Services

Air cargo capacity may still be down by as much as 10% on pre-pandemic levels, but over-supply could soon be the story, as freighter orders surge, say industry leaders.

Etihad Cargo SVP Martin Drew told delegates at the World Cargo Summit in Abu Dhabi this week freighter supply was at its highest for more than a decade, with new orders and passenger-to-freighter conversions set to hit the market.

“There is pressure on yields and, as more capacity comes online with the return ...

A parallel freight market is emerging for exports from China that undercuts the lowest container spot rates.

Asia-North Europe ocean carriers are proactively quoting small- and medium-volume shippers ‘special’ FAK rates below $1,000 per 40ft from China to the UK, as they scramble to fill their ships in the dismal market that has followed the Chinese New Year holiday.

Indeed, The Loadstar has sighted an e-mailed quote this week from a major carrier for $998 per 40ft from a range of Chinese ports to the UK port of Felixstowe, valid until 14 February.

Moreover, The Loadstar also received a no-volume commitment offer from a China-based forwarding agent down to $1,400 per 40ft from Shanghai and Ningbo to Felixstowe, and $1,450 for Hamburg and Rotterdam, valid until the middle of the month.

The forwarder claims the rates are valid with all the main Asia-North Europe carriers and they can offer prompt shipment.

A UK-based NVOCC contact told The Loadstar the forwarder would most likely enjoy a “sizeable markup” on the rates, so the base rate with the carrier would “probably be around $1,000”.

He added: “The way things are going, they might even be able to achieve lower rates than that soon, as the carriers are desperate.”

Nevertheless, the container spot market indices appear to have paused their decline with, for example, Xeneta’s XSI North Europe component almost unchanged this week, at $1,787 per 40ft.

“These indices are only as accurate as the information they are given, and some of this data is obviously being held back,” said the NVOCC contact. “And don’t forget also, that spot rate indicators are an average and therefore do not necessarily reflect the lowest rates.”

Meanwhile, on the transpacific, Drewry’s WCI Asia to US west coast reading was down 1% on the week, to $2,056 per 40ft, whereas the XSI saw a drop of 3%, to $1,529.

However, on the US east coast, the Freightos Baltic Exchange FBX reading held steady this week at $2,660 per 40ft.

And transatlantic shippers are starting to see the impact of the significant injection of extra capacity on the route, with another 5% fall in the FBX North Europe to the US east coast spot, to $4,956 per 40ft.

According to Vespucci Maritime CEO Lars Jensen, the immediate outlook for carriers is more of the same, with new rate wars looming across tradelanes.

He noted that volumes on the major deepsea trades were “either at, or below, pre-pandemic levels following the collapse which began in September”.

“This is driven by importers, especially in Europe and North America, undergoing an inventory correction,” said Mr Jensen. “All elements in the container shipping markets point to a challenging period for container carriers in 2023.”

And the analyst warned: “Not only are the fundamental elements pointing to a cyclical downturn, but competitive pressure between carriers is also poised for a temporary increase.”

Director general of Tiaca Glyn Hughes has welcomed the entrance of container shipping lines into the global airfreight market, describing it as a “show of support” for the industry.

On the sidelines of the World Cargo Summit in Abu Dhabi this week, Mr Hughes told The Loadstar: “These carriers [like MSC and Maersk] made some $200bn collectively over the pandemic and they chose to invest that in airfreight,” said Mr Hughes.

“It shows that, long-term, they are seeing this as a sector with a bright future, and I can only consider that as a positive, because they are not trying to shave volumes from existing airlines, they are banking on a much bigger pie.”

Asked if airlines were right to be concerned, Mr Hughes said while it “certainly amounted to a challenge for the status quo”, the capacity on offer by shipping lines was “not huge”.

Others have been less receptive to the move by shipping lines that have faced repeated attacks over recent lavish spending and their intentions in the forwarding sector.

All-cargo carrier Silk Way West Airlines CEO Wolfgang Meier said: “Shipping lines are, of course, now our competition. But I am convinced it will be a struggle for them, and some, many, will not make it in the airfreight sector, for the very real fact that this is a day-to-day business operation and one not conducive to newcomers.”

CMA CGM’s commitment to its airfreight operations has already faced questions, after it appeared to suspend its scheduled services to Atlanta and Chicago last year. Some have speculated that, with the market entering a downturn faster than expected, the shipping line might be questioning its investment.

However, with news that CMA CGM’s forwarding arm, Ceva Logistics, is likely to be on a merger path, the group could see greater market share and power. Equally, some observers may wonder if the group is biting off more than it can chew.

DB Schenker’s global head of airfreight, Asok Kumar, suggested the move into airfreight by shipping lines was a result of their “pandemic bonuses”, leaving them “with so much money they did not know what to do with it”.

Evergreen chairman Chang Yen-i has warned that, with the large number of newbuild mega-box ship deliveries beginning this year,  liner operators could see a return of pre-pandemic rates wars, if consumption fails to keep up with the capacity growth.

Mr Chang was speaking at the National Association of China Shipowners Chinese New Year celebration on Wednesday.

Evergreen itself has 49 vessels of 463,442 teu under construction, but market leader MSC has the largest orderbook, with 133 ships for over 1.8m teu being built, followed by Cosco (884,272 teu), CMA CGM (816,476 teu).

Mr Chang told Taiwan’s de facto shipowners’ association: “After two years of amazing profits, the liner industry now faces three challenges. The first is the slowdown of international trade and the global economy; the second is the fall in container freight rates; and the third, the big number of new ships being built.”

Latest reports from Iskenderun Port in Turkey suggest that the fire following Monday’s earthquake, has been brought under control.

Turkish maritime authorities told Reuters a combined effort from the air and sea had managed to quell the blaze, which began when a container stack collapsed after the horrific shocks that have killed thousands and wrecked supply chains.

However, vessels heading for Iskenderun have been warned to divert to other ports, as the southern Turkey facility remains closed.

A local source told Reuters: “The flames ...