Shipping Services Continue To See Disruption And Rate Increases


By Stuart Burns

As a followup from a piece we posted last month about container logistics in the current pandemic environment, we thought an update may be appropriate.

In that vein, the dynamics at play in global supply chains remain highly volatile.

From bad to worse

We had hoped to post good news for consumers, namely that as manufacturing in China, Europe, and North America recovers, freight capacity would increase. As a result of that increase, the disruption shippers experienced in the spring would subside.

Unfortunately, if anything, it is getting worse.

Shipping lines introduced blank sailings at the beginning of this year. This essentially removed scheduled services from the rotas due to an initial lack of demand for space, as China went into lockdown, and in an effort to contain costs and support freight rates.

According to Sea-Intelligence, blank sailings increased 15% week over week. As a result, a six-week plateau – during which carriers did not announce significant decreases in capacity – ended.

Uptick in blank sailings

Sea-Intelligence had been predicting further growth in blank sailings; they were right.

The uptick is the result of blank sailings announcements by 2M and THE Alliance in the third quarter.

These two alliances are part of the three major shipping alliances (2M, THE Alliance, and Ocean Alliance). They were formed in 2017 to support prices and try to even out provision of services.

Based on the current Alphaliner ranking of all the shipping lines, these three alliances account for 80% of the global container market, according to Container Exchange. In the past two weeks, there have been 20 additional blank sailing announcements on Transpacific routes. Meanwhile, there have been 24 on Asia-Europe routes, Sea-Intelligence reports.

So far, there has been no indication of a summer peak season that would normally occur in ocean shipping.

The industry has been very agile in its capacity management. As a result, there has been no fall in rates.

Indeed, if anything, rates have risen steadily during the first half of the year and are looking particularly resilient now.

For the next 12 weeks, about 8% of capacity has been taken out of the Transpacific route. In addition, about 15% has been taken out on Asia-Europe. The effect of these actions will be to support rates and potentially increase them. Furthermore, they will continue to cause delays and disruption to established supply chains.

Original Post

Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.

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