According to Chinese customs authorities, iron ore imports for March came in at 87 MMT, down 15% YOY. Iron ore imports for March were 4% lower than the 5-year average of 91 MMT. As a result, total iron ore imports in Q1 2022 came in at 268 MMT, down 5% YOY compared to 284 MMT in 2021. We had modelled for Chinese iron imports to increase 4.8% in 2022, which compares to a decline of 5.4% so far in 2022 due to China’s recent lockdown measures disrupting import levels.

For March, Chinese coal imports saw an increase from February figures of 46% MOM, while down 40% YOY to 16 MMT. For Q1 2022, coal imports stand at 52 MMT, down 24% YOY and below YTD 5-year average of 76 MMT. The decline in Q1 2022 can be attributed to the elevated energy prices this winter, which have prompted increased domestic production offsetting import needs in recent months. The YTD coal imports decline of 24% compares with our modelled 3% growth for 2022.

Torrential rain – the worst experienced in more than six decades – has knocked out operations at South Africa’s largest port, Durban. Some parts of KwaZulu-Natal province recorded as much as 300 mm of rain within 24 hours earlier this week with many deaths reported and severe damage to road and rail links. An update from Danish carrier Maersk stated that depot and warehouse operations have been suspended, and there is no access to the Durban terminal because of “significant damage” to an access road.

Transnet, the state-owned ports and rail operator, suspended shipping in Durban yesterday until further notice. “Shipping has been suspended until further notice as a result of environmental damage caused by the adverse weather, and vessels on berth are on standby,” Transnet spokeswoman Ayanda Shezi said in a statement.

Key routes into the port, including the coastal N2 highway and the N3 route that links Durban to the commercial hub of Johannesburg, were closed because of flood damage. Social media show many images of collapsed container stacks, and boxes floating away in the storms.

The port of Durban, once Africa’s largest, is also a vital conduit for landlocked neighbors including Botswana, Zimbabwe, and Zambia. President Cyril Ramaphosa is visiting Durban today, while the army is preparing to deploy troops to provide assistance.

South Africa is this year experiencing the La Nina weather phenomenon. A weather station at Mount Edgecombe on the outskirts of Durban received 307 mm of rainfall within 24 hours on Monday — the most since it began gathering data 62 years ago and almost double the previous high in 2019.

Shanghai has reportedly eased the lockdown for 43% of its housing complexes, according to media reports. During a briefing, deputy secretary general of the municipal government declared that residential compounds with no virus infections for two weeks will have their lockdowns lifted. However, while some housing complexes will see their lockdowns eased, officials will reimpose lockdowns if even a single new case is reported. In addition, according to local government data, Shanghai reported a daily infection rate of 26,087 on Sunday, while 95% of the cases occurring among those already in isolation.

Shanghai’s strict Covid measures have led vessels to pile up at Shanghai’s port. According to our most recent AIS data, dry bulk congestion outside of Shanghai’s port has increased to 248 vessels, up from 205 at the beginning of March. As the global dry bulk fleet currently stands at 12,790, dry bulk vessels piled up outside of Shanghai’s port account for 2% of the global dry bulk fleet. According to news reports, congestion has been building as shortage of vehicles causes imports to not be cleared. While the recent easing might indicate a progression out of the current lockdown, the high infection rates are still a concern going forward as the government continues to depend on a zero-Covid policy.

Contaminated fuel bunkered in Singapore is causing headaches for shipowners and charterers in the capesize and newcastlemax market, with the Brazilian market expected to be affected next quarter. Marine fuel testing company Veritas Petroleum Services (VPS) has identified 60 vessels that bunkered high-sulphur fuel oil (HSFO) contaminated with chlorinated hydrocarbons at the port of Singapore between mid-February and mid-March. Affected vessels are said to have suffered engine blackouts and other problems. Some vessels have had to turn back to Singapore, stop or head to the nearest port to debunker.

Several capesizes have been said to have been taken off the list of open tonnage in the Pacific while they deal with fuel-related problems, but market sources have struggled to quantify exactly how many. Several vessels had been contracted to Vale and were ballasting to Brazil when they encountered engine problems, which will have consequences for the Brazilian miner later this year. A source at Vale confirmed that the miner has had several vessels affected by the contamination. “At the moment we have long waiting times at load ports, so the impact to us will actually be a positive one in the immediate term, however, there may be a knock-on effect in Q3 as a result of the delays,” the source said. “Typically, the vessels that were contracted to us have been put back by 10-30 days.”

VPS on Monday said that 14 vessels across all sectors have reported “serious” damaging effects from contaminated fuel and warned that the off-spec fuel could continue to be a problem. “We would advise our customers to be very aware that this contaminated fuel remains in the supply chain and could potentially be reused or re-blended for use as a bunker fuel,” Malcolm Cooper said on Monday. The Singapore contamination has affected 140,170 tonnes of HSFO bunker fuel, which Veritas Petroleum Services called a “significant” quantity. Around 60 vessels are so far thought to have been affected. The fuel was contaminated by chlorinated hydrocarbons, which are hard to detect in sample testing using standard methods. These contaminants cause higher production of sludge in fuel lines and pumps, which can immobilize engines. These HSFO deliveries were made from two suppliers and 12 delivery barges, VPS added. Press reports have named the two suppliers as Glencore and PetroChina.

Now questions are turning to whether this incident is as serious — and potentially litigious — as the fuel contamination in the US in 2018. Marine fuel tracking firm FuelTrust thinks that insurance claims for the Singapore incident could “easily” run in the hundreds of millions of dollars, given the additional disruption to cargo deliveries. “We are seeing another fuel crisis similar to Houston in 2018,” said Jonathan Arneault, co-founder of FuelTrust. “Four years later, the lawsuits from Houston are still ongoing, and we’re just realizing the financial impact that a single batch of bad fuel can have on the industry. This recent incident is shining a light on a persistent global issue. Fuel quality problems cause de-bunkering issues every month in ports around the world, most of which never make the news.”

Ulf Bergman, senior economist at shipping data platform ShipFix, said there has been a definite drop in advertised vessel openings for the broader capesize segment in the Pacific. “While not historically low, the tonnage supply on offer is in the lower end of what we have seen in the last 24 months,” he told TradeWinds. “Globally, vessel openings for capes are also down but not to the same extent, suggesting that there may be a regional angle. “Likewise, vessel openings among larger capesizes have been trending lower in recent weeks. However, here the number of vessels is somewhat more limited, and the low numbers are not that unusual, so should be treated with some caution.” Arrow Research told TradeWinds it was aware of five or six capesizes affected by the contaminated fuel and said the number may be higher — but still not enough to have any noticeable market impact. Braemar ACM Shipbroking’s research team have also struggled to quantify the number of affected vessels. “While some vessels have been temporarily removed from the open tonnage list, this has not had a major effect, given the capesize market is in oversupply right now,” said Mark Nugent, senior freight, and commodities analyst at the shipbroker. “In tighter market conditions, such as in Q3 last year, we would have likely seen a stronger reaction to an event of this nature.”

Some residents of Shanghai stepped out of their homes for the first time in more than two weeks today, as the city took tentative steps towards easing a Covid-19 lockdown. The city has classed residential units into three risk categories, to allow those in areas without positive cases for a stretch of two weeks to engage in “appropriate activity” in their neighborhoods. Nevertheless, the limited reopening – with estimates suggesting less than a third of the population are allowed out in very limited conditions – is unlikely to ease the shipping backlog mounting at the city’s ports and across swathes of China’s coastline.

As of April 7, import container dwell times at the port of Shanghai had reached eight days, a 74% increase, since the March 28 start of the lockdown according to data from US logistics platform, project44. Trucks’ limited access into the port, import shipment numbers rising, and lack of rail freight assets, are all contributing reasons, project44 suggested.

Nomura estimates that as many as 45 cities in China are now implementing either full or partial lockdowns, making up 26.4% of the country’s population and 40.3% of its GDP.

According to Dimerco Express infections are spreading in cities near Shanghai in Jiangsu and Zhejiang provinces. “Jiangsu Province is home to many electronics and automotive manufacturing operations. Kunshan and part of Taicang are now locked down and many other cities in East China are also being greatly impacted by the pandemic,” an update from Dimerco Express stated.

Beijing yesterday ordered all provincial-level governments to keep airports, harbors and highways open so that transport and logistics links can be maintained amid strict anti-pandemic controls. Local authorities must not erect roadblocks or put healthy truck drivers into quarantine either, the State Council – China’s cabinet – said on Monday evening, amid plenty of reports of highway blocks and limited trucking availability.

It is not just the container side of shipping feeing the brunt of the Shanghai lockdown. There were 222 bulkers waiting off Shanghai as of April 11, 15% higher than a month earlier, according to Bloomberg shipping data.

Shanghai’s big shipyards have also called force majeure on their many ongoing newbuild projects, meaning ship delivery times will likely be pushed back. “No doubt, China’s strict zero-Covid policy has kept a lid on economic growth and affected the whole supply chain from construction to industrial production and over to mining activities and inland transportation, not to mention port handling,” an update from Norwegian shipbroker Lorentzen & Co stated today.

Further details of Lidl’s new shipping line have emerged. Splash reported earlier this month how the giant European budget supermarket chain had registered a container shipping company, Tailwind Shipping Lines.

Alphaliner reports that Tailwind has chartered three ships and bought another one. The three taken on charter are the 4,957 teu sisters Wiking and Jadrana from Reederei Tamke and Peter Doehle, respectively, as well as the 3,868 teu, Vinnen-controlled Merkur Ocean. Tailwind is also tipped to have bought the 5,527 teu Talassa from Peter Doehle. Alphaliner suggested the ships would likely be deployed on routes from Asia to Europe.

Brokers Braemar ACM reported that Tailwind is now building a dedicated Asia – Europe service while analysts at Linerlytica report that Lidl has been operating a China-Mediterranean service since December last year using a sub-1,000 teu ship. The service is operated independently by Lidl and does not involve the participation of an ocean carrier.

“The goal is to be able to manage the increased volume of different production facilities more flexibly in the long term,” Wolf Tiedemann, who heads up logistics operations for the German retailer, told German logistics title VerkehrsRundschau earlier this month.

Lidl operates around 11,200 stores and is active in 32 countries, recently entering the US market.

During the global supply chain crunch experienced during the pandemic a host of well-known retail names including Ikea, Walmart and Home Depot opted to charter in their own ships. Chinese furniture manufacturer Loctek Ergonomic went a step further this January, ordering a 1,800 teu boxship newbuild from Huanghai Shipbuilding for a swift delivery in the first quarter of next year.

China is blocking more highways to curb the spread of coronavirus in the country as the snarl-up in cargo traffic is expected to deteriorate and further weigh on ocean freight rates. The move comes as the number of domestic positive cases continues to rise, with several mega cities such as Beijing, Hangzhou, and Guangzhou, recently experiencing a resurgence of infections — in addition to Shanghai, which is on strict lockdown. Most provinces in east and central China — including Zhejiang, Henan, and Shandong — where economy and transport systems are seen more developed than those in the country’s west, have started to shut highway exits and entries, according to local government statements.

Although most highways remain open, authorities have tightened scrutiny there on the passage of drivers, exacerbating congestion levels. Waiting time on the G2 highway that links Shanghai and Beijing, for example, has exceeded 20 hours, according to DuckBill, a Shanghai-based container trucking company. It said in a circular that some nearby cities such as Yiwu and Taicang now reject the entry of truck drivers from Shanghai, while others require government-issued passes, among other certificates, to allow them in. One senior executive of the company told Lloyd’s List that trucking volume is severely impacted, as many drivers in Shanghai are still locked up at home while less cargo is available in hinterland.

China’s transport ministry held a meeting last week, aiming to safeguard the country’s road transport from the disruptions caused by coronavirus control rules. The meeting, which was also participated by officials from other ministry-level bodies, including the National Development and Reform Commission, and Ministry of Public Security, has required local governments not to arbitrarily block roads or tighten travel restrictions and called for the establishment of a nationwide pass system for truck drivers. “I do not expect any significant improvement anytime soon.” said a Shanghai-based freight forwarder. “The local officials will not really listen to the transport ministry because coronavirus prevention is overriding economic growth on their agenda.”

Maersk foresees the efficiency of its trucking service to and from Shanghai will be further impacted because of the lockdown measures in the Chinese financial and shipping hub, it said in an advisory. It previously expected a 30% reduction. The Danish giant also announced that several vessels will be omitting Shanghai port. They include Maersk Hamburg (IMO: 9784312) on Asia-Europe trade, Maersk Karun (IMO: 9624299) on Asia to West Africa. It also offered relief packages for customers to amend or cancel outbound and inbound shipments free of charge. It and other shipping lines have announced that reefer cargo, and some types of dangerous cargo, will be discharged at alternate ports.

With clogged road transport and disrupted manufacturing output, the cargo volume is expected to drop. Sea Intelligence said the ripple effect of China’s pandemic-related measures will inflict continued downwards pressure on spot rates. “As carriers have not yet blanked sailings due at Shanghai, it means their capacity utilization is lower than expected, and consequently spot rates will still see a downwards trend,” it said in a report, adding the softening sport markets also weigh on contract rates that are still being negotiated on transpacific trade. Carriers may eventually respond by void sailings to shore up rates, however. “This will stem the fall in rate levels but will in turn create more problems in terms of equipment repositioning, setting the 2022 peak season up for even more shortage problems,” said Sea Intelligence. New cases reported in Shanghai, the worst-hit Chinese city during the current outbreak wave, has continued to grow, exceeding 26,000 on April 10. That said, the municipal government announced plans over the weekend to relax some lockdown restrictions in part of the city, where the situation of infections is under control. Residents in those so-called “precaution zone” — residential compounds and villages where no new cases have been reported over the past 14 days — will be allowed to leave their home and travel within the neighborhoods where they live. However, production facilities in those areas are not expected to be restored yet. While the time frame for a reopening of the city is highly uncertain, a surge of cargo coming out of Shanghai could be expected once it arrives, Vespucci Maritime chief executive Lars Jensen said on the Baltic Exchange. “This will be a mix of cargo which has not loaded during the lockdown as well as factories playing catch-up with lost production while under lockdown. This will lead to a sharp upwards pressure on freight rates.” Some, however, suggested the pent-up cargo volume could be disappointing.

Part of the lost trucking capacity is being compensated by increased barge services offered by carriers and ports, said forwarding sources. Also, shipments from factories have been weak since late January after the Chinese New Year holiday amid lackluster demand from the large consumer countries. “The situation now is that I am chasing factories for their shipments with a slew of available slots,” said one freight forwarder in Shenzhen, which exited a city-wide lockdown a few weeks ago.

Looking on horrified at millions of hungry, irate Shanghainese, citizens in many other cities across China have started to hoard food in preparation for any impending Covid-19 lockdown. China’s heavy-handed municipal lockdowns have attracted sharp criticism. Authorities have relented a little in Shanghai, the country’s largest city, where lockdown entered its third week today. However, down south mass testing is underway at another important port city, Guangzhou.

In Shanghai, the city has classed residential units into three risk categories, to allow those in areas without positive cases for a stretch of two weeks to engage in “appropriate activity” in their neighborhoods. The city has been divided into 7,624 areas that are still sealed off, a group of 2,460 now subject to “controls” after a week of no new infections, and 7,565 “prevention areas” that will be opened after two weeks without a positive case.

Supply chains are feeling the brunt of the Shanghai lockdown with trucking capacity cut and many factories and warehouses closed. CMA CGM in an update on Friday noted the “massive” impact on both trucking movements velocity and available trucking capacities. “These factors have a major impact on import cargo that suffer drastically slower pick up time and therefore excessively stretched dwell time,” the French carrier pointed out.

Some carriers have now announced that reefer cargo, and some types of dangerous cargo, will be discharged at alternate locations as Shanghai has run out of available reefer plugs and space for certain types of DG cargo. Danish carrier Maersk has announced plans to omit calls to Shanghai from this week with other lines expected to follow suit.

“If Shanghai remains closed for an extended period, then carriers will respond with large- scale blank sailings. This could possibly lead to a peak season supply shortage, coinciding with a release of built-up Shanghai volumes, which could push rates to new records,” the latest weekly report from Sea-Intelligence suggested. Shanghai has been in lockdown for 15 days. Other Chinese cities have endured worse. For instance, Xi’an, a northwestern city of 13m people, suffered a 33-day lockdown through much of December and January.

In Guangzhou, a metropolis of over 18m people, mass coronavirus testing for all residents started over the weekend after two symptomatic local cases and an asymptomatic one were reported. Guangzhou closed in-person classes at elementary and middle schools today, shifting courses online as the number of confirmed Covid cases spiraled. The measures will last for at least a week. Municipal authorities said locals should not leave the city unless necessary and would need a negative virus test from within the last 48 hours to do so.

Japanese bank Nomura estimated six days ago that a total of 23 Chinese cities have implemented either full or partial lockdowns, which collectively are home to an estimated 193m people.

Japan’s Prime Minister, Fumio Kishida, announced on Friday that Japan will impose ban on Russian coal imports. The Japanese government has not established a date for Russian coal ban, with Minister of Economy, Trade and Industry Koichi Hagiuda stating that it will be phased out in stages.

According to UN Comtrade data, Japan imported 20 MMT, 22 MMT, and 20 MMT of coal from Russia in 2019, 2020, and 2021, respectively. Japan’s total coal imports were 186 MMT, 174 MMT, and 183 MMT in 2019, 2020 and 2021, respectively. Hence, Russian coal to Japan contributed to 11% of Japan’s total coal imports.

Furthermore, Russian coal is primarily supplied to Japan from Vostochny and Vanino in Russia’s far east, according to media reports.

Thus, more coal supplied from either Australia or Indonesia would therefore increase tonne-mile shipping demand. Of note, Australia, and Indonesia supply Japan with 110 MMT and 26 MMT of coal on average, respectively, which account for 60% and 15% of Japan’s total coal imports.

In addition, Panamax vessels account for 55% of coal shipped from Russia to Japan, according to our AIS data. As Japan seeks to move away from Russian coal, a shift to more coal imports from either Australian or Indonesian would likely benefit Panamax vessels going forward.

Japan, the world’s third-largest coal importer, said it will ban coal imports from Russia and impose a wide range of additional sanctions. The Asian economic powerhouse said these measures were being made in response to the alleged atrocities committed by Russian forces in Ukraine. According to the Asahi Shimbun newspaper, Japan is also phasing out Russian oil imports and is implementing bans on the imports of Russian lumber and other goods. In addition, new Japanese investments in Russia are prohibited.

Japan’s prime minister Fumino Kishida said the sanctions against Russia are in line with an agreement by the Group of Seven countries that consists of Canada, France, Germany, Italy, Japan, the UK, and the United States. Kishida did not set a timeline for the total ban on Russian coal, claiming Japan would first need to assess the impact and take steps towards securing alternatives supplies.

Coal is used widely by Japanese utility companies and manufacturers, with Russian coal accounting for around 11% the country’s total coal imports. In 2021, Japan imported 17 MMT of Russian coal.

Japanese shipping source said supramax and ultramax bulkers are the predominant carriers of Russian coal into Japan with most loading taking place at ports in the Russian Far East such as Vostochny and Vanino. One source told TradeWinds that he does not expect the coal ban to have a negative impact on the dry bulk sector. In fact, he said he believed the impact may even be positive as Japan will be importing more coal from countries such as Indonesia and Australia, which will lead to an increase in tonne/mile ratios.

As Japan reduces its Russian crude oil imports, the country’s refinery companies are reported as having cut their ties with Russia. Eneos Holdings, Japan’s biggest refiner, was reported not to have signed new contracts for Russian crude since the invasion of Ukraine was launched in late February. While Japan is one of the world’s largest crude importers, buying on average 2.49 million barrels per day in 2021, only 4% of that amount was supplied by Russia. Kishida noted February that Japan was holding about 240 days’ worth of oil reserves.

To help bolster European energy supplies, Japan also agreed in February to divert surplus LNG cargoes to Europe as a hedge against the possibility of Russia cutting off gas supplies. Acting together with the G7 nations, Japan has expelled eight Russian diplomats and trade officials. It is also stepping up financial sanctions against Russian banks and freezing assets of about 400 more individuals and groups, including military-linked organizations.