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As Diana Shipping joined the list of operators avoiding the Red Sea, CMA CGM complained about how the conflict related revisions to schedules has forced up costs for liners such that inflated freight rates may not be high enough to run operations profitably when higher time charter, fuel and emissions costs are eating into margins. CMA CGM reported an 83% year on year fall in Q4 earnings from $24.88bn in 2022 to $3.64bn in 2023. Its shipping margin fell from 54% in 2022 to 24% in 2023, though logistic profits compensated, justifying the decision to vertically integrate services. Singapore-based ONE says that the Red Sea crisis is causing scheduling problems across the industry leading to berthing clashes as ships arrive unexpectedly at terminals and especially at hub ports in the Mediterranean and in Asia. Despite talk of rising ship deliveries, the ONE CEO Jeremy Nixon said in February that his line had too few ships to maintain its service schedules. He added that ONE has to deploy 16 ships on its Asia to North Europe loop going via the Cape of Good Hope compared to 12 sailing through Suez, even with ships sailing many knots faster. 2024 promises to be a year of twists, turns and surprises Increased demand for boxships reduced the idle ship count from 89 at the end of January to 84 on February 12, according to data from Alphaliner. There will be little sympathy from shippers who remember the tenfold increase in freight rates during the pandemic and who may point to an expected 8% increase in fleet capacity in 2024 as a reason why freight rates need not spike again this year. They may also point to UNCTAD data which suggest that containership speeds peaked in January at just over 16 knots only to fall back below 15.5 knots by mid-February. Vincent Clerc of AP Moller – Maersk said earlier in February that large numbers of buildings would saddle container shipping operators with overcapacity for some time “and could mean a difficult patch in the coming years.” He forecast 12% capacity growth this year and next year. Maersk has announced 10,000 redundancies and the sale of its towage business Svitzer, as well as its new Gemini Cooperation alliance with Hapag-Lloyd, aimed at managing costs and maintaining service schedules. Meanwhile, liner demand continues to perform positively. US containerised imports were up 9.2% in January after a revised 8.9% increase in December. Some of this demand growth was pre-Lunar New Year stock management. West coast container port Long Beach reported a 23.5% increase in January throughput. East coast ports reported only a 2% increase in throughput which may be linked to the situation in Panama, though broker Braemar reported in February that 205 container ship transits of the Panama Canal in January was only a 5% reduction on the seven-year average of 218 transits a month. Strong US economic data is driving a return to pre-pandemic levels of import growth according to consultancy Freightwaves. Nevertheless, this increase supported the rise in transpacific freight rates that was experienced in January as much as the diversion of ships via the Cape of Good Hope. For instance, Hapag-Lloyd announced an indefinite $480 per teu and $ 600 per feu ‘peak season’ surcharge on January 21. Freight rates as reported by Freightos on the North Asia to US west coast route rose 138% in January to $4,027, before adding a further 19% to $4,809 by February 23. Rates to the US east coast ended last year at $2,525, surged 144% to $6,141 in January then added another 9% by February 23 to reach $6,709. On the direct China to Europe routes, January’s bubbles burst in February. Rates had risen in the first month by 239% to $5,492 but then lost 17% to land at $3,553 on February 23. For boxes discharging in the Med, the freight rate peaked at $6,773 on January 19, up 168% on the year end figure of $2,401. The assessment has since fallen 23% to sit at $5,224 on February 23. In the Atlantic, firm US demand growth pushed up westbound freight rates from Europe by 59% in the four weeks to February 23 to $1,862, while on the reverse eastbound voyage February has been flat with rates hovering around $548 all month. With liner companies offering differing views about how much overcapacity will develop this year, and what effect that overcapacity will have on freight rates, it is clear that they have had to throw out their expectations, suspend their strategies and manage day to day. 2024 promises to be a year of twists, turns and surprises.

Containerlines get no sympathy from shippers

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