China’s October Golden Week, Christmas and Chinese New Year will bolster strong container shipping demand for the last quarter of 2021. But port congestion, especially in the U.S. and Europe, and service delays are expected to create headwinds for service schedules, Maersk said in a market update Monday.
Maersk says extra loaders (additional vessels) and ad hoc port omissions will be implemented to help improve schedule reliability. Meanwhile, inventory levels in Europe and the U.S. remain at the lowest levels on record, which has led to stock-outs for some products. This means that even as retail demand declines, we will see cargo volumes remain strong as inventory levels need to be rebuilt, Maersk said.
Global container demand growth is forecast to be between 6% and 8% in 2021, reflecting the strong first half, as well as continued demand strength in the U.S. and, in part, in Europe. While container demand growth has run ahead of supply growth since the second half of 2020, the real drivers of high freight rates are port congestion and supply chain bottlenecks, Maersk says.
Vessel waiting time at ports has increased, requiring more vessels per chain to lift the same volume of cargo. At the ports of Los Angeles and Long Beach, wait times increased with more than 70 vessels at anchor in mid-September. Covid-19 has also caused stoppages that have delayed vessels from Asia. Storage capacity has also been reduced due to port and land congestion, while returning empty containers to Asia remains a challenge.
“Maersk has taken many measures to redirect flows back to Asia and ensure equipment supply. Despite this, equipment lead times continue to increase due to onshore and offshore delays,” Maersk says.
To address capacity and equipment shortages, Maersk says it has taken steps to alleviate this situation by streamlining its schedules and repositioning empty containers. The company has also tripled the number of dry cargo containers in its fleet in recent months to support customers’ export needs. “However, the influx of new containers into the fleet is no longer sufficient to meet global demand, so it remains vitally important that import containers are repositioned as soon as possible,” Maersk said.
In Vietnam, hundreds of factories have remained closed under COVID-19 closure rules, with many expected to reopen from early October when local restrictions are lifted.
On the water
In the marine segment, Maersk continues to expect strong export demand from Asia to continue for the remainder of the year, especially to the United States and Europe. Several upcoming holidays, such as China’s Golden Week and Christmas, will create a seasonal increase in volume, and Maersk expects to see the first signs of an increase ahead of Chinese New Year in December.
To improve scheduling reliability, which has been affected by strong demand and network disruptions, Maersk says it has decided to adjust vessel voyage numbers on Asia-North Europe services to match the corresponding departure weeks. Maersk says it will streamline some of its service coverages to reduce the number of port calls and advises customers to plan their supply chains well in advance, especially ahead of the upcoming holidays.
The fourth quarter is shaping up to be stronger for Asian imports as network utilization remains above 95%. “We are striving to meet the needs of our import-focused customers and to reposition empty equipment back to Asia. As boxes remain in North America and Europe longer, the severity of the container shortage in Asia increases,” Maersk said.
Equipment availability, especially in China and Vietnam, is also expected to remain tight through the end of the year.
“We have increased our empty container flow in Asian ports, and have invested in the new container fleet to provide sufficient stocks for the fourth quarter. Our vessel scheduling continues to be affected by port delays and we consider it necessary to change some port rotations to reduce the total backlog. Both the outfitting and vessel scheduling actions are specifically aimed at improving reliability to the extent possible,” Maersk said.
Meanwhile, port congestion remains problematic. Severe congestion in Asia-Pacific persists with high shipyard density and weather disruptions since July, as well as operational problems, with no signs of improvement in the immediate future.
In the United States, congestion levels at the ports of Los Angeles and Long Beach continue to deteriorate as we move into the peak shipping season. Labor restrictions, along with high traffic volumes, remain the main constraint, Maersk said. On the east coast, the port of Savannah has become increasingly difficult as congestion increases. As of mid-September, there were more than 30 vessels at anchor with wait times of more than 7 days, according to Maersk. Meanwhile, the Port of Seattle continues to struggle with available yard capacity, with wait times increasing to 11-12 days and the typical port stay lengthening from 3 days to around a week, Maersk said.
While UK ports are operating smoothly, the severe shortage of trucks across the country is leading to high yard densities at the ports. The port of Rotterdam is also experiencing trucking shortages, although not as severe as the UK shortage, according to Maersk.
Latin American ports are also experiencing congestion that is causing further delays.
Finally, the market outlook, particularly Asia to Europe and Asia to North America, remains challenging.
In the case of Asia to Europe, “market demand is expected to be strong and vessel space is very tight. Maersk is planning to reduce port calls to improve reliability and has contingency plans to mitigate the impact of equipment shortages in Yantian and Nansha and feed capacity shortages in Southeast Asia,” said Maersk.
Regarding the Asia to North America route, Maersk commented, “We expect strong demand to continue for the remainder of the fourth quarter, but the overall situation at North American ports has deteriorated recently. We expect the loss of capacity due to lack of sailings to continue. We have deployed gap loaders and launched new TP-X and TP20 services at USWC and USEC to bolster capacity and improve schedule reliability.”