CARRIERS are deploying greater levels of capacity on the Asia-North Europe trade despite relatively flat growth in volume, but the injection of supply is being countered by congested ports delaying vessels and inland logistics bottlenecks slowing equipment turnaround.
This dynamic, also playing out on the trans-Pacific, is keeping spot rates at red-hot levels while heaping pressure on European manufacturers that are struggling to manage supply chain delays and meet regional demand, reports IHS Media.
Statistics provided by container shipping visibility provider eeSea shows Asia-North Europe capacity growth in August 2021 increasing 29 per cent versus the capacity deployed in July and up 11 per cent versus June. August capacity was up 34 per cent year over year.
Yet even with the addition of capacity, rates continued their sharp rise through August.
The increase in rate levels this year far outstrips the growth in volume on the China-North Europe trade. While volume for August is not yet available from Container Trades Statistics (CTS), the July volume is up just 2.4 per cent compared with July 2019. Average rate levels in July of $6,745 per TEU were more than nine times higher than those in 2019.
Capacity deployed on the Asia to North Europe and Mediterranean trade has risen 19.7 per cent in the last 12 months compared with the previous year to 5.25 million TEU, said Peter Sand, chief shipping analyst at shipping association BIMCO. But, he said, the additional capacity is being offset by the market disruption.
'Even with these extra ships, carriers are struggling to meet their scheduled departures, which leads to cancellations of sailings or port calls because the supply is not there rather than due to a lack in demand,' Mr Sand wrote in a container shipping update.
'Adding capacity on already congested trade lanes does little to solve the fundamental problems,' he added. 'The limiting factor is not capacity onboard ships, but rather how many containers the ports and hinterland connections can manage, as well as storage space in temporary container yards and final destinations.'
Michael Braun, vice president of customer solutions for Xeneta, said that there was no real peak in demand on Asia-Europe, but there was so much capacity stuck in terminals and waiting outside ports.
'It's not that there are not enough ships to handle the demand; it is the congested supply chain that cannot handle the backlogs, and that is causing the disruption all around the globe,' he said.
Jeremy Nixon, CEO of Ocean Network Express, said in a recent interview: 'Landside port and intermodal transport delays, plus additional customer container dwell times, have adversely combined to seriously and negatively impact global network capacity.
'Without these largely Covid induced industry root causes, there would be adequate capacity in the system to handle current demand.'
The supply-side disruption continues to make life difficult for European manufacturers, according to Chris Williamson, chief business economist at IHS Markit.
Dominique von Orelli, vice president and global head of ocean freight at DHL Global Forwarding, said the impact of the disruption on Chinese orders was also being seen among the forwarder's customers. 'The fact is that customers are reluctant to order due to the uncertainty, and order very early or not at all,' he said.
McKinsey and Co put a figure to the global capacity effectively being tied up by the disrupted container shipping markets, estimating in a recent market update that global container carrying capacity has dropped 11 per cent since September 2020 as a result of port congestion in Asia, Europe, and the US.
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This dynamic, also playing out on the trans-Pacific, is keeping spot rates at red-hot levels while heaping pressure on European manufacturers that are struggling to manage supply chain delays and meet regional demand, reports IHS Media.
Statistics provided by container shipping visibility provider eeSea shows Asia-North Europe capacity growth in August 2021 increasing 29 per cent versus the capacity deployed in July and up 11 per cent versus June. August capacity was up 34 per cent year over year.
Yet even with the addition of capacity, rates continued their sharp rise through August.
The increase in rate levels this year far outstrips the growth in volume on the China-North Europe trade. While volume for August is not yet available from Container Trades Statistics (CTS), the July volume is up just 2.4 per cent compared with July 2019. Average rate levels in July of $6,745 per TEU were more than nine times higher than those in 2019.
Capacity deployed on the Asia to North Europe and Mediterranean trade has risen 19.7 per cent in the last 12 months compared with the previous year to 5.25 million TEU, said Peter Sand, chief shipping analyst at shipping association BIMCO. But, he said, the additional capacity is being offset by the market disruption.
'Even with these extra ships, carriers are struggling to meet their scheduled departures, which leads to cancellations of sailings or port calls because the supply is not there rather than due to a lack in demand,' Mr Sand wrote in a container shipping update.
'Adding capacity on already congested trade lanes does little to solve the fundamental problems,' he added. 'The limiting factor is not capacity onboard ships, but rather how many containers the ports and hinterland connections can manage, as well as storage space in temporary container yards and final destinations.'
Michael Braun, vice president of customer solutions for Xeneta, said that there was no real peak in demand on Asia-Europe, but there was so much capacity stuck in terminals and waiting outside ports.
'It's not that there are not enough ships to handle the demand; it is the congested supply chain that cannot handle the backlogs, and that is causing the disruption all around the globe,' he said.
Jeremy Nixon, CEO of Ocean Network Express, said in a recent interview: 'Landside port and intermodal transport delays, plus additional customer container dwell times, have adversely combined to seriously and negatively impact global network capacity.
'Without these largely Covid induced industry root causes, there would be adequate capacity in the system to handle current demand.'
The supply-side disruption continues to make life difficult for European manufacturers, according to Chris Williamson, chief business economist at IHS Markit.
Dominique von Orelli, vice president and global head of ocean freight at DHL Global Forwarding, said the impact of the disruption on Chinese orders was also being seen among the forwarder's customers. 'The fact is that customers are reluctant to order due to the uncertainty, and order very early or not at all,' he said.
McKinsey and Co put a figure to the global capacity effectively being tied up by the disrupted container shipping markets, estimating in a recent market update that global container carrying capacity has dropped 11 per cent since September 2020 as a result of port congestion in Asia, Europe, and the US.
SeaNews Turkey