Danish giant AP Moller-Maersk has detailed ongoing port congestion for container ships worldwide — and says disruption is set to continue. The sector has been enduring shortages of vessels as queues of hundreds of ships built up off terminals due to a rebound in demand and the persistence of the Covid-19 pandemic. This has been a major positive for freight and charter rates, but a big problem for cargo owners.

Maersk said the waiting time for a vessel to berth at Felixstowe in the UK is between seven and nine days, while Bremerhaven and Hamburg in Germany, Rotterdam in the Netherlands and Antwerp in Belgium are seeing waits of up to four days. In the US, things are much worse, with Long Beach in California experiencing delays of up to 45 days, and Los Angeles 28 days. “We do foresee the strain to continue for some time still,” the owner said.

But some signs of improvement are being seen. Antwerp had waits of up to 10 days in the week ending 7 January, but this could be cut to two days this week. “2021 proved a challenging year for global supply chains, seeing significant disruption and bottlenecks around the world,” Maersk said in a note to customers. “We saw pockets of improvements, only to get setbacks when terminals or vessels encountered a Covid-19 outbreak,” the shipowner added. And Maersk said: “Unfortunately, 2022 has not started off as we had hoped. The pandemic is still going strong and unfortunately, we are seeing new outbreaks impacting our ability to move your cargo.” The company added that “general sickness” remains high as key ports in key regions experience new virus outbreaks. “Ongoing contingency plans will always be made with the objective of minimizing supply chain delays,” Maersk said.

In China, the city of Beilun is enduring a new outbreak. Of the five container terminals in Ningbo, three are located near the epidemic area but are so far operating with no positive cases reported. Vessel calls and departures are so far running as normal, as well as loading and discharge activities, Maersk said. “As a key passage for world trade, we are monitoring the Ningbo situation very closely,” the line added.

Consultancy Alphaliner calculates overall ship idling for 2021 as less than 3% of the fleet, or about 600,000 teu of capacity. Fearnley Securities said this inactive fleet includes commercially idle vessels and ships in drydock. The current idle fleet of 550,000 teu compares to about 650,000 teu in January 2021, having effectively more than absorbed all new capacity added in 2021, the investment bank added. “As the market remains tight and having picked up steam in January with record Shanghai Containerized Freight Index levels, tonnage availability is expected to remain very limited,” analysts Peder Nicolai Jarlsby, Erik Gabriel Hovi and Ulrik Mannhart said. “Especially non-operating owners see extremely low idle numbers amounting to less than 8% of the already low idle capacity,” they added.

With only 1.1m teu of new capacity expected to be added through 2022, demand is likely to stay very healthy throughout the year, and charters could potentially see further highs, Fearnleys believes.

Japanese liner Ocean Network Express (ONE) has reported another container stack collapse on one of its ships. The accident happened onboard the 13,900 teu Madrid Bridge four days ago while the ship was passing through the North Atlantic en route to New York.

“Our immediate priorities are to ensure the safety of the crew, the vessel and the cargo on board. Delays to the vessel’s schedule are expected,” ONE stated in an update.

On November 30, 2020, a stack collapse onboard another of the company’s ships, the ONE Apus, resulted in a massive series of insurance claims.

Container shipping has been battling a series of container stack collapses over the past couple of winters.

Indonesian authorities have backed down from a blanket ban on coal exports, giving permission for fully loaded bulk carriers to depart. In addition, the government will decide on Wednesday whether to scrap the export ban entirely, according to a report by Reuters.

The country’s coordinating minister of maritime affairs Luhut Pandjaitan — who is often referred to locally as Mr Fixit — said that the vessels that had been given permission to sail could depart as soon as they secured verifications from mining and transport authorities. The partial easing of the ban on Monday comes after 10 days of intense negotiations between government leaders and the Indonesian coal industry to resolve serious coal shortages at the power plants of state-owned utility Perusahaan Listrik Negara (PLN). “As of today, after seeing a much better supply condition at PLN, 14 vessels that have already been fully loaded with coal and have been paid by the buyers, can be immediately released for export,” Pandjaitan said. “There are already a few dozen ships that have been filled with coal and have been released. Tomorrow they will depart,” he told local media on Monday.

Pandjaitan added that the government would conduct a review on Wednesday. If it decided to scrap the ban it would do so gradually, as it considered how the resumption affected compliance with the domestic market obligation rules that require miners to sell 25% of the coal, they produce to PLN at $70 per tonne, a rate well below market levels. Luhut has said the government will produce a new formula for the pricing so PLN would pay at market price, which is currently more than $200 per tonne.

The coal export ban, which was implemented without warning on 1 January, has disrupted the operations of nearly 200 supramax to panamax-size bulkers that were loaded, loading, or ready to load Indonesian coal. Industry sources told TradeWinds on Monday that while loading had continued for some ships, others had begun to cancel Indonesian loading dates, with some charters looking at how to extricate themselves from fixtures as shippers declared force majeure.

Government leaders from Indonesia’s main Asian coal customers — Japan, South Korea, the Philippines, and India — have put strong pressure on the government to lift the ban as they feared that they too would begin to run short of coal.

Can liners improve their financials this year after a record breaking 2021? Is there a risk the market might implode? Splash asks the analysts for their container predictions.

The opening days of the new year in the world of container shipping have been a continuation of the main themes that contributed to a record-breaking 2021. Covid-19-related delays, rates climbing to new highs and the public increasingly conversant in all things shipping. Can container shipping better its financial performance of last year where liners were tipped by consultants Drewry to have made a combined net profit of more than $150bn?

Philip Damas, managing director at Drewry Shipping Consultants, says the volatility of spot rates will stay and that both spot and contract rates will not normalize until the current systemic market disruptions and crisis in container shipping, caused by the pandemic, reduce significantly. “The only certainty in the container shipping market today is that annual contract freight rates this year will be going up by more than 60% on the major routes, when compared with 2021 contract rates,” Damas predicts. Considering both spot rates and contract freight rates, average container shipping rates will see a further annual increase in 2022: the latest Drewry Container Forecaster expects an increase of 16% in 2022, following the doubling of rates in 2021.

In normal shipping cycles, rates would have eased post-peak season. Not today however as Alan Murphy, the CEO of Sea-Intelligence, points out. December 31 saw the Shanghai Containerized Freight Index (SCFI) pass the 5,000 points for the first time – and it has continued to rise in the first days of 2022. “There are no indications that rates are dropping, placing a question mark on whether there is going to be a slack season at all,” Murphy says. While global volumes are starting to slow, liner shipping still must contend with very unbalanced flows dominated by US imports, and congestion getting worse. In terms of contract pricing, Murphy anticipates the spot/contract spread will remain “substantial” throughout 2022. “Contract enforceability will be the name of the game,” Murphy says. “Even if shippers manage to sign contracts well below spot, the value of such contracts will be minimal if the carriers can drop them without serious penalty, in pursuit of a much more profitable spot market.”

Judah Levine, head of research at Freightos, expects spot rates to remain at current levels in the coming months. “Even with a shift in consumer spending, low retail inventory levels will mean strong demand will keep volumes elevated between Chinese New Year and peak season 2022,” Levine predicts. Peter Sand, chief analyst at Xeneta, warns that as container shipping remains pressed to the edge, any shocks could cause further increases either in base rates or surcharges. “With the virus still spreading and China maintaining its zero-Covid strategy, more port shutdowns or other black swan events that would send spot rates upwards can’t be ruled out,” Sand says. In terms of long-term contracts, Sand says shippers signing traditional contracts face two- and three-fold increases this year.

Much has been written of the record containership orderbook, but analysts polled by Splash are not concerned that this will dampen earrings prospects this year. 2023 is a different matter, however. The orderbook currently accounts for roughly 20% of the existing fleet, the same level seen before the market imploded in 2015-2016. However, much has changed since then, most importantly the absence of competitive pressure from 20 global shipping lines, as well as a much greater level of carrier resolve. Any meaningful impact is still 18 months away, argues John McCown, the founder of Blue Alpha Capital. “Even with that orderbook, it would be a mistake to assume the market will swing back to excess capacity and do the things that have typically occurred in those situations,” McCown suggests, insisting carriers will be more disciplined in the future and more inclined to reduce capacity instead of reducing rates to fill that capacity.

The 2022 delivery numbers are likely to be like 2021, perhaps even less, says J Mintzmyer, lead researcher at Value Investor’s Edge, who goes on to point out that significant environmental regulations – EEXI and CII – will start kicking in by early 2023, which will synthetically reduce global supply by capping the engine speed limits of older tonnage. “Nobody knows if the current supply challenges will have been resolved when the new vessels come on stream in 2023, but if carriers start to fear an oversupply situation, they have a long list of older vessels they can scrap to restore equilibrium, while arguing that they are doing so for sound environmental reasons,” says Murphy from Sea-Intelligence.

So, is this a brave new world for liner shipping, one where competitors do not destroy the party for everyone else or will the carriers revert to type when conditions ease up?

“As I look at all the data and facts now, I’m not sure that history will repeat itself as I see a fundamental change in the DNA,” suggests McCown from Blue Alpha, who worked with Malcom McLean, the creator of containerization, for more than 20 years. Quite so, concurs Murphy from Sea-Intelligence, a man who has often been quoted in the past, saying that carriers have an uncanny ability to snatch failure from the jaws of victory, something he concedes is no longer the case. “For 10 years we have argued that carriers’ biggest challenge was a lack of resolve. I dare say they have found it now, and they have shown that they no longer have any reservation in dropping the ‘liner’ part of liner shipping if rates are coming under pressure,” Murphy says, referring to the dire schedule reliability of the carriers during the pandemic.

Drewry’s Damas is one analyst however willing to predict a crash of sorts, expecting the spot market to nosedive next year, albeit that the contract market will remain strong in 2023 given the new behavior and capacity management of carriers.

Scrapping of vessels remained at below-average levels in 2021 as booming containership and dry bulk rates kept older assets trading and elderly tankers were deployed to ship US-sanctioned Venezuelan and Iranian crude.

Some 265 ships of 10,000 dwt and over totaling 20.4 mdwt were tracked by Lloyd’s List Intelligence as beached at yards in India, Pakistan, and Bangladesh in 2021. That compares to 307 vessels of 20.9 mdwt in 2020, data show. The decline was due in part to pandemic-related recycling yard closures in India in the second quarter of the year.

Volumes of dry bulk carriers scrapped were the lowest in five years, as owners kept hold of older ships while charter rates across all sizes soared to 13-year highs over the first 10 months of the year. Most of 58 bulk carriers recycled during the year were sold earlier in 2021, before bulk carrier freight rates began to climb significantly on the back of Chinese-led demand for raw materials.

Hardly any containerships were scrapped, an unsurprising figure given the record boom in charter rates and second-hand vessel values over the year, even for older tonnage. Less than 1% of dwt sold for demolition comprised boxships, compared with 18.6% of crude tankers and 14% for bulk carriers. Ships over 15 years old worth $17m at the end of 2020 were being sold for five times their value by late 2021 as demand for vessels outpaced supply. Port congestion and Covid-led supply chain interruptions lifted freight rates to new highs throughout the year. Just eight containerships of 10,000 dwt or more were reported scrapped, compared with 75 in 2020 and 168 in 2016.

Despite dire trading conditions for the global fleet of tankers, only 100 chemical and product tankers totaling 3.8 mdwt were demolished, Lloyd’s List Intelligence data show, and 50 crude tanker or floating storage and/or production tankers of 8.2 mdwt. That number is up on 2020 figures, when 20 crude tankers of 2.6 mdwt and 34 product or chemical tankers of 1.2 mdwt were recycled. However, this remains well below 2018 volumes of 18.5 mdwt and 109 crude tankers. Lower recycling tanker sales in 2019 and 2020 reflected volatile freight rates that touched fresh records across most asset sizes in the early stages of the pandemic when demand for floating storage on stalling oil consumption lifted demand. These freight rates have now slumped and have barely met operating level since the final months of 2020, with protracted and depressed unprofitable conditions now seeing many owners take the decision to sell ships to cash buyers.

Compounding these numbers are three-year-old US sanctions on Venezuela’s and Iran’s oil and shipping sector. Sanctions have diverted many scrapping candidates to these trades, with a fleet of some 200 vessels aged around 20 years or more resold and then deployed for these shipments. It is believed that if — or when — sanctions are lifted these tankers will immediately head for breakers’ yards. Tanker owners and operators have called for increased scrapping to reduce the surplus of tonnage that has weighed on freight rates. But many might choose to wait to see whether any recovery in oil demand growth as the year progresses may finally lift demand and earnings.

“Most recyclers across the board remain keen to fill their plots, even though there is not enough tonnage going around and it seems unlikely to be a busy 2022 as compared to last year, with containers and dry bulk still flying and a feeling that the beleaguered tanker sector may also turn at some point this year,” said cash buyer GMS in a weekly report published today. “Much may also depend on the severity of this recent Omicron wave and whether the surge in cases begins to restrict trade and movement, international travel restrictions seem imminent, and infection rates skyrocket once again.”

The lower scrapping figures in 2021 were recorded despite recycling rates hitting 13-year highs on higher steel plate prices and remaining about $600 per ldt by the year’s end, up from $260 per ldt 12 months ago.

Taylor Maritime Investments (TMI) is eyeing a move towards longer bulk carrier charters as it anticipates a rate boost after the Chinese New Year holiday early next month. The London-listed owner has just taken delivery of two more geared ships bought in 2021, one supramax and one handysize. These have been fixed on short-term period deals of less than six months at average unlevered gross cash yields of more than 20%.

Chief executive Edward Buttery said: “In the short term, we are pleased to have locked in such attractive yields for these newly delivered vessels. However, we expect the market to firm after Chinese New Year and will consider longer-term charters at that point as part of the strategic balancing between pricing and contract longevity.”

In December, TMI became the biggest investor in Singapore bulker rival Grindrod Shipping after selling its first ships. It spent $77.9m on a 22.6% stake acquired from a wholly owned subsidiary of Grindrod’s largest shareholder, Remgro. The deal was partly funded through the sale of two Chinese-built vessels for a combined $42.8m — an internal rate of return of 100%. Cash and an existing debt facility will also be used. One of the sold units, a Chinese-built handysize, has now been delivered, with the second due to leave the fleet in the first quarter. Tomini Shipping of the United Arab Emirates is the buyer.

TMI, which listed in London last May, currently has 30 ships, with a final purchased bulker due to join the fleet early next month.

Due to heavy rains, Vale has partially halted train service on the Estrada de Ferro Vitória a Minas railway, the production in the Southeastern (21% of production last twelve months) and Southern Systems (18%). While all complexes within the Southern system was affected, Vale reports that only Brucutu and Mariana has been impacted amongst the Southeastern systems, which would see our estimated impact on production decrease to ~30%. Seasonally, heavy rains should be expected, and we note it as a positive that Vale reiterates its 2022 production guidance of 320-335 MMT. However, when coupled with the recent Indonesian export ban and the upcoming winter Olympics, the development could be seen as another blow strengthening the short-term headwinds seen for the space.   

A breakout of the omicron strain of Covid-19 over the weekend has seen the port city of Tianjin near Beijing enter partial lockdown. Exit controls have been put in place and mass testing is underway in the city, whose population today stands at 14m people. Another 21 cases were reported in the northeastern city on Monday with citizens placed into three tiers of lockdown.

The outbreak comes just weeks ahead of Beijing hosting the Winter Olympics. The Chinese capital is situated just 130 km northwest of Tianjin. Beijing’s strict zero-Covid policy has curbed local outbreaks with mass testing, snap lockdowns, vigilant surveillance, and extensive quarantines. However, new variants such as omicron have seen outbreaks intensify since the fall.

Ningbo, home to the world’s largest port, has had three partial lockdowns in the space of six months. The risk of further shut-downs in China is significant due to the combination of a zero-tolerance policy towards Covid and an omicron variant which is much more contagious than previous variants, analysts at liner consultancy Sea-Intelligence warned in their latest weekly report.

Rounds of talks between Indonesian government officials and the country’s coal mining sector over the weekend failed to lift the ban on coal exports that was implemented on 1 January. Indonesia’s government is hoping to reach a decision on resuming coal shipments “in the coming days”, its energy minister said on Monday. “In the past week we have done stocktaking and we hope in coming days there will be more clarity so we can have coal security and resume exports,” Reuters quoted energy minister Arifin Tasrif as saying during a meeting with Japan’s industry minister, Koichi Hagiuda.

Commodities analysts say that the month-long ban has the potential to disrupt as much as 30 MMT of the seaborne coal trade. As the ban drags on into its 10th day, coal prices have begun to soar globally while increasingly pessimistic owners and operators of supramax and panamax bulkers open in Asia have begun to search for gainful employment for their ships elsewhere. Dry bulk brokers based in Singapore told TradeWinds that some owners with tonnage in Asia are beginning to accept loadings in Australia, where Asian nations such as South Korea, Japan and the Philippines are said to be looking for alternative coal supplies as their governments put pressure on the Indonesian government to rescind the ban. Reuters reports that Japan and South Korea are among the top destinations for Indonesian coal and together with China and India, they accounted for 73% of its exports in 2021.

Chinese buyers will have to look further afield due to the country’s unofficial ban on Australian coal, although commodities analysts said that for now China is relying on domestic producers and existing stockpiles. Brokers said the market is becoming increasingly pessimistic across the board. “We have lost 10 days’ supply out of Indonesia and even if the ban was to be lifted today, we are still looking at weeks for the backlog to clear,” one broker said. Nervous charterers are also said to be on their phones asking their lawyers and brokers how they can extricate themselves from fixtures for loadings on which force majeure has been declared by suppliers, or where long loading delays are expected.

So far there have been few reports of fixtures being cancelled. Despite the export ban, the loading of vessels continues. “There is nothing to stop ships from loading coal. The problem is that they cannot get sailing permits,” said the managing director of a Jakarta-based coal shipper. “This is leading to disputes over demurrage. It is going to be one big mess,” he added. Meanwhile in Indonesia, government officials continue to drag their heels despite reaching an agreement with the country’s top coal producers at the end of last week to secure enough supply to avert any shortages for domestic power production.

Indonesia requires miners to sell 25% of their production to local power generators at a maximum $70 per tonne, a price that is below the export market price and had led to some producers ignoring the quota. This was blamed for the domestic shortages. Coordinating Minister for Maritime and Investment Affairs, Luhut Pandjaitan, said last Thursday that the domestic supply emergency at state-owned utility Perusahaan Listrik Negara was over, the government was still discussing issues related to the ban. Hendra Sinadia, executive director of Indonesia Coal Miners Association, said on Sunday that one of the issues still being discussed was the limited availability of vessels to transport the coal to power plants. An Indonesian coal shipping source said that with the domestic supply secured, there was no reason for the Indonesian authorities to continue with the export ban while domestic logistics and shipping issues were being resolved. “I think this is a case of the government showing the coal industry who is boss,’ he said.

Under Indonesian cabotage laws only Indonesian-flagged vessels are allowed to transport cargo on domestic voyages, and in the dry-bulk sector these are said to be in short supply. On Monday, Indonesia’s Sea Communications Department under the Ministry of Communication sent out a rallying call to the country’s shipowners asking them to send all available bulkers and barges to load coal for distribution to power stations scattered throughout the vast Indonesian archipelago.

New data shows how much longer containers are taking to reach their destination on the main east-west trade lanes, helping explain the port snarl-ups seen across the world over the past year. San Francisco-based freight forwarding and customs brokerage Flexport provides a weekly measurement called the Ocean Timeliness Indicator, which measures the time taken from the moment cargo is ready from the exporter until the importer takes delivery.

On the transpacific eastbound, the average time in 2019 prior to the pandemic was 45 to 50 days. The latest measurement on January 2, 2022, was a new record high of 110 days. Similarly for Asia to Europe, the pre-pandemic average transport time was around 55 to 60 days, whereas the situation on January 2 was 108 days. “This extreme increase in transportation time leads to a similar large increase in the demand for containers – simply because each container is tied up much longer than usual,” analysts from Sea-Intelligence pointed out in their latest weekly report.

Sea-Intelligence data shows that pre-pandemic typically 2% of containership capacity was caught up in delays, a figure that shot up to 11% in 2021. Early indicators this year show that congestion is far from improving. “All the available data shows that congestion and bottleneck problems are worsening getting into 2022,” Sea-Intelligence warned. “Port congestion and inefficiencies remain an ongoing issue resulting in everything from vessels slow steaming, vessels being diverted to different ports, containers being uncirculated, and longer unloading times by onshore workers. COVID is still boosting consumer spending on goods, and we believe rates will hit new record highs in the coming weeks,” a new shipping report from investment bank Jefferies stated today.