Shipping companies are scandalous abuse of the current situation

Tariffs have exploded, shipping companies are making record profits, ports all over the world are overloaded, there are weeks of delays and the containers are unavailable. What is going on?

The origin of the current container crisis lies in the outbreak of the corona pandemic at the beginning of the year, when many countries, leading China, went into complete lockdown. Factories were closed overnight, ports closed and workers had to stay at home. Demand for container transport plummeted and shipping companies adapted by sharply reducing the number of departures.

Thanks to unprecedented strict measures, China had the corona virus under control within six months and the factories were able to start operating again, partly thanks to state aid. In many countries that were still in full or partial lockdown, consumers ordered products online en masse, which resulted in a peak in demand. This coincided with the traditional third-quarter transport spike, ahead of Christmas sales in the Western world in December.

Container lines had in the first half of the year severely limited the number of departures, in transport between Asia and Europe almost halved, according to an analysis by the British agency Drewry. When demand skyrocketed in the third quarter, the disused ships were reactivated at a rapid pace, but by then there had already been a significant backlog in the discharge of Chinese production. This backlog is now being quickly made up, resulting in enormous supplies from Asia.

The ports in the United States and the United Kingdom in particular proved to be barely able to cope with this current, which resulted in long waiting times for the ships, or congestion. The sometimes weeks of delays in British ports in turn led to delays in continental ports, including Rotterdam, Antwerp and Hamburg. There too the containers piled up and shipping companies were forced to take emergency measures. For example, Hapag-Lloyd has informed its customers that containers with export cargo may only be delivered to the Container Terminal Altenwerder (CTA) from 48 hours before the ship’s scheduled departure.

According to Drewry, the cause of the shortage of empty containers must mainly be found in the United States. With more than 300,000 corona deaths of all countries, the country has been by far the worst hit by the pandemic and many factories and distribution centers are running at half speed or closed, causing containers to pile up. As a result, they often only become available again after a long delay for export or to be transported empty to Asia. The container factories in China, which produces almost all containers worldwide, are now working overtime in an attempt to solve the lack of empty containers.

In the meantime, prices in container transport from Asia to Europe continue to hit new records every week and are now the highest in at least ten years. Last week alone, spot transport rates shot up by a quarter to nearly $ 3,000 per teu, ie 6,000 for a forty-footer. That is twice as much as a month ago and three times as much as a year earlier. The booking freeze has probably contributed to this sharp price increase in a number of ways.

In the Netherlands, shippers are getting tired of the constant price increases and some of them suspect that shipowners are still limiting the capacity to drive up prices further. For example, freight forwarders association Fenex recently called on shipping companies to “upscale capacity”. However, an analysis by Drewry shows that this upscaling already took place in the second half of the year. After a peak in the number of “blank sailings” in the period February-May, hardly any more port calls are missed.

Where that still happens, it has to do with congestion in ports. In a number of cases, Maersk unloaded containers destined for England in Morocco and canceled calls at Felixstowe. And some shipping companies, including CMA CGM, are now trying to put in extra sailings with ships of less than 4000 teu to meet the worst needs. Such ships are normally used in feeder transport, but with current rates they can now also be operated very profitably in deep sea transport. The sky-high rates and the container shortage are driving some to despair.

According to a logistics service provider, “the shipping companies are scandalous abuse of the current situation, which they have largely created themselves”. According to this source, bookings are accepted at astronomical rates, and just as easily canceled again and then accepted at even higher rates. The company says it deals with customers who are at their wits end every day: “Can it be an ounce less?”.

1 Like

Good write up except:

yeaaaaaaaaaah, I don’t know about that…

Then you should thank Dutchie for updating you.

lol ok dude.