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Container port congestion levels are yet to fall substantially in the US, where 153 ships were reported waiting at the end of July compared to 148 at the start of the year. The reason this time seems to be retailers were filling inventory ahead of peak season while fearing a dispute between dock workers and employers, which eventually did not happen. There were reports of an increase in blanked sailings from the US in August as liners tried to avoid congested ports. Containerised imports to North America reached a record 3.01m teu in June but were down by 3% in 1H22 compared to 2H21 according to data from industry benchmark Container Trade Statistics. The trend in the second half of this year so far seems to be downward. As of August 24, bookings from China to Los Angeles were at their lowest since March 2022, and down 30% since June, while bookings from China to New York were down 33% compared to June this year, according to Project44. Consequently, transpacific spot freight rates have fallen further in August, to $5,419 on China-US west coast and to $9,085 on China-US east coast. These levels were last seen in May 2021 as the market was taking off and they are way down on the September 2021 peaks of $20,600 on China-US west coast and $22,200 on China-US east coast. President Biden has been quiet on the matter of freight rates this month; perhaps he thinks his intervention in July was enough to frighten the liners into cutting prices. US east coast ports may be further disrupted by the strike at the UK’s main container port, Felixstowe, which is also adding to supply chain disruption in western Europe, where a labour dispute in Germany has now ended, easing congestion there. Freight rates on the transatlantic westbound route have wobbled, falling from $8,400 to $7,950 in two weeks to August 5, then rebounding to $8,500 over the next two weeks before falling back to $8,300 by August 26. The backhaul US east coast-North Europe rate fell sharply from about $750 in late July to $500 in mid-August before rallying to $600 on August 26. The disruption in Europe has led to volatility in China-Europe freight rates, which have yo-yo’d from $9,600 in late July to $10,500 in mid-August and back down to $9,700 in late August, back to June-2021 levels with the outlook definitely bearish due to macro-economic conditions in Europe. Christian Roeloffs, CEO and co-founder of Container xChange, says, that “strikes at European ports this year have already been highly damaging to logistics operations, manufacturers, and industry at large. We expect further industrial action to be just as harmful.” The downturn in trade into and out of Europe was already apparent in 1H22 data recently released which show a 3% fall in European exports in the first half of this year compared to the second half of last year, and a 6% fall compared to the first half of last year. European containerised imports were also down in 1H22, by 3% compared to 2H21 and by 4% compared to 1H21. As Chinese and European river transport suffers from low water levels, rain is now an issue with Typhone Ma-On making landfall in China on August 27, causing Shenzhen container terminal to suspend entry of all containers, full and empty, for up to three days. Hong Kong stopped accepting empty containers on August 26, causing a weekly 67% fall in teu capacity calling at the port as of August 25. The weather has been very disruptive in southern China as Sichuan province ordered all factories to shut for a week from August 19 due to extreme temperatures and energy shortages. The shutdown affected manufacturers of solar panels, semiconductors, car batteries and other capital goods, which will reverberate along global supply chains even when the weather cools down. The message for the global container logistics business, after two years of pandemic and weather related disruption, is that considerably more resilience needs to be built into global logistics. This will presumably add to costs over time. In the time charter markets, costs are currently falling as the freight market outlook weakens. The Harper Petersen time charter index which peaked at 4,600 points in March this year has fallen to 4,200 points in August. For an 8,500 teu vessel, this means a fall to a still mouth-watering $143,000 a day for one year. One wonders where the liners’ profits will head if they have to pay these kinds of time charter rates while freight income continues to fall in what looks like being a difficult peak season this year. Economic media report that retailers in North America are facing unheard-of levels of customer returns, as much as 5% of all sales, leading to problems of logistics, storage, and cash flow. As European consumers in particular face a winter of economic recession and high energy prices, consumers are tightening their belts, cutting discretionary spending. The traditional economics of supply and demand are clearly still working in liner shipping.

Container shipping must beware of consumers’ tightened belts

Boxes handled are sliding. We’re all easing up on buying stuff. Something has to give.

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