPG tanker just paid $2.4M for auctioned canal transit slot
“We also see that when the Panama Canal opens up for [transit slot] auctions, the price some VLGC owners are willing to pay just to pass through the Panama Canal for one leg is up to $2 million,” added Rigault.Panama Canal restrictions are rerouting LPG shipping flows
Other Panama Canal Stories:
- Panama Canal drought sees supply chain chaos warning
- The Panama Canal: Setting the record straight
- Panama Canal to extend transit restrictions for at least 10 more months
- Panama Canal delays are worst for ships without reservations, project44 says
General Ocean Freight News
Rates, unlike schedule reliability, have yet to stabilize. Trans-Pacific rates were going up again, but have since stalled. Still, container shipping has seen earnings of almost 9 billion dollars in the past quarter. Shipping companies are in for a challenge for the remainder of the year, as the outlook looks less promising for the year’s final leg. The main reason for the challenges is the economic downturn, driving shipping volumes down. Among others, Maersk has warned about declining demand. In the meantime, there was a jump in container traffic from Asia to Europe in the first six months of the year.
Whatever the rates or the financial results, this does not deter shipping companies, and many are adding more ships to their fleets. We are also seeing disruptions in the flow of global trade, the most obvious being the congestion around the Panama Canal. More on that further down. Below are the main ocean freight news items that caught our attention:
Container shipping spot rates in the Asia-U.S. trade have halted their ascent after rising double digits since late June. Several spot-rate indexes are now showing a retreat from recent highs.
Spot rates still remain relatively healthy — above pre-COVID spot rates and current contract rates — and it’s too early to know whether this is the start of a pronounced reversal or just a temporary setback.
But recent rate action further undermines any lingering hopes that the goods inventory overhang amassed during the pandemic has wound down and restocking will lead to a better-than-normal peak season.Rebound in trans-Pacific container shipping rates has stalled
Container exports from Asia to Europe jumped 11.9% year on year to 1.49 million TEUs in June, which have remained on an upward trend for four months in a row…
Meanwhile, imports from Europe to Asia decreased 7.5% to 3.17 million TEUs in June. From North Europe, 2.25 million TEUs were imported, down 6.6% from the western Mediterranean, 499,370 TEUs, down 8.6% and from the eastern Mediterranean, 419,692 TEUs, down 10.8%.Asia-Europe container exports increase in June, H1
According to Alphaliner, ONE is mulling an order for a series of 15,000 teu containerships, HMM is said to be considering a series of 16,000 teu vessels, but is holding off while the sale of a majority shareholding is completed, and Yang Ming and CMA CGM are poised to order 9,000 teu vessels.Container lines may be eyeing even more new tonnage
The container shipping industry had a net income of $8.9 billion in 2Q23, a decrease of $54.2 billion and 85.9% from the $63.1 billion profit in the year-ago quarter. That year-ago quarterly profit represented an all-time peak in industry earnings from multiple angles that it is doubtful will ever repeat… This is the fourth straight quarterly downturn after seven straight quarters of record net income for the sector driven by significant pricing increases across most lanes.JMC: Container shipping earns $8.9bn in Q2 23
In July 2023, schedule reliability remained steady M/M at 64.2%, being slightly lower than the high set in May 2023. However, on a year-over-year basis, schedule reliability in July 2023 is still 23.8 percentage points greater.Sea-Intelligence reports schedule reliability stable at 64.2%
Container traffic at the world’s leading ports during the first half provided clear evidence of the sharp reduction in Western demand. The fall in traffic was particularly marked at ports in the United States….Chinese ports are virtually the only ones to show positive results, even though the country’s economic recovery, following its abandonment of its Zero-Covid policy, was less strong than it had hoped. European ports, meanwhile, are struggling and the fall in traffic at US ports has been even more severe.World port traffic driven down by economic slowdown
Other ocean freight news:
- MSC gets into another vessel-sharing deal with Zim
- Modern ultramaxes in demand
- Maersk warns of declining demand for container shipping
- Cosco bucks the trend as container line profits hit $8.9bn in Q2
- Sea-Intelligence analysis: Shortage of blanks in Golden week
- Strong trading interest in China’s new container freight futures
- DP World announces resilient 1h2023 results with adjusted Ebitda of $2.6 billion
- Hapag-Lloyd reportedly ruled out of HMM bid
Sustainability and Innovation
Like Elon Musk is trying to create self-driving cars, the shipping industry is trying to develop self-sailing ships. Korea Line Corporation has announced that they have gotten approval for their self-sailing ship to make an automated trip.
Korea Line Corporation, a shipping arm of SM Group, revealed on Monday that its subsidiary, Korealine LNG, has secured approval for self-sailing from Panama for its LNG bunkering ship equipped with the Samsung Autonomous Ship (SAS) system developed by Samsung Heavy Industries.
Earlier this year, the shipbuilder successfully demonstrated autonomous vessel navigation from South Korea to Taiwan, marking an industry first. The demonstration involved the installation of SAS and the smart ship system SVESSEL on a 15,000 teu containership. The vessel sailed about 1,500 km from Geoje to Jeju Island and Kaohsiung Port in Taiwan between June 26 and July 1.South Korea takes the next step forward in autonomous shipping
One of the most significant contributors to carbon emissions is the energy we consume all over the planet. Finding a sustainable alternative could really help bring down the global footprint. One of these energy sources is fusion.
If the 2020s are going to be the decade of AI, then the 2030s could be the decade of fusion power — that is, if the sector’s startups are able to deliver.
Fusion power has never had a more solid foundation. Advances in semiconductors, magnets and, yes, artificial intelligence have driven fusion power forward faster than at any time in the last few decades. And over the last few years, startups in the sector have raised over $6 billion, according to the Fusion Industry Association.7 founders explain what fusion power needs to go mainstream
When it comes to sustainability is very important to be truly sustainable. We are definitely not helped by greenwashin or worse: lying about whether your products are green at all.
We are quickly getting used to the idea that colourless liquids and gases have an invisible colour after all, be it brown, blue or green, none of which we can see, that people are throwing these terms around, with nobody who can be relied on saying which “colour” a given stock of the new planet-friendly fuels are.
A quick recap. Brown fuels are the regular dirty kind that we all use every day. Blue fuels are made from brown feedstocks by stripping the excess carbon out (where does it go?) and green fuels – the sort that everyone imagines being used – are made without contributing any carbon dioxide to the atmosphere at all. An example of a green fuel might be hydrogen gas formed by electrolysis of water using electricity from wind power. An example of a blue fuel might be hydrogen gas made by stripping the carbon from regular methane.
People are going to claim that blue fuels are green fuels, and the money that will be made from this will make the global trade in illicit hard drugs seem like stamp collecting. It seems to me that there will be a need for reliable, generally accepted, certification of the true origins of marine fuels.
The final article we’re highlighting here is on American start-up EagleRail that has developed a sustainable alternative to drayage trucks to get containers out of ports and to container yards further inland that are easier to reach.
The largest ships currently carry over 24,000 containers. While this is great for shipping companies, it often creates problems in ports, where thousands of containers get offloaded at once. These containers need to be transported inland. Especially for ports with bad rail connections, thousands of trucks must pick them up.
Trucks increase the pressure on road systems, especially those in and around port areas, causing congestion. To minimize congestion in port areas, it would be better to transport containers to container yards further inland using other systems than trucks.
That’s all for this week!