Transporte e LogĂ­stica Global | DSV

No immediate improvement in market conditions

The container market out of the Asian continent is usually seen to weaken slightly in the period after Chinese New Year. Given the extremely problematic congestion issues in the global market shippers might have hoped for a similar easing this year, as that will alleviate pressure on other worldwide trades.

However, there is still good news to find

If we start out looking at the positives, there is a glimmer of hope when it comes to both freight rates and congestion. Since CNY, spot rates from Asia to Europe have fallen by almost USD 800 / FFE according to the SCFI index. The overall SCFI index for major collection of freight routes out of China has fallen by 5% compared with the start of CNY. 

And there is more good news: outside the ports of Los Angeles and Long Beach the large queue of waiting ships has been reduced from more than 100 ships to less than 50 in the past month. Given these developments, shippers might feel slightly more hopeful as it does convey a sense of quick improvement. But the latest data show that the positive developments are unfortunately not totally representative for the worldwide market status. 

Freight rates remain high

It is true that the SCFI spot rate is down by almost 800 USD / FFE, but it must be seen in the right context. The actual level is still just below USD 15,000 / FFE from Asia to Northern Europe and is therefore still at a historically extremely high level - where a fall of USD 800 / FFE is relatively limited. 

Looking at the overall index, it is correct that SCFI is down by 5%, but this is not the case for other spot rate indices. At the same time the global WCI index lowered only with 1.5% and the global FBX index dropped only with 0.5%. The WCI and FBX include a broader geographical scope than the SCFI, so that the reality is that there is only limited broad declines in the spot market globally, and the actual rate levels remain historically high. 

At the world's largest container shipping conference, TPM in California in early March, data provider Xeneta presented figures showing that the new annual contracts for the Pacific in 2022 will be entered into at levels twice as high as 2021 - and that there are now contracts for 2023 at almost the same high level.

Vessels are still queuing

In terms of congestion: the reduce of the queue for the ports of Los Angeles and Long Beach must be seen in a bigger context. Vessel queues have grown on other ports in the United States. With Charleston as an example of that, with over more than 30 vessels in waiting line to be (un)loaded. Part of the solution in California is simply because the problem has shifted. 

Additionally, there was a large decline in vessel departures from Asia to the US West Coast around CNY and this is also manifesting itself as a reduction in the queue. Looking at the current situation there is a large increase in vessel departures from Asia that will soon reach California. So the queues might well start growing again.

When looking at global port congestion data you see that there is no improvement in congestion levels. Neither in Europe nor North-America, when comparing March with February. The problems in Europe, for example, resulted in Hapag-Lloyd temporarily stopping export booking acceptance from Germany and central Europe for any cargo going out via Hamburg, due to severe congestion issues.

The war in Ukraine

In addition, there are the problems posed by the war between Russia and Ukraine. It affects shippers who are otherwise not involved with both countries. The disruption of freight to the two countries as well as Belarus means that containers that were already on-board ships to Europe now end up in ports in the Eastern Mediterranean, in the Black Sea and in Northern Europe.

This will only increase the bottleneck problems in these ports. Furthermore, most services by train from China to Europe now stopped since transport trough Russia became almost impossible. This leads to extra pressure on the ship capacity from Asia to Europe. War sanctions have further led to a sharp rise in the price of marine fuel. We have seen prices above USD 1.000 per ton, compared to USD 650 per ton at the beginning of 2022. And an average of USD 560 per ton in 2021. This will put upward pressure on fuel surcharges on all container routes worldwide. 

A more realistic look

The reality in the market, at present, is that the small bright spots you can find as a shipper are unfortunately just isolated effects. The reality is a market where there is no improvement to be traced. This both in relation to operational problems and where the domino effects from the Russia / Ukraine war could easily lead to a worsening soon.

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