Competitive shipping trends and developments

Compiled by Bruce Abbe, SSGA Strategic Adviser for Trade & Transportation

Sky rocketing rates and demand for container imports to the US leading to service challenges on the Trans Pacific

The transportation news media over the past week has continued to cover the latest trends in container shipping, most notably the ongoing surge in demand and sky rocketing rates for high value imports on the Trans Pacific trade lanes coming into the U.S. While U.S. exports haven’t yet seen the rate increases, that surge had led to extraordinary pressure on ocean carriers to get containers back to Asia – China in particular – and it is starting to have a downstream impact on service for exporters.

Import surge creating imbalances
Two industry experts told Freightwaves news site last week that bookings of imports into the U.S. are up nearly 90 percent, year-over-year compared to 2019. The combination of projections of reduced trade due to COVID-19 leading carriers to cancel sailings early in the year – when, in fact, there was a surge in demand for personal protection equipment, E-consumer and health products – has led to the high rate increases and bulge in demand during the fall peak season.

The ocean carriers are reaping high profits now on imports, but the two experts predicted the current freight boom will be followed by a ‘substantial dip.’ Go here for the full story.

Container shortages rising – Freight forwarders advised the Journal of Commerce (JOC) that container shortages are “intensifying” across much of Asia due to the demand in China for shipping “high-yield” trans Pacific freight to North America. While there are struggles to find containers in some locations, there are reports of carriers loading empties on ships in various locations to reposition them to China. Go here and here for full related JOC stories.

US exporter shipment schedules pinched
The drive by ocean carriers to get containers back to China has even started to affect U.S. export shipping schedules.

At least one Specialty Soya and Grains Alliance (SSGA) exporter reports his company has had containers sitting at ports ready to be loaded for shipment to a non-China Asian destination rolled to a later vessel because the carrier is loading empties for direct voyage to China. That will mean at least a two-week delay in a food ingredient delivery to a customer. Needless to say, the shipper is not happy.

Will governments intervene?
The imbalances in service, high rates and space shortages following earlier cancelled sailing by the ocean carriers has now caught the eye of government regulators.

Chinese regulators were first reported to look into what has been going on, and reportedly suggested it’s time for the ocean carriers to add more capacity back into the trade lanes and “less aggressively” raise rates on the trans-Pacific. Go here for a more detailed story by JOC.

The volatility in rates and service has also caught the eye of the U.S. Federal Maritime Commission (FMC).

Hellenic News reported late last week that the FMC is reviewing ocean container shipping for possible non-competitive practices after east bound trans-Pacific rates recently hit record levels. The impact of cancelled or “blanked” sailings is a key focus of FMC. Globally the carriers reportedly cancelled more than 400 sailings between February and May in the early stages of the pandemic. Go here for the full story.

Freightwaves also provided more insights after reporting that China’s ministry of Transportation and Communication questioned ocean carrier representatives on Sept. 10. That meeting caught the industry by surprise, noted one expert. At least one ocean carrier has announced it is withdrawing a planned general rate increase (GRI).

One expert told Freightwaves that, unlike years past, when high rates led to over-capacity then lower rates, things may be different now for two reasons. The dozen leading container ocean carriers are now operating in just three major vessel-sharing alliances. That means it’s easier for the carriers to engineer capacity cuts, he speculated. The second reason, he said, is the practical reality that it will be difficult for the carriers to “stop blank sailings.” While the carriers might need to find some way of meeting new stringent rules if the Chinese institute the, it will be difficult for the carriers to give them up, “…because you’re talking about taking away the only thing that has worked for the carriers in the past 10 years.” Go here for the full story.

Katie Farmer named president and CEO of BNSF Railway

Congratulations to Katie Farmer, who last week was named president and chief executive officer of BNSF Railroad, succeeding the retiring Carl Ice, who had been with BNSF for 42 years of his career.

Farmer becomes the first woman to head a U.S. class one railroad, and a key railroad serving many export shipper members of SSGA.

“I have had the pleasure of working with Katie and am impressed,” said Bob Sinner, chairman of SSGA’s Competitive Shipping action team. “Katie is customer-focused and has taken the time to listen and consider alternative solutions to our container issues in rural America. Her new promotion is well-deserved and SSGA looks forward to working with Katie.”

Farmer is a longtime member of the BNSF leadership team, most recently serving as executive vice president of operations.

During his tenure, Ice led a team that orchestrated the merger and integration of the Burlington Northern Railroad and Santa Fe Railroad in 1995. Since then, the company grew to become the largest class one railroad in North America. Ice will retire at the end of 2020, but remain on the BNSF board of directors.

Go here for the BNSF announcement.

Largest container ship yet calls on East Coast ports

While it may not be as big as the huge 18,000 twenty-foot-equivalent (TEU) container ships or the mammoth 24,000 TEU ships that are starting to ply the Asia-to-Europe trade lanes, the CMA CGM Brazil at 15,072 TEU’s is no small potato among container vessels.

Last week the Brazil became the largest container ship to call on East Coast North American ports, and it made the news and captured public attention at each stop.

Halifax, Nova Scotia was the first stop, steaming in after departing from the Port of Colombo.

New York-New Jersey was the second stop on Sat., Sept. 12, where photos captured it steaming under the Bayonne Bridge to dock at APM Terminals.

The Port of Virginia in Norfolk was next, followed by Savannah on Friday morning. It pulled into the Port of Charleston Sunday, and was set to leave late Monday, for a return voyage to Shenzhen, China.

Go here and here for more coverage of the New York and Charleston news.