What’s happening in 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 Easter coming up, it was a relatively quiet week in the world of ocean freight news.
General
Container rates have been going down for a while, which would normally mean shipping companies would sell ships for demolition, but this is not the case. The ships are being kept in circulation. What will this unexpected capacity do with shipping prices? Or will they still be scrapped?
“The supply of tonnage to the ship recycling market has slowed considerably, with only a handful of units currently being circulated. However, there is speculation that some of these units will instead be sold on for further trading amid some improving shipping market conditions.”
The world’s largest shipbroker noted that last week, Taiwanese liner operator Evergreen Marine Corporation circulated two 1999-built, 5,652 TEU ships, Ever Unific and Ever Uberty.
“However, some reports suggest there are buyers interested in the vessels for further trading; it is yet to be seen if the ships will eventually make their way to a recycling yard,” said Clarksons.
Boxship demolition slows to crawl
The market is expected to stabilize further and peak season this year is expected to be better than last year. It could be a reason for more ships being kept in circulation. The charter market is also seeing demand rising.
Container xChange co-founder and CEO Christian Roeloffs said industry sentiment was “gradually turning positive” and added: “We anticipate a subdued rebound in demand as retailers begin to deplete their excess stock in the coming months, leading up to the peak season.”
And carriers are hearing positive news from their major shippers that purchase orders, to replenish old stock and buy in new season lines, are starting to trickle through.
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Awash with cash and eager to capture market share, the container lines have gone back to the charter market to boost their capacity and Alphaliner said this week activity in the market “remained high”, with “demand strong across the board”.
Positive ocean freight sentiment keeps the charter market bullish
Geopolitical tensions are also playing an increasing role in the global shipping markets. The recently announced vessel boardings by China in the Taiwan Strait are one, and the war in Ukraine is another important factor. FreightWaves reports:
According to Drewry, the “superpower grudge match” between the U.S. and China “has been brought to a boiling point by Russia’s invasion of Ukraine,” with Russian President Vladimir Putin “a useful puppet to China” who “can help widen the geopolitical schism and bring more countries over to [China’s] side.”
Geopolitics is heightening the focus on “friend-shoring” — container trade between trusted countries that share common values. “If friend-shoring becomes the standard trading model, ocean carriers will need to start thinking creatively about how they can continue to serve both sides of the divide,” said Drewry.
“It will also put countries such as Vietnam and India in a very awkward predicament. They are understandably trying to play both sides at the moment. But there will come a time when China or the U.S. will decide for themselves if they are one of theirs or not.”
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Geopolitical unrest poses high risk to future container shipping demand. Reshoring of manufacturing to the U.S. and nearshoring to Mexico would reduce trans-Pacific volumes.
Furthermore, container shipping is more exposed than tanker shipping to global GDP, which economists argue will be negatively affected by geopolitical rivalry versus multilateral cooperation.
China-Russia vs. US-EU: How global shipping is slowly splitting in two
Amongst the uncertainty, there is also some good news. The ocean carriers have improved on their schedule reliability.
The ocean carriers’ global schedule reliability increased sharply by 7.7% month-to-month in February 2023, reaching 60.2%, according to Sea Intelligence.
On a year-to-year level, schedule reliability has marked a staggering 26% rise. At the same time, the average delay for late vessel arrivals decreased by 0.07 days month-to-month in February reaching 5.29 days, while it is down 2.30 days year-to-year.
In relative terms, the average delay for late vessel arrivals is now closer to the 2019 level than to the highs of 2021-2022.
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On a year-to-year level, all carriers recorded double-digit improvements in schedule reliability in February 2023, with Wan Hai recording the largest growth of 36.2%.
Ocean carriers increase schedule reliability, Maersk ahead of competitors
Other interesting news:
- Hapag-Lloyd implements new rate increase from East Asia to North America
- China launches ship inspection campaign in the Taiwan Strait
- China Announces Vessel Boarding Campaign Amidst Tensions With Taiwan
Sustainability & Innovation
Only one story jumped out at me this week in this category and it is about the sustainability of the Panama Canal, which is an important source of fresh water for the surrounding land. It’s good to see that sustainable development is high on the agenda for the Canal.
“The Panama Canal, which runs on freshwater, is a critical connection point in global supply chains” stated Administrator Vasquez.
“Also, it is the only canal that, in addition to guaranteeing its daily operation, has the responsibility of keeping water available to supply more than 50% of the national population. Therefore, the handling and management of water resources is a strategic issue for us, and this experience makes us an international benchmark in this area. For the Canal, it is not enough to be a strategic step in the service of world trade; our commitment lies in being world leaders in sustainable connectivity,” he added.
Sustainability of the Panama Canal reaches the United Nations
That’s all for this week!
