There’s a painful New Year’s Eve hangover looming on the horizon for maritime container cargo carriers, reports NS News.
Demand and capacity issues
In the leadup to New Year’s Eve 2022, the 18-month pandemic economy profit party enjoyed by Vancouver-based Seaspan Corp., A.P. Moller Maersk and other major players in the global container-shipping sector has been historic by any measure in any industry sector. But a host of demand and capacity issues are signalling an end to the freight movement festivities as early as 2023.
An October report from John McCown, a New York-based container shipping industry analyst, noted that the 10 largest ports in the United States recorded a 9.4 per cent drop in inbound container volume compared with the same month in 2021, which was “the biggest year-over-year decrease since the beginning of the pandemic.”
The downturn was led by West Coast ports, which suffered an overall 23.3 per cent drop in volume. That, McCown pointed out, was the biggest decline in over seven years. Globally, the numbers are similarly sobering.
Demand growth for container cargo movement
Demand growth for container cargo movement measured in 20-foot-equivalent units (TEUs), according to Lars Jensen, CEO of Denmark’s Vespucci Maritime, “has dropped off a cliff.”
A panellist on S&P Global’s year-end outlook for container shipping in 2023, Jensen said September data shows that, regardless of how that global container cargo movement is being measured, “[it] is now less than what we did pre-pandemic.”
Jensen added that most of the supply chain bottlenecks at major container cargo hubs like Los Angeles-Long Beach have been removed. He pointed out that more than 50 per cent of ships are now arriving on time. Jensen said that vessel reliability factor is still poor, but it is an improvement over January, when it was below 10 per cent on the U.S. West Coast.
The average containership delay time at the top five West Coast ports has consequently been cut by 40 per cent between January and October, according to Container xChange, a logistics technology company. That supply chain efficiency improvement has also increased container-shipping reliability and capacity.
“So, the backdrop here is, we’re seeing a lot of capacity come back on stream at exactly the same time as we are seeing demand collapse,” Jensen said. “The result is, of course, not surprising at all. We’re seeing freight rates drop like a rock…. The extremely high freight rates that we saw in late 2021 and early 2022 were clearly driven by a physical shortage of capacity.”
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Source: NS News