Panama Canal Water Levels to impact Westbound Trade Well Into 2024

Global Logistics, Global Trade Daily, News, Ocean Ports

Panama Canal Water Levels to impact Westbound Trade Well Into 2024

November 30th, 2023 Container xChange Leave a comment

Container xChange, the leading online platform for container logistics, provides crucial insights into the far-reaching effects of the ongoing Panama Canal crisis on global trade and on the container shipping industry. With this update, we aim to assist our customers and partners with visibility into the situation for better decision making for their businesses.

Panama Canal Crisis and Global Trade Impact

The Dry Bulk and LNG segments have borne the brunt of restricted transits, particularly due to their ad hoc scheduling. In contrast, liner shipping has faced minimal consequences from transit reductions but has been significantly affected by draught reductions.

“The Dry Bulk and LNG segments have experienced the greatest impact due to restricted transits, primarily because they don’t adhere to a fixed liner schedule but instead “arrive at the canal on an ad hoc basis.” In contrast, liner shipping has faced minimal consequences from transit reductions but has primarily been affected by draught reductions. The maximum draught has been decreased from 50 feet to 44 feet, with each foot reduction in draught resulting in a “loss” of 400 TEU capacity. Consequently, an average container vessel can now transport 2400 TEU less.” shared Christian Roeloffs, cofounder and CEO of Container xChange.

The Panama Canal, currently spared from chaos, finds an unexpected ally in the form of a demand lull, preventing disruptions that would have posed a significant challenge for westbound trade shippers.

“At present, container shipping trade flows remain unencumbered. However, anticipating increased pressure on the US east coast, the Suez Canal and the Cape Horn in the coming months, shippers are likely to explore alternative routes to circumvent potential disruptions.” added Roeloffs.

The immediate impact includes a halved number of vessels passing through the canal, resulting in shipping companies rerouting vessels, blank sailings, longer transit times, and potential higher shipping costs in the coming times.

The impact of Panama Canal will run easily throughout the next year (2024) because of the irreversible environmental concerns that dwindle the performance of the canal.

Current Challenges at the Panama Canal

The ongoing challenges, compounded by the Panama Canal Authority’s water conservation measures in response to a drought, have led to prolonged wait times, capacity limitations, and additional strain on shipping schedules. Measures like the restriction of booking slots and adjustments to vessel weight requirements have further elongated waiting times.

The resulting supply chain disruptions are expected to reverberate throughout the industry, potentially impacting container prices. Heightened competition for available slots has driven up spot freight rates, prompting carriers to re-evaluate pricing strategies to offset increased costs and uncertainties. Several carriers have already announced new fees for Panama transits including MSC who will impose a US$297/container Panama Canal Surcharges (PCS) from 15 December.

According to the Panama Canal Authority, the average daily queue of non-booked vessels waiting for transit has increased from 2.5 days on November 4, 2023, to 9.3 days as of November 28, 2023, for northbound vessels. Southbound vessels have experienced a similar trend, reaching an average waiting time of 10.5 days.

Vessels statistics and transit backlog in the Panama Canal- https://apps.pancanal.com/t/TI/views/DashboardColadeEspera/DashboardCola-EN?%3AisGuestRedirectFromVizportal&%3Aembed=y&%3Ahighdpi

Business Impact on US Businesses

As a response to the crisis, carriers are redirecting more volume to the U.S. West Coast or opting for routes via the Suez Canal. This shift in shipping patterns may impact transportation costs, delivery times, and overall supply chain efficiency for U.S. businesses. The potential escalation of intermodal volume to the U.S. West Coast could affect capacity and efficiency, leading to increased costs or delays for businesses relying on these services.

Outlook on the Future of US Container Logistics

The Panama Canal drought poses profound implications for global container logistics. With 40% of all U.S. container traffic transiting through the canal annually, amounting to approximately $270 billion in cargo, logistics providers may explore alternative shipping routes to alleviate potential disruptions.

To navigate potential canal-related disruptions, logistics operators may intensify their utilization of intermodal transportation and engage in renegotiating shipping contracts for the upcoming contract season in 2024. Collaborative efforts among logistics stakeholders become crucial to address the multifaceted effects of the Panama Canal congestion on global trade routes and container prices.

Global Logistics, Global Trade Daily, News

54% Container Logistics Pros do not Believe Shifting Container Production Away from China will Ease Supply Chain Woes

November 26th, 2023 Container xChange Leave a comment

The global shipping industry is currently grappling with a complex challenge that revolves around a crucial element – shipping containers. The real issue at hand is not the geographical concentration of container production but rather the efficient positioning of the global container pool.

According to Container xChange’s recent survey, 54% of container logistics professionals did not believe that shifting container production away from China would improve the supply chain.

Container xChange surveyed around 1500 supply chain professionals to gauge container logistics and supply chain professionals’ sentiment around shifting container production away from China. The survey also delved into concerns about potential cost implications stemming from shifting container production. A significant 51% of respondents anticipated that such a transition could result in increased costs in the shipping industry, indicating a strong concern about the financial aspect of the change.

“In the global trade landscape, it’s not where containers are produced that matters but rather where they are repositioned at the right place and the right time. This challenge is further exacerbated by factors such as supply chain disruptions, labor strikes, COVID-19, and the unforgettable incident in the Suez Canal.” Added Christian Roeloffs, cofounder and CEO, Container xChange, an online global container logistics platform.

Recent years have seen a notable shift in container production, with countries like Vietnam and India aspiring to reduce reliance on China, the giant in container manufacturing.

The Challenge of Container Repositioning

A surplus of containers has become a growing concern. The container industry experienced a 13% boost in capacity in 2021 due to various supply chain issues, increasing transit times. However, the shorter transit times that followed and fluctuating demand left the industry with an excess of 13 million containers globally in the spring of 2023. To make things more complicated, this surplus has led to a drop in container rates, and there’s a cost attached to it – about $0.5 to $1 per TEU per day for regular containers, and potentially more for specialized containers like reefers and chemical tanks.

What’s even more telling is that data from Drewry shows that the production of 20-foot equivalent units (TEUs) plummeted by a staggering 71% from 1.06 million to 306,000 between the first quarter of 2022 and the same period in the following year. The push to diversify container production away from China doesn’t provide a clear picture of how much capacity will shift away from the Chinese giant.

“There was a significant discussion about container scarcity during the pandemic, but it had nothing to do with any geopolitical underlying reasons. The only reason, in my view, would be geopolitical risk management — i.e., you want to hedge yourself against a black swan event where trade relationships with China are sanctioned or the like.

The numbers don’t lie. While diversifying container production away from China might seem like a great idea, we need to tread carefully. The surplus of containers and the complexities of repositioning containers raise concerns about the effectiveness of this strategy in addressing global supply chain challenges.”, said Christian Roeloffs, Co-Founder and CEO, Container xChange.

China’s Iron Grip as Container Pool Surge to Unprecedented Levels

In recent years, there has been a significant shift in container production, with countries like Vietnam and India seeking to reduce their reliance on China, the dominant player in container manufacturing. To better understand this landscape, let’s delve into the numbers. In 2021, China produced a staggering 7.1 million twenty-foot equivalent units (TEUs), a substantial increase from the average annual production in the previous decade, which stood at just 2.6 million TEUs. This places China at the forefront of container production, contributing to more than 95% of the world’s containers.

China’s advantage doesn’t stop at scale; they have a bustling export market, ensuring immediate utilization of their containers. In contrast, containers produced outside China often face skepticism due to quality concerns and higher costs. For instance, an Indian container can cost around Rs 1.46 lakh per box, while a Chinese container is considerably cheaper, at just Rs 75,000 each.

New Contenders

Vietnam has emerged as a strong contender in this shift, with the capacity to manufacture a significant chunk of the world’s steel boxes. India is also stepping up to the plate, looking to diversify the container production landscape. But there’s a catch.

Containers produced outside China often face scepticism due to concerns about their quality. These non-Chinese containers may also come with a higher price tag, primarily because they can’t leverage China’s massive scale to keep costs down. When we look at the cost, it’s quite a difference. An Indian container can cost around Rs 1.46 lakh per box, while a Chinese one is a lot cheaper, at just Rs 75,000 each.

Moreover, the immediate demand for containers in China, driven by a significant export volume, adds to its appeal. New build containers in China, especially when produced in large quantities, offer more attractive economies of scale compared to Vietnam and India. The industry’s skepticism about how this transition will unfold is grounded in these considerations.

While India and Vietnam do present certain advantages, such as the ability to produce smaller batches and customize containers, the extent to which production will shift to India and China remains uncertain.

In addition, China’s unique advantage, immediate domestic demand, is not something others can replicate. This means that containers produced in places like Vietnam and India may not find as many immediate takers.

While the idea of diversifying production sources is intriguing, it’s important to recognize the challenges involved.

The changing dynamics of container production are a crucial development in the shipping industry. The desire to reduce dependence on China is understandable, but it’s essential to weigh the pros and cons carefully. The industry must navigate the tricky waters of an oversupplied market and the intricacies of container repositioning.

The current market is flooded with an abundance of shipping containers, well-equipped to meet the short-term surge in demand. This presents a unique opportunity to address persistent issues that have plagued the shipping industry for years.

Now is the time to rectify problems such as the inefficiencies in repositioning containers, ensuring the quality and reliability of containers produced outside dominant markets, and the implementation of robust, localized supply chain strategies.

In the long run, as demand rebounds, countries must ensure their supply chain strategies are effective, localized, and responsive to the demand hotspots, rather than focusing solely on container production. Finding a balanced and sustainable path forward is essential for the future of global trade and logistics.

Global Logistics, Global Trade Daily, News, Ocean Ports, Uncategorized

Container xChange Unveils ‘The Future of Shipping in 2024’ Report

November 22nd, 2023 Container xChange Leave a comment

Container xChange, a leading authority in the shipping industry, released its second annual “2023 Shipping Industry Trends and Future of Shipping in 2024” report. The report gives an analysis of the key impacts that shaped the container shipping industry in 2023 and provides predictions and scenarios for 2024 with an aim to equip the industry to plan ahead in time for a ‘grumpy’ 2024.

Overall, the report indicates high probability of market recovery failure in 2024. The industry surveys conducted with the supply chain professionals globally indicates that in 2024, the shipping industry is predicted to grapple with persistently reduced demand and oversupply, potentially leading to fiercer competition, further reduced profits, and possible market consolidation. Although container schedule reliability is improving, persistent challenges remain. Blank sailings are expected to rise in response to market volatility, while imbalanced container availability, driven by economic crises, may continue in certain regions.

Planning considerations for container logistics players in 2024 –

1. In the wake of longer-term factors such as inflation, increased interest rates, and a shift in consumer spending patterns from goods to services, cautious consumer spending in 2023 is expected to extend into 2024. This caution is anticipated to impact the demand for imported manufactured products, with implications for the container market. According to PYMNTS research findings, 74% of consumers have reduced nonessential retail spending, influencing the container market for an extended period. Container prices took center stage in 2023, causing concern among stakeholders, and a further decline in demand is expected as the Chinese New Year approaches.

Josilene Mattos, Senior Global Account Manager at Hapag-Lloyd AG, anticipates a stable demand for 2024 and a more balanced market supply, primarily driven by evolving environmental regulations. “Importers in the USA have diversified their sources to include Southeast Asia, India, and Pakistan. This strategic move has proven to be a successful business practice and should be sustained in the years to come. Relying solely on a single source is not advisable, as it allows for the growth of other countries in the production of various products.” said Josilene.

2. Oversupply Risks and Increased Deliveries:

The shipping industry faces the risk of oversupply in 2024 as deliveries are set to increase to 2.95 million TEUs. The surge in deliveries, including “Megamaxes” and “Neopanamaxes,” may lead to intense competition, reduced profits, and potential mergers and acquisitions. Carriers, particularly in North America, are navigating a delicate balance between government-driven demand and rising interest rates. Overordering of ships during the economic boom could create overcapacity, turning 2023’s profits into 2024’s losses. The sector is projected to face challenges to restore supply and demand equilibrium until 2026.

Timothy Renshaw, a shipping industry analyst, highlights the overcapacity issue and the potential disruption of reliable container ship scheduling in 2024. “The North American shipping sector in 2023 is navigating a precarious balance between government-driven demand from programs like the Infrastructure Investment and Jobs Act and rising interest rates aimed at curbing inflation. This has left consumers squeezed, potentially depleting their savings by early 2024, jeopardizing freight demand as capacity increases. Global ocean container companies ordering new ships during the pandemic’s economic boom have created an overcapacity issue that may turn 2023’s profits into 2024’s losses and disrupt reliable container ship scheduling. It’s projected that supply and demand equilibrium won’t be restored until 2026, posing challenges for the industry’s profitability in both the short and long term” said Timothy Renshaw, a British Columbia-based shipping industry analyst and journalist.

3. Geopolitical Uncertainties and Shifts in Trade Routes:

Geopolitical uncertainties in 2023, including conflicts in Ukraine, Taiwan, and Israel, significantly impacted the shipping industry. These effects are expected to persist in 2024, with potential consequences for trade routes. The Russia-Ukraine conflict led to the closure of Black Sea ports, causing congestion and delays in goods transportation. Potential conflicts in the Taiwan Strait and the Israel-Palestine region pose risks to key shipping routes, impacting trading in 2024 and beyond.

The expansion of BRICS countries introduces new dynamics, diversifying trade routes and introducing alternative payment systems. Energy cooperation and resource competition may reshape shipping dynamics, offering both opportunities and challenges for the shipping sector.

4. China Plus One Diversification:

Various factors, including ongoing trade tensions between the United States and China, rising labor costs, and concerns about potential future manufacturing disruptions, are driving companies to diversify away from China. While completely disengaging from China is challenging due to extensive electronic supply chains, companies are making strategic moves to relocate final manufacturing and assembly processes outside of China.

Christian Roeloffs, CEO of Container xChange, notes the expected increase in trade between China and Southeast Asia, India, and other similar destinations. The “China Plus One” strategy is anticipated to show more prominent trends and signs `ZAZ~ZAQS in 2024, with companies seeking additional containers to diversify their supply chains.

Impact and Potential Scenarios in 2024:

1. Reduced Demand and Oversupply Intensify Competition:

The break of alliances, such as Maersk and MSC’s decision not to renew their 2M alliance, marks a significant shift in the industry. The resulting less demand and oversupply may lead to heightened competitive pressures and lower profits. The industry could witness fierce competition for market share among carriers, potentially necessitating further rounds of mergers and acquisitions.

Vladimir Tagasov, Head of Analytics at FESCO, highlights the unique factors setting Russia’s container-shipping market apart from the rest of the world.

2. Container Line Schedule Reliability on the Rise:

Container line schedule reliability is improving, returning to pre-pandemic levels. Although global schedule reliability declined slightly in August 2023, the industry is on a positive trajectory. MSC emerges as the most reliable top-14 carrier in August 2023, followed by Maersk and Hamburg Süd. Despite improvements, challenges persist, and the industry is focused on achieving further enhancements.

Josilene Mattos, Senior Global Account Manager at Hapag-Lloyd AG, emphasizes the influence of evolving environmental regulations on schedule reliability.

3. Blank Sailings to Increase in 2024:

Blank sailings fluctuated in 2023 but are expected to increase in 2024 due to market volatility. Despite being more organized than in the previous year, blank sailings remain a strategy to stabilize market rates and manage demand patterns. Significant fluctuations in blank sailings across major shipping routes reflect the dynamic global shipping industry influenced by factors such as market conditions and disruptions.

Christian Roeloffs, CEO of Container xChange, highlights the challenges posed by the imbalanced container trade and shipping service reliability.

4. Container Availability to Remain Imbalanced:

Economic challenges in the Euro Zone contribute to imbalanced container trade, affecting container availability. The Container Availability Index indicates higher container burdens in ports like Rotterdam. As the Euro Zone grapples with an ongoing economic crisis, the region struggles with the challenge of surplus containers causing repositioning costs exceeding the asset cost.

“In 2023, the Russian container-shipping market differs notably from global trends. It’s characterized by a growing focus on autonomy, an expanding linear service network with new ports and routes, continued state support for exporters, local market imbalances, and high freight rates. These factors combine to set Russia’s container-shipping market apart from the rest of the world” said Vladimir Tagasov, Head of Analytics, FESCO.

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Pressure on Box Owners in Europe to Reposition Containers to other Regions as Depots Flood with Empties

November 9th, 2023 Container xChange Leave a comment

As the Euro Zone grapples with an ongoing economic crisis, facing declining trade and subsequently, a drop in container trade, the region struggles with the challenge of surplus containers causing repositioning costs exceeding the asset cost. Industry predicts that the container lessors are more focused on long term strategies so that the cost of repositioning may result extremely diluted over the asset lifetime.

Exactly one year prior, in November 2022, Container xChange reported the persistently deepening problem of an excess of containers burdening depots across Europe. Fast forward to today, and the situation has continued to escalate.

“We have a poisonous mix of severely imbalanced container trade with high level of excess inventory in Europe, and at the same time unreliable shipping services, suddenly lacking the vessel capacity to reposition empties out which in turn makes the situation even more difficult” commented Christian Roeloffs, cofounder and CEO, Container xChange an online container logistics platform based in Hamburg, Germany.

COVID aftermath in 2019, and later Russia’s war in Ukraine in 2022, left a permanent impact on EU’s trade with its major trading partners like China, the US, and UK. Subsequently, the imports and exports, both declined.

Retail trade volumes and economic sentiment, both further declined for the Euro Area in 2023. While the final household consumption further declined, the household savings grew from 14.5% in Q1 to 14.9% in Q2 2023.

With consumers retracting their expenditures persistently, and trade declining, this of course leaves its due impact on the shipping business in Europe.

Ports in Europe experience consistent month on month low import and export volume TEUs.

In the first nine months of 2023, there was 6% less throughput in the port of Rotterdam: 329.9 million tonnes compared to 351.0 million tonnes in the same period in 2022. The decline was mainly related to the throughput of containers and coal. The container segment saw a decline of 8.1% in weight and 7.2% in the number of containers (TEU, twenty feet equivalent unit) in the first nine months.

The import and export comparison are similar at the port of Antwerp and that of Hamburg. The biggest struggle for container owners in Europe is the persistent problem of excess containers leading to overflowing depots. The container owners are looking for solutions to repatriate containers back to China and to Russia.

The excess of inbound containers this October is also evident in the Container availability Index (CAx) which measures the inbound and outbound containers at any given port. For Rotterdam, the values are at an all-time high at 0.70 this October as compared to 0.59 in October 2022. This indicates that the burden of containers is significantly higher in Rotterdam. According to Drewry, In August 2023, the European Container Port Throughput Index saw a 0.4% MoM decline, reaching 100.2 points, down 2.8% dover the August 2022 level.

“Container owners are grappling with the issue of repositioning empty containers to Asia, and this task has become financially burdensome as repositioning costs now surpass the asset costs. However, the caveats here is that this could be an issue for operators looking for short term results, for instance, the traders. On the other hand, container lessors are more focused on long term strategies so that the cost of repositioning may result extremely diluted over the asset lifetime.” Commented Andrea Monti, Italian container depot owner Sogese chief executive Andrea Monti.

While the carriers are looking to reduce capacity in this region, on the other hand we see the persistent blank sailings trend. In the next five weeks, 9% of 660 scheduled sailings on major East-West routes are cancelled. Most of these cancellations (52%) are on the Asia-North Europe and Mediterranean routes, with 35% on Transpacific Eastbound, and 13% on Transatlantic Westbound routes.

“We do hear from our customers that depots are burdened, and the box owners are looking to move their containers to other regions. There is also a rush to reposition containers out of Russia and the prices there are quite low. With recessionary fears on the horizon in Europe, and specifically in Germany, the outlook for 2024 is shaky. But one thing is certain – 2024 will be better than 2023 for the container shipping industry.” Shared Christian Reoloffs, cofounder and CEO of Container xChange.

The biggest uncertainty is the geopolitical risks that have been destructive for the supply chain industry.

“The Israel – Palestine conflict have remained a regionally destructive humanitarian crisis and have not yet impacted the European Union’s trade and economy. Nevertheless, it is essential to recognize that the container market is highly sensitive to broader economic and geopolitical shifts, as these can substantially influence global trade. The ongoing conflict in Israel holds the potential to affect consumer confidence, manufacturing operations in the region, and ultimately trade volumes emanating from that area.” Roeloffs added.

Amidst this, there are positive signs for container trade witnessed on the Container xChange platform. Russia is a very popular container trading and leasing market.

“Hot stretches include 40 ft high cubes from Ex Russia to China and Intra Russia. The container prices are more stable now in Euro area and in China which brings cheer for box trading players as more stable prices gives way to plan the moves better.” Jakob Hafner, Business Unit Leasing & Trading, Germany, Container xChange.

An overview of the container prices across key ports in Europe

Average prices for 40 ft high cube cargo worthy containers down by 44% this year in October 2023 from October 2022 across key ports in Europe, lowest in four years since 2020.

Time Series	Antwerp	Hamburg	Rotterdam
October 2020	1740$	1690$	1726$
October 2021	4132$	4062$	4108$
October 2022	2091$	2216$	2111$
October 2023	1005$	1283$	1248$

Source: Container xChange marketplace platform

Similar trend is observed for 20 ft DC, cargo worthy containers. However the decline is steeper for 40 ft HC containers, as compared to 20 ft DCs across ports in Europe.

Time series	Hamburg	Antwerp	Rotterdam
October 2020	1075$	900$	913$
October 2021	2546$	2484$	2388$
October 2022	1584$	1612$	1418$
October 2023	1140$	945$	615$

Source: Container xChange marketplace platform

Container xChange periodically deep dives into the container trading and leasing market trends to help equip its customers and industry drive better container business decision making. This analysis evaluates company and market information to contextualize solid understanding of the macro economic factors and draws correlation into how these are impacting the container market in the region.

Global Trade Daily, International Trade, War

Trade Route Market Update

October 21st, 2023 Container xChange Leave a comment

The world’s trade routes are in a state of flux, disrupted by unprecedented events. The pandemic, the conflict in Ukraine, and now the Israel-Hamas tension have rewritten the rules of global trade.

In this changing landscape, staying informed is not just an option; it’s a necessity. To make smart decisions about your container logistics business, one must keep a close watch on events such as these and its impact on their business.

In a world where the old rules no longer apply, knowledge truly is power.

Global Overview

Overall, we witness minimal volatility across trade routes in the month of October so far which keeps container prices stable. This also indicates that the container demand remains unchanged mostly across the key trade routes.

As we compare the different leasing rates in October across stretches, Russia to China has the most expensive per diem charges, followed by Port Kelang in Malaysia to Moscow. The volatility in Russia is indicated in the chart (below) owing to uncertainty and risk involved in container movement in and out of Russia.

Most Transacted Stretches

Here we have identified five significant trade routes, based on the volume of containers exchanged along these routes in 2023.

The chart above shows the demand hotspots for containers this October namely, China and Vietnam. The demand is coming mostly from the US. Alongside US, Moscow stands second for demand of containers. To read more about the China to Russia trade situation, here is our recently published analytical piece that narrates the current state of container excess in Russia.

Since the demand for containers on the China to Russia stretch is strong, the leasing spot rates are the highest on our platform as compared to the other stretches.

Shenzhen to Warsaw consistently maintains lower rates, showcasing its cost-effectiveness for shippers. Meanwhile, the Shanghai to Moscow route experiences relatively high and stable rates throughout, indicating a robust and consistent trade relationship between these two cities as well as stronger demand for containers on this route compared to others.

Intriguingly, Ho Chi Minh City to Atlanta, GA exhibits a substantial increase in rates from week 38 (18-24 September 2023) onwards.

Vietnam’s growing importance as a supply chain destination is underscored by its strong trade ties with the US, which is now its second-largest trading partner after China, with bilateral trade reaching $79 billion in first eight months of 2023. This surge in interest from US investors in Vietnam’s green energy and semiconductor manufacturing sectors points to the substantial increase in leasing spot rates from Vietnam to the US.

In contrast, Vietnam’s emergence as a favored destination for US investors is contributing to decreasing the gap in leasing spot rates between Vietnam and China to the US, firmly positioning Vietnam as an attractive hub for investment and trade diversification. Despite being a major player in the global supply chain, China’s leasing spot rates to the US have remained relatively stable.

“In this ever-shifting trade landscape, one thing is clear: every trade route is a tale of opportunities and challenges. Black swan events like the pandemic, war in Ukraine and now the Israel- Hamas conflict remind container logistics players to rethink their container logistics strategy. Volatility has led to tangible shifts in shipping trade lanes. While the intra-Asia trade remained stable by far, the Israel Hamas conflict gives reasons to stay cautious. China trade resurgence is going to again bring some hopes back for carriers.” Commented Christian Roeloffs, cofounder and CEO of Container xChange.

On the Asia-Europe stretch, the inclusion of Türkiye in the India-EU trade route offers promise amidst political complexities, while Central Asia and the South Caucasus create a bridge connecting the EU and China. The flexibility of the Asia-Europe trade route, as demonstrated by MSC, showcases the necessity for adaptability in a shifting market

Christian Roeloffs added – “However, the recent Israel-Palestinian conflict serves as a stark reminder of the challenges and complexities in establishing new trade corridors. Similarly, the relationship between Pakistan and Afghanistan underscores the potential for economic cooperation in neighboring states, promising substantial rewards despite historical and political complexities.”

Asia-North America

While the turmoil in Israel has the potential to cause multifold impact, here is all about the situation in our most recent analytical piece on the israel situation

Challenges affecting the Malacca Strait

The Malacca Strait, a crucial passage uniting the Indian and Pacific Oceans, faces growing stress due to the US-China trade rivalry. This leads to a noticeable reduction in trade volume and marks the strait as a pivotal security and economic chokepoint for Southeast Asian nations.

In an evolving Indo-Pacific landscape, China’s rise as a global player challenges the once-unipolar world. The US, a premier player, faces questions about its past engagement, notably evaluating the implications of Henry Kissinger’s influential outreach to China.

A staggering 90,000 ships annually congest the Malacca Strait, causing navigational challenges. To ensure trade reliability, calls for alternative routes and enhanced connectivity become imperative.

US trade initiatives in a global context:

The US actively seeks permanent normal trade relations with Central Asian nations through the C5+1 partnership, encompassing Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan. This initiative fosters stronger ties and opens doors for new trade connections.

In a quest for bolstered economic development, energy security, and enhanced connectivity, the US scales up infrastructure investments. This effort particularly targets the Trans-Caspian trade route, known as the “Middle Corridor.”

As global commerce faces complex waters, the need for adaptation and strategic thinking becomes paramount. In the midst of geopolitical shifts and economic rivalries, nations and businesses must create opportunities amidst challenges.

Asia Europe

Türkiye’s key role in the IMEC trade route:

Türkiye’s strategic significance as a bridge between Europe and Asia takes the spotlight in the evolving India-EU trade route. Its NATO membership enhances regional security, while the country’s robust infrastructure capabilities promise to contribute significantly to the corridor’s growth.

Challenges like political complexities and geopolitical tensions are acknowledged but outweighed by the promise of enhanced trade and geopolitical influence.

Forging a new trade connection Central Asia and South Caucasus

Amid Russia’s waning influence in the region, Central Asia and the South Caucasus draw closer, forming a potential bridge between the EU and China. Recent developments, including a roadmap for the Middle Corridor’s development, highlight the region’s commitment to facilitating trade between the two areas. Rising transshipment levels underscore their growing interdependence, shaping evolving trade dynamics between Asia and Europe.

MSC’s Adaptive Moves in Asia-North Europe Trade:

Market dynamics and shifting demands prompt changes in the Asia-North Europe trade route. The Mediterranean Shipping Company (MSC) takes proactive steps to adjust its capacity, including omitting certain sailings to align with current demand.

This strategic move, seen as a potential industry precedent, reflects the ever-evolving nature of global trade, emphasizing the need for flexibility and efficiency in the Asia-Europe trade route.

Intra-Asia

Challenges in new trade corridors:

The Israel-Palestine conflict casts doubt on the India-Middle East-Europe Economic Corridor (IMEC), a Western rival to China’s Belt and Road initiative. IMEC relies on a stable Saudi Arabia-Israel connection through Haifa port, owned by India’s Adani group. This highlights the challenges in building long-term trade routes amid regional political complexities.

Pakistan-Afghanistan: Toward Economic Cooperation:

Pakistan and Afghanistan face geopolitical hurdles but can pivot to economic cooperation. Their trade balance has fluctuated, but both countries stand to gain from increased trade. A TDAP study identifies untapped potential in Afghanistan, exceeding $20 billion in trade value, making a compelling case for enhanced economic cooperation.

Global Logistics, Global Trade Daily, War

Israel-Palestine Conflict Set to Create Challenges in Maritime Industry while Trade Continues with Caution

October 13th, 2023 Container xChange Leave a comment

The Israel-Palestine conflict, marked by recent violence between Israel and Hamas, has sent ripples through the shipping and maritime industry, leading international companies to issue cautionary advisories and adapt their operations in the region.

“In light of recent developments in the Middle East, including the outbreak of war in Israel and its vulnerability to missile attacks and the incursion of opposing militias, the security of transporting goods through the port of Haifa has become uncertain. The transit of containers, especially hazardous materials, and the arrival of commercial vessels greatly emphasize the importance of security on this route. Such insecurity or potential terrorist attacks could lead to a shift in the transportation of goods,” said Hossein Norouz Fashkhami, a senior marketing expert from Middle East.

Shipping industry’s resilience amidst Israel-Palestine conflicts

Maersk, a major player in the industry, reassured stakeholders by announcing that its port operations across Israel’s key terminals are functioning without disruption. MSC echoed this sentiment, asserting that Israel’s major terminals are operational, enabling them to facilitate cargo delivery.

However, the maritime industry is aware of the security situation, and companies such as MSC remain vigilant, pledging to monitor the situation closely and heed government guidance. This underscores the industry’s adaptability and resilience in the face of geopolitical tensions.

The specific impact on individual ports tells a compelling story:

Port of Ashdod: This port, situated a mere 50 kilometers from the Gaza border, operates in an ’emergency mode’ only, subject to potential missile attacks. Furthermore, restrictions on vessels carrying Hazardous Materials (“HAZMAT”) remain in effect.
Port of Haifa: In contrast, the port of Haifa, encompassing the Haifa Bay port and Israel shipyard, continues with business as usual, undeterred by the conflict.
Port of Ashkelon: Located just 15 kilometers from the Gaza border, the Port of Ashkelon is severely impacted, rendering it incapable of normal operations due to missile threats. Vessels can only discharge cargo while moored at sea buoys, highlighting the risk and necessity for adaptive measures.
Port of Hadera: The port of Hadera, in comparison, carries on without disruption, maintaining its regular functions.
Port of Eilat: The port of Eilat similarly remains operational, showcasing the industry’s commitment to ensuring the flow of maritime trade.

Beyond the ports, several global companies with a presence in Israel have been forced to adjust their operations. Chevron, the second-largest U.S. oil and gas producer, was directed by Israel’s energy ministry to shut down the Tamar natural gas field off the country’s northern coast. Adani Ports, operator of the Haifa Port, assured stakeholders of operational readiness while closely monitoring the situation and having a business continuity plan in place.

The Israel-Palestine conflict serves as a testament to the shipping and maritime industry’s ability to adapt, demonstrating that despite challenges and disruptions, trade and operations can persist, albeit with the necessary caution and vigilance.

Global trade relationships hang in the balance, with disruptions, diplomacy, and dollars at stake

Israel’s trade with China is characterized by a notable trade imbalance, with China being a major importer of Israeli goods. While Israel’s exports to China are substantial at $4.68 billion, the conflict may disrupt trade flows, particularly concerning Israel’s high-tech exports. The disruption could affect Israel’s exports and potentially hinder access to China’s vast market.

The United States is a critical trade partner for Israel, with a strong focus on exports. Israel exports goods worth $18.67 billion to the U.S., including high-tech products and defense-related items. The conflict may strain diplomatic relations between the two countries, potentially impacting Israeli exports to the U.S.

Germany is a key European trade partner for Israel. The conflict might impact Israel’s exports to Germany, valued at $1.88 billion. As Israel navigates regional instability, German imports from Israel could be affected.

India is another crucial trading partner for Israel, with $3.94 billion in Israeli exports. The conflict could have an impact on bilateral trade, potentially leading to disruptions in Israel’s exports to India.

Uncertainties surrounding ambitious trade initiatives

“The Israel-Palestinian conflict serves as a reminder of the uncertainties facing ambitious trade projects like the India-Middle East-Europe Economic Corridor (IMEC), positioned as a Western counterpart to China’s Belt and Road” said Christian Roeloffs, cofounder and CEO, Container xChange.

IMEC, involving railways, ports, and green energy, aligns with the G7’s plans to mobilize $600 billion by 2027 for global infrastructure investments. India’s trade with Saudi Arabia has doubled in two years, reaching $53 billion in 2023, but the corridor’s true potential lies in strengthening Indian-European trade ties.

To fully realize IMEC, a reliable link between Saudi Arabia and Israel is essential. However, the ongoing regional complexities make it riskier for Saudi Crown Prince Mohammed bin Salman to normalize diplomatic relations with Israeli Prime Minister Benjamin Netanyahu.

In the near term, the Suez Canal remains the primary route for goods from India to Europe. This conflict underscores the enduring complexities of reshaping global trade and financial routes, highlighting the unpredictable nature of such endeavors.

Geopolitical conflicts and global health crises, unfortunate as they are, often lead to unintended consequences, boosting profits in specific sectors. Wars tend to inflate returns for defense contractors, while the pandemic brought substantial gains for select pharmaceutical companies. The maritime industry is not immune to these dynamics, with shipowners reaping unexpected benefits from both types of crises.

Christian Roeloffs added – “In the case of the conflict in Israel, any expansion of the hostilities beyond the country’s borders could introduce risks to two vital shipping choke points. The Suez Canal, a critical waterway for various commercial vessels, including container ships, may face disruptions. Similarly, the Strait of Hormuz, a backbone for oil and gas shipping, could be affected. However, the extent of these effects will largely depend on the conflict’s expansion and duration.”

It’s worth noting that Israel itself represents a relatively small market for container shipping, with its primary ports of Ashdod and Haifa accounting for just 0.4% of global throughput. Consequently, the threat of disruptions to container trade flow through the Mediterranean region remains limited.

Additional Information

India-Israel exports, costs, and risk management amid conflict

Key Indian exports to Israel include diesel, cut and unpolished diamonds, electronics, and telecom components like integrated circuits and photovoltaic cells. Conversely, India’s imports from Israel consist mainly of rough diamonds, fertilizers, and herbicides. This evolving trade relationship extends beyond traditional sectors, encompassing electronic machinery, high-tech products, communication systems, and medical equipment.

Higher costs for Indian exporters: The Israel-Hamas conflict has raised concerns about increased costs for Indian exporters, such as higher insurance premiums and elevated shipping expenses. These expenses stem from the heightened risk associated with shipping goods to regions experiencing geopolitical unrest.

Limited impact on trade volumes but financial strain on exporters: While the conflict may result in higher expenses for Indian exporters, the impact on trade volumes is expected to be limited unless the war escalates significantly. The primary concern is the financial burden on exporters, which may reduce their profit margins.

Risk Premiums from ECGC to Safeguard Indian Businesses: To protect Indian businesses from potential losses due to geopolitical uncertainties, India’s Export Credit Guarantee Corporation (ECGC) may introduce higher risk premiums for firms exporting to Israel. This is a standard risk management practice in regions facing increased instability.

While the Israel-Hamas conflict has the potential to increase shipping costs and insurance premiums for Indian exporters, it is essential to emphasize that the impact on trade volumes remains relatively limited at this stage. The bilateral trade relationship between India and Israel has diversified in recent years, encompassing various sectors beyond diamonds and petroleum products.

trade recession supply chain freight peak descartes

Global Logistics, Global Trade Daily, Ocean Ports

Russia-China Trade Dynamics in a Post-War Era: Navigating Challenges and Opportunities

September 29th, 2023 Container xChange Leave a comment

As Russia grapples with the western sanctions one year after the invasion in Ukraine, China supports by bolstering bilateral trade between the two nations. Container xChange investigates the intricacies of the China-Russia trade and how it impacts the container logistics industry, now and in future.

China – Russia trade ties

“There is significant cargo movement from China into Russia but very scarce movement back to China from Russia. Containers are piling up in Russia which means that the secondhand container prices are very low in Russia. You see a 40ft high cube container being on sale in Moscow for less than $1,000, while in other parts of the world it is almost double or even more. This is significant and has tremendously detrimental impact on the business of container logistics because of the high imbalance of demand and supply of containers.” said Christian Roeloffs, cofounder and CEO, Container xChange.

In February 2022, the average price of a 40ft high cube container in Moscow was $4,175, which is now $580 as of 25 September 2023. (See graph below)

Similarly, the average price of a cargo worthy 20 ft DC was $1,961 in February 2022, which has consistently declined and bottomed out to $675 as of 25 September 2023.

“Currently there are around 150,000 surplus containers in Russia, and everybody is looking for an opportunity to return containers back to China. All containers from Russia to China go with a pickup charge. Regarding container trading, many Chinese companies are selling containers below market price to get rid of the boxes since it doesn’t make sense to send them back to China. From Moscow to Shanghai, the offline market offers around $1,500 for new containers. If cargo worthy containers are in good condition and cost less, they prefer to sell the boxes in the local market.

But this doesn’t mean that the market is bad. There are still many companies exporting as many as 4,000 SOC containers from Russia to China. The transactions between China and Russia are still very significant.” a customer of Container xChange shared.

China, traditionally a substantial purchaser of Russian energy, has now emerged as a vital source of imports, encompassing a wide range of products such as machinery, pharmaceuticals, auto parts, consumer goods, smartphones, cars, and agricultural equipment, from China. This shift has created a shortage of closed cargo containers, further intensifying the logistics challenge.

This shift is a direct result of numerous international companies exiting the Russian market amid ongoing geopolitical tensions and the conflict in Ukraine.

Trade between China and Russia witnessed substantial growth of 36.5% in the first seven months of 2023, totaling $134.1 billion, according to Chinese customs data. China’s exports to Russia surged by 73.4%, reaching approximately $62.54 billion, while imports from Russia also grew significantly by 15.1%, totaling $71.6 billion.

Soon after Russia’s invasion in Ukraine last year in February 2022, the bilateral trade between China and Russia dipped for a brief period of time and then picked up to reach record levels.

Russia anticipates that its trade volume with China will surpass $200 billion this year, a notable increase from the approximately $185 billion recorded in 2022.

Surge In trade causing container imbalance

As imports from China to Russia continue to surge, it is leading to a significant trade imbalance and container congestion. According to a report from the VPost, Russian railway depots are grappling with an overwhelming accumulation of empty shipping containers originating from China. Managers at Russian shipping companies have expressed concerns about the severity of the situation, describing it as “almost critical” in regions like Moscow and central Russia.

This container crisis is primarily a consequence of the deepening trade imbalance between Russia and China. Russia is flooded with more containers carrying goods from China than it can dispatch back. Furthermore, the commodities exchanged between the two countries play a role in exacerbating the problem, as Russian raw materials are primarily transported to China via rail tanks and open wagons rather than in containers.

In an attempt to improve the container congestion, Russian shipping companies have started offering discounts to expedite the return of containers to China.

Overloaded Russian ports and roads are causing transportation inefficiencies. Although some investments have been made to improve infrastructure, fiscal constraints and the use of the National Wealth Fund to cover budget shortfalls complicate matters. Russia seeks Chinese investors to address these issues, but uncertainty stays due to recent actions against Western companies. However, Russia’s pivot to Asia hinges on substantial infrastructure development.

China-Russia trade: Current trends and prospects

As we look ahead to the future of China-Russia trade, it becomes evident that despite recent declines in shipping rates, operators providing container shipping services are pressing forward with their expansion plans on this trade lane.

One noteworthy development is the entry of CStar Line, a newcomer in the industry, into the China-Russia trade arena. In a parallel development, Yangpu New New Shipping has expanded its Northern Sea Route service, connecting China to St. Petersburg. This expansion follows the successful eastbound trial voyage by the 1,638 TEU Newnew Polar Bear, which departed from Xingang in August.

Despite recent rate declines in shipping to Russia, operators like CStar Line and Yangpu New New Shipping are finding profitability, especially during the summer peak season. Notably, cargo volumes from Busan to Russia’s Pacific ports saw a robust 6% increase in July, reaching 13,600 TEU compared to the previous month. However, the market faces pressure from new Chinese entrants, leading to a month-on-month decrease in the average freight rate for the Busan-Far East Russia route, ranging from $1,000 to $2,200 per TEU—a drop of approximately $100. These developments underscore the shipping industry’s resilience and adaptability as the China-Russia trade landscape continues to evolve.

Additional Data:

Strengthening trade Ties with Central Asian nations

In 2022, trade between Russia and Central Asian countries increased by 15%, reaching more than $42 billion. This growth is attributed to strong trade partnerships among countries in organizations like the Shanghai Cooperation Organization (SCO), BRICS, and the Eurasian Economic Union (EAEU). Central Asian nations, such as Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan, collaborate closely with Russia on technology and independence-related matters. This expansion of trade bolsters Russia’s regional influence and strengthens its ties with Central Asian partners.

The compatibility between Russia and China’s foreign policy objectives, emphasizing multipolarity and resisting control, may strengthen their partnership in Asia, impacting the region’s geopolitics. This shift towards Asia represents a clear trend for Russia towards establishing better trade partnerships with Asian countries.

Russia’s European trade challenges

Russia, a key euro area trade partner, experienced a 50% dip in trade with the region. While euro area exports to Russia initially dropped quickly, they have since partially recovered for non-sanctioned goods, while sanctioned goods exports remain low. Russia also reduced natural gas flows to Europe, causing a 90% drop in gas imports. Europe compensated by importing gas from Norway, Algeria, and Azerbaijan while increasing liquefied natural gas (LNG) imports, substantially diminishing Russia’s influence in European energy markets.

EU trade with Russia has been strongly affected by import and export restrictions imposed by the EU following Russia’s invasion of Ukraine.

Both exports and imports have dropped considerably below the level prior to the invasion. Seasonally adjusted values show that Russia’s share in extra-EU imports fell from 9.6% in February 2022 to 1.7% in June 2023, while the share of extra-EU exports fell from 3.8 % to 1.4% in the same period.

European sanctions and voluntary boycotts have redirected Russian trade away from the euro area, increasing dependence on non-sanctioning partners and leading to discounted commodity exports. This shift has reoriented Russia’s global trade, making it heavily reliant on China and other Asian countries.

It is clear that Russia does not foresee agreement with the US and the West, making Asia, particularly China and India, its top priorities in economic and military cooperation.

port houston porto rule container conflict

Global Trade Daily, Ocean Carriers, Ocean Ports, Uncategorized

Container Shipping: Challenges, Chances, and the Global GDP Trend

September 21st, 2023 Container xChange Leave a comment

Container xChange, an online container logistics platform held its 5th edition of its Ultimate Container Networking Event, the Digital Container Summit 2023 on 13-14 September 2023 in Hamburg, Germany.

Industry experts like Peter Sand, Xeneta, Antonia Ambrozy, Freightos, John Fossey, Drewry, Nick Saavides, Loadstar, Supal Shah, Arcon Container, Jack Sun, Orange Container Line, Danny den Boer, SeaCube, and Stefan Verberckmoes, Alphaliner/AXSMarine examined container leasing, demand-supply dynamics, market shifts, and strategic insights, providing an unparalleled understanding of the industry’s current landscape and its future trajectory.

Demand- Supply Dynamics; the shipping outlook

In a deep dive of container shipping demand, experts agreed that the growth in container traffic experienced a notable decline in 2022. Projections for the current year also suggest a less-than-optimistic outlook. While there is optimism for a recovery, the overall rates of growth are anticipated to remain lower compared to previous decades.

The supply side of the equation revealed that the global fleet of container ships is set for expansion in 2023 and beyond. Projections indicate that by the end of 2025, the industry will boast an impressive 30 million Twenty-Foot Equivalent Unit (TEU) slots in service. Vessel slot capacity growth, a crucial factor, witnessed a 4.5% increase in 2022 and is forecasted to expand by 5% in 2023 and further by 6.3% in 2024.

Despite the prevailing slowdown in trade, the interest in ordering new ships has remained unwavering. Over 80% of vessel orders placed in 2023 have been for dual-fuel tonnage, with a substantial number targeting neo-panamax vessels. However, experts cautioned that the historically low rate of scrapping in recent years is set to change, signifying a significant shift in the industry.

Drewry, a leading maritime consultancy, provided a deeper perspective by estimating that the effective container ship capacity was approximately 17% below its potential in 2021 and 15% in 2022. However, significant improvements have already occurred in 2023, with this figure expected to plummet to 7% or possibly even lower. These findings highlight the critical role capacity availability has played in influencing freight rates and carrier profitability over the past two years.

Container equipment market

The container equipment market discussions revealed that the global fleet of containers is on track to experience a slight decline in the current year, and production is expected to hit its lowest point in more than a decade. Drewry anticipates a dip in the pool of container equipment this year, from 50.9 million TEU to 49.9 million TEU, followed by an upward trajectory leading up to 2025, where 53.5 million TEU is anticipated to be in service.

The underlying reason for the unexpectedly low replacement of aging containers in 2021 and the first eight months of 2022 was attributed to supply chain congestion, where these containers were indispensable for maritime trade. However, this overhang is gradually diminishing as supply chains return to a semblance of normalcy.

Lessors’ influence over the pool witnessed a slight dip in 2022, down from just over 51% in 2021 to 49.8%. In 2023, it is projected to further decrease to 48.5%, before rallying to 50.2% by 2025. Notably, ocean carriers have capitalized on their financial strength by ordering more equipment, while logistics companies and Beneficial Cargo Owners (BCOs) have also been investing in containers.

Container production statistics revealed that over 6.6 million TEU of dry freight containers were produced in 2021, which drastically fell to 3.45 million TEU in 2022. 40ft high cube containers dominated the market in 2021, accounting for over 85% of dry freight production. However, this dominance waned in 2022, with 40ft high cubes accounting for less than 65% of the output. Production trends continue to fluctuate, with expectations of an upswing in 2024, largely driven by replacement needs. Furthermore, potential competition from new factories in Vietnam could further shape this landscape.

Container Prices and Lease Rates

Price dynamics in the container industry have undergone significant shifts. Prices have exhibited a downward trend since the summer of 2021. Supply-demand imbalances have played a significant role in these fluctuations, with expectations of a narrowing gap from 2024 as more ships retire.

To adapt to the changing landscape, ocean carriers have implemented super-slow steaming and added additional vessels to loops to absorb surplus tonnage. Newbuild container prices experienced a strong surge until late summer or early autumn 2021, with a 20ft standard dry freight container’s price soaring over 35% within a year.

However, prices softened throughout 2022, with 40ft high cubes even lower than their end-of-2020 prices and 20ft standards stabilizing at the end-of-2020 levels. While prices exhibited a slight uptick in the first half of 2023, demand remained subdued. Reefer container prices remained relatively stable, with expectations of gradual increases driven by strong demand.

“The container shipping industry is facing a turning point with both challenges and chances. Trade growth is slowing down, and this year, we only expect a tiny 0.3% increase. There are uncertainties related to the economy and politics that are affecting the market. Also, the container shipping business is getting more stable and closely connected to changes in the economy. But there’s some hope on the horizon – the expected increase in the space available on ships in the next three years might help balance supply and demand by 2025.”, commented Chrisitan Roeloffs, CEO & Co- Founder, Container xChange.

Slower trade growth and reduced supply chain congestion have led to improvements in slot capacity and container availability, creating a situation of considerable oversupply, especially in the vessel segment. Drewry’s estimations suggest that the container pool is set to decline by about 2% in the current year, with total manufacturing output unlikely to exceed 1.9 million TEU—a stark contrast to the 7.2 million TEU and 3.8 million TEU produced in 2021 and 2022, respectively. Newbuild prices, similar to freight rates and spot rates, showed signs of bottoming out, but any price increases in the current year are expected to be modest, given the soft demand landscape.

Second-hand container prices experienced significant fluctuations, with notable increases in 2021. These prices closely tracked newbuild prices, driven by robust demand and limited equipment availability due to maritime trading requirements. Forecasts indicate that prices are likely to soften in the coming years.

“Containers can be booked from Hamburg to Shanghai for $80 per box, from India and the Middle East it’s $5 per container, but that includes the THC [terminal handling charge] which is around $250 a box, so they [the lines] pay [between $170 and $245] to evacuate their equipment to Asia,” explained Supal Shah, the group president of Arcon Containers, during the Digital Container Summit (DCS) 2023 in Hamburg. This highlights the significant cost carriers bear in moving empty containers, emphasizing the need for improved operational efficiencies through better depot communications.

HHLA’s Strategic Stake Acquisition and Expansion Plans

Highlighting an industry-shaping development, the Port of Hamburg witnessed a groundbreaking agreement. Hamburger Hafen und Logistik AG (HHLA), the terminal operator at the port, has entered into an agreement to acquire a substantial 49.9% stake in the operator. Currently, the city of Hamburg holds a 69.25% stake in HHLA. This acquisition is expected to have a domino effect, with Bremerhaven potentially losing out.

Industry experts at the Container xChange conference emphasized that MSC, a key player, might be required to commit further volumes as part of the agreement. MSC has also pledged to enhance its volume throughput at Hamburg, targeting a remarkable 1 million TEU by 2031, alongside relocating its German headquarters to the city. This strategic partnership aims to fortify the entire Port of Hamburg, positioning it as a central hub within MSC’s global network of container services and logistics chains.

Chief analyst at Xeneta, Peter Sand, shared his insights at the conference. He highlighted that MSC’s agreement to buy a 49.9% stake in HHLA will likely impact the container shipping landscape, with potential commitments and benefits for both parties.

Sand stated, “MSC will surely have to commit further volumes as part of the agreement, but the city will benefit from the injection of cash.” He also noted that this move aligns with MSC’s strategy of operating efficiently from port to port.

Expansions will allow Panama canal to handle more shipments of export cargo and import cargo in international trade.

Global Logistics, Global Trade Daily, News

Potential Shortages Loom as Panama Canal Restrictions Impact Holiday Stocks

August 22nd, 2023 Container xChange Leave a comment

As wholesale inventories dwindle in the U.S., the ongoing restrictions at the Panama Canal could have implications for Christmas stocks and supply chains. With the imminent Christmas shopping season, the delay in inventory restocking due to shipping disruptions and congestion at the Panama Canal could result in missed sales opportunities for businesses.

The present disruptions have raised concerns about the ability of businesses to replenish their inventories in a timely manner due to shipping delays. If these disruptions continue, there is a looming threat of shortages for select goods during the critical Christmas shopping period.

“Ongoing challenges at the Panama Canal are making existing worries for industries even worse. New industry information shows that the U.S. economy’s consumer spending has seen an uptick, which is good. With inventories falling and demand expected to rebound, the Panama Canal, which carries 40% of container traffic from Asia to Europe, is likely to experience increased pressure.”, remarked, Christian Roeloffs, Cofounder and CEO of Container xChange.

With the Panama Canal Authority implementing water conservation measures in response to a drought, vessels are experiencing prolonged wait times and capacity limitations, resulting in a ripple effect across the shipping sector.

Prominent industry sources, including Alphaliner, Sea-Intelligence, and Drewry, have reported a notable increase in blanked sailings – the practice of cancelling scheduled sailings to manage capacity. Specifically, during June and July, an approximate 10.8% of the regular sailings connecting Central China and Europe were cancelled. Comparable patterns have also emerged in the transpacific trade lanes. As a direct result of these capacity reductions, the market has witnessed a corresponding rise in spot freight rates. This outcome aligns closely with earlier projections made by industry experts.

Notably, the ongoing efforts by the Panama Canal Authority to conserve freshwater amidst the prevailing drought conditions have contributed to a substantial backlog of vessels – currently numbering around 200– awaiting their turn to transit through the canal. As this queue lengthens, waiting times have surged to a peak of 21 days, introducing significant delays across multiple segments of the shipping industry.

Given the Panama Canal’s role as a vital trench for U.S. shippers, who channel 40% of all U.S. container traffic through the canal annually, the ramifications of the current disruptions are extensive. Measures such as the restriction of booking slots and adjustments to vessel weight requirements have compounded the existing backlog, further elongating waiting times. This, in turn, is straining shipping schedules, potentially leading to disruptions along supply chains and the potential for knock-on effects on pricing structures. The Panama Canal plays a critical role for U.S. shippers en route to Gulf and East Coast ports. The U.S. accounts for 73% of Panama Canal traffic representing about $270 billion in cargo.

The knock-on effects are also anticipated to affect costs. The need for alternative routes and the resulting longer lead times due to the ongoing congestion have the potential to increase operational expenses for carriers. These cost increases may eventually be passed down to businesses and consumers alike. While optimism surrounds the prospect of improvements as the rainy season approaches, historical data indicates that even after the removal of draft restrictions, the process of clearing the accumulated backlog may still be a time-consuming endeavour.

“These supply chain disruptions are expected to reverberate throughout the industry, with potential consequences for container prices. The ongoing congestion and reduced capacity have led to heightened competition for available slots, driving up spot freight rates. The scarcity of available vessel capacity has prompted carriers to reevaluate pricing strategies to offset increased costs and uncertainties. Consequently, the traditional equilibrium of container prices may experience adjustments to accommodate the challenges of the Panama Canal congestion.” commented Roeloffs.

Against this backdrop, collaboration among stakeholders becomes even more pivotal. Effective coordination and communication will be instrumental in addressing the multifaceted effects of the Panama Canal congestion on global trade routes and container prices.

About Container xChange

Container xChange is the leading online platform for container logistics that connects all relevant companies to book and manage shipping containers as well as to settle all related invoices and payments.

The neutral online platform…

connects supply and demand of shipping containers and transportation services with full transparency on availability, pricing, and reputation,

simplifies operations from pickup to drop-off of containers,

and auto-settles payments in real-time for all your transactions to reduce invoice reconciliation efforts and payment costs.

Currently, more than 1500+ vetted container logistics companies trust xChange with their business—and enjoy transparency through performance ratings and partner reviews. Unlike limited personal networks, excel sheets and emails that the industry generally relies upon, Container xChange gives its users countless options to book and manage containers, move faster with confidence, and increase profit margins.

Global Logistics, Global Trade Daily, Ocean Ports

Container Market Sentiment Signals Rebound: A ‘Shipper’s Market’ this Peak Season

August 22nd, 2023 Container xChange Leave a comment

Container xChange, an online container logistics platform, published its August Container Market Forecaster today. Despite the ongoing market fluctuations, the Container Price Sentiment Index (xCPSI) has exhibited resilience and witnessed growth in July as compared to the month of June. The forecaster also noted that container prices have been relatively stable over the past 30 days (July) as compared to the previous 90 days (May-July).

The Container Price Sentiment Index (xCPSI) conducts market surveys concurrently and distils industry experts’ collective insights about container price trends into a quantitative measure, providing insight into near-future expectations for the container market dynamics. In July, 2,570 supply chain professionals participated in the survey.

While the opinion is varied, still most respondents (42%) foresee an increase in container prices in the near-term which is indicative of potential market improvement, 28% foresee a further decline in container prices, suggesting a certain degree of pessimism in market conditions. 30% of those surveyed maintained that prices would remain unchanged.

This growth in sentiment underscores the industry’s anticipation of an imminent turnaround, contributing a sense of positivity to the landscape.

Container Industry Stabilizing Amidst Market Fluctuations

Average container prices have been relatively stable in the last 30 days as compared to the price volatility over the past 90 days (30 days – July, 90 days – May-July).

Analyzing a 30-day price delta comparison across key regions, the market has witnessed average price fluctuations ranging from -4% to +5.20% in the month of July 2023. However, the container prices have experienced a visible dip over a 90-day period, with Southeast Asia reporting a substantial -15.73% decline from May to July 2023.

Despite this sustained dip, the sentiment index has stayed strong, even growing in July. The alignment of sentiment and pricing trends suggests an industry outlook that foresees a turning point, shifting away from skepticism towards a shared anticipation of market recovery despite ongoing price adjustments.

Asian ports have been witnessing steady changes in average container prices for 40 HC cargo-worthy containers. For shippers, engaging in container trading or leasing within Southeast Asia at present, compared to three months prior or even just one month ago, presents a viable business prospect.

These average prices for 20 ft cargo worthy containers (region-wise) as of 9th August 2023 is illustrated in the graph below.

Region-wise average prices for 20 ft cargo worthy containers

Carrier Capacity Management Spur Intra-Asia Trade Surge

According to Fitch Ratings, in the second quarter of 2023, China witnessed a 6% year on year increase in total container throughput, a significant improvement compared to 3% growth in first quarter of 2023. This expansion was primarily propelled by intensification of trade under the Regional Comprehensive Economic Partnership (RCEP), introduction of new foreign trade routes at the Dalian port, and upward trajectory of trade with nations participating in the Belt and Road Initiative.

A surge in demand for containers on Intra Asia trade lanes was observed on the platform, for example, the China to India stretch was popular in the month of July on Container xChange.

Here are the top five stretches for both the 40 HC and 20 DC containers Ex China on xChange Insights as on 10th August 2023 –

40 ft HC	20 ft DC
China to India	China to United States
China to Russian Federation	China to India
China to China	China to Russian Federation
China to United Arab Emirates	China to Canada
China to Belarus	China to United Arab Emirates

Leasing charges for 40 ft HC containers on stretches Ex-China are amongst the top 10 stretches on xChange Insights indicating a bounce back from low leasing pick up charges over the last months.

Leasing charges for 40 HC containers on prominent trade stretches

Indications from Drewry point towards Asia’s entry into a peak season, resulting in a notable 42% surge in the Shanghai-Los Angeles spot rate over a four-week period concluding on August 3rd. Simultaneously, the Drewry Shanghai-Rotterdam index also saw a 20% upswing within the same duration.

Due to increased trade between India and the wider Asian region, ocean carriers are adding more capacity on the Intra-Asia trade route. This is also propelled by the sourcing diversification strategy in South Asia, particularly in countries like Vietnam and India. The aim is to increase shipment volumes and improve market presence. These changes in strategy allow these companies to optimise their operations and potentially strengthen their market position. This is important in a dynamic and competitive shipping industry.

United States: A potential Industry Rebound

The Global Ports Tracker forecasts, provided by NRF (National Retail Federation), indicate that import cargo volumes are poised to reach their peak in August 2023. This surge aligns with retailers’ preparations for the winter holiday season stocking.

Real GDP increased at an annual rate of 2.4% for the April-through-June period, after rising 2% in the first quarter this year, surpassing expectations and delaying concerns of a recession.

The S&P Global Flash US Manufacturing PMI posted 49.0 in July, up from 46.3 in June indicates market improvement. A decrease of 0.5% in wholesale inventories also indicates that the inventories are becoming leaner in the US.

“As economists shift from predicting recession to a ‘soft landing’, the industry holds its momentum. While some experts remain cautious, the foundation of a resilient economy, sustained consumer activity, and strategic federal investments improves the outlook of the upcoming holiday season.” shared Christian Roeloffs, cofounder and CEO, Container xChange.

“It’s a shipper’s market this peak season as rates stabilize at below pre-COVID levels and capacity is abundant. Prices are low and this offers a great opportunity for exporters this peak season.” Roeloffs added.

Eurozone Emerges from Technical Recession: A Turning Tide

In the second quarter of 2023, seasonally adjusted GDP increased by 0.3% in the euro area and was stable in the EU, compared with the previous quarter, according to a preliminary flash estimate published by Eurostat, the statistical office of the European Union. In the first quarter of 2023, GDP had remained stable in the euro area and had increased by 0.2% in the EU. Therefore, avoiding a technical recession in Eurozone.

“Although we did avoid a technical recession in the Eurozone, retail trade is down by 0.3%, along with high inflation rate. These high prices will continue to exert pressure on operating costs for shipping companies. Carriers and freight forwarders should anticipate rising expenses related to provisioning ships and providing for crew members. Shippers might also experience increased costs for transporting goods, affecting overall supply chain costs.” Commented Roeloffs.

“Short-term shipping demand may experience a boost, especially for routes connected to countries with stronger growth rates like Ireland and Spain. However, the potential for growth to be less robust than expected warrants cautious optimism. Prepare for potential shifts in shipping demand as companies explore more cost-efficient transport options during uncertain economic periods.” Added Roeloffs.

The shipping industry’s course for the next few months is intricately woven with economic shifts, trade dynamics, and supply chain adaptations. As we approach the holiday season, the industry’s resilience and adaptability will be put to the test.

Panama Canal Water Levels to impact Westbound Trade Well Into 2024

Demand- Supply Dynamics; the shipping outlook

Container equipment market

Container Prices and Lease Rates

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