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Container issues: what are the expectations after the Chinese New Year?

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Container issues: what are the expectations after the Chinese New Year?

Mid-autumn festival China

There seems to be no end in sight for the issues plaguing container shipping. The lack of capacity is still significant and the tariffs are sky high. What are the prospects for the period ahead, and in particular for the period around the Chinese New Year?

 

Blank sailings after Chinese New Year

Cargo capacity is always low after the Chinese New Year, due to factories having been shut down for a time. This usually results in shipping companies cancelling a number of departures.

 

For quite a while it seemed that shipping companies would forego these blank sailings, as there would probably be a backlog of cargo waiting to be exported after the Chinese New Year. What’s more, empty containers have to be brought to Asia to resolve the container shortage. Unfortunately, shipping companies announced a number of blank sailings this week after all.

 

The reason shipping companies still opted for blank sailing is down to the reliability of the sailing schedules.. Many ports are struggling with heavy congestion. Delays of several days are now the rule rather than the exception, and ports are regularly being skipped too. The blank sailings should result in fewer delays and increased reliability of sailing schedules.

 

No short-term solution for lack of capacity

The coronavirus pandemic caused a massive peak in online purchases last year. There was a huge demand for goods from Asia. At the same time, the container fleet grew by just 2.9%, the smallest increase since 2016. The explosive demand, offset against the minimal capacity growth, quickly created problems.

 

The gigantic container shortage is still an issue in Asia. However, there is good news too. For instance, the Container Availability Index (CAx) announced this month that the number of available containers in Shanghai is finally on the rise, and this positive trend can also be observed in other Chinese ports. However, it is impossible to predict when the lack of capacity will be resolved completely. It is likely that the progression of the coronavirus pandemic will play a big role in this.

 

Continued high tariffs

During the last quarter of 2020, trade from Asia to Europe was faced with the largest global tariff increase. The Shanghai Shipping Exchange saw an increase of about 300% compared to September 2020. By now, tariffs of $10,000 for a 40’ container are no longer unusual. It is probable that these sky high tariffs will only fall when the pressure on shipping capacity wanes.

 

Will the tariffs ever return to their “old levels”? Sadly, this seems unlikely. The number of container shipping companies has almost halved over the last decade. What’s more, experienced shipping companies often operate as part of consortiums and make use of the same ships, allowing them to bring more and more balance to supply and demand. All this means that shipping companies have got a tighter grip on the market, with more stable tariffs as a result. Their occasional drop below the cost price is not expected to happen again.

 

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