Competitive Shipping Roundup: New FMC chair Maffei calls for review of Shipping Act

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

The newly appointed chairman of the Federal Maritime Commission (FMC) last week told a major shipping industry trade group that it’s time for a review of the U.S. Shipping Act’s laws and regulations. 

FMC Chair Daniel Maffei, speaking to the National Customs Brokers and Forwarders Association of America, said the last significant reform of the shipping laws was nearly 23 years ago, and key provisions date back to 1984. 

The shipping environment has significantly changed since those times, Maffei said, as the number of major ocean carriers has gone from more than 20 down to about nine. No major carrier is domiciled in the U.S., yet container shipping volume on the high seas has tripled. 

In light of the current, unprecedented surge in imports, skyrocketing rates and nearly unmanageable congestion in supply chains, Maffei said a review of the U.S. shipping act by Congress is in order. 

SSGA and the Agriculture Transportation Coalition have been among groups that have urged Congressional consideration of reforms to the Shipping Act to strengthen the FMC’s review and enforcement powers, as well as requirements upon the ocean carriers to provide full and fair service to U.S. exporters. 

Click here to view the full story in Container News. 

Maritime industry analyst: Brace for two years of high rates 

During a major container shipping outlook webinar last week by the prominent, London-based, global shipping consulting firm Drewry, shippers were advised to prepare to see higher freight rates and tight capacity for at least two more years. 

A Drewry executive said some relaxing of freight rates was seen for 2022, but ocean carriers are still expected to keep rates high, thanks to the capacity management capability they achieved during the pandemic and the “pricing discipline they have shown,” Loadstar reported. 

The consultancy predicted a blend of spot rates, contract rates, backhaul and regional rates will increase 23% this year, with some head–haul rates “substantially higher.” 

Ocean carriers log unprecedented profits 

While shippers are struggling with poor service and unprecedented congestion at ports globally and at inland container rail terminals in the U.S., the ocean carriers at the center of the supply chains are reporting unprecedented levels of profits, thanks to a continued surge in imports and high rates. 

Last week, A.P. Moller-Maersk reported a first-quarter profit of $2.7 billion. That was a record quarterly return for the largest ocean carrier and just shy of its full yearly profit of 2020.     

Cosco Shipping Holdings, the parent company that owns Cosco Shipping Line and Orient Ocean Container Line, reported it earned $2.39 billion for the first quarter of 2021, that was up a whopping $2.33 billion over the first quarter of 2020.   

Ocean Network Express earlier reported a net profit of $3.48 billion for its fiscal year that ended March 31. The ocean carrier was formed in 2017 through the merger of the container shipping divisions of Japanese conglomerates NYK, Mitsui OSK Line and Kawasaki “K Line.” 

How long the current global container congestion crisis will last is subject of much debate. The Drewry analyst above noted the ocean carriers have signed contracts for 170 new build ships during the first three months of the year. However, the majority won’t be delivered until 2023, on top of other existing orders. 

Lars Jensen, CEO of another major consulting firm Vespucci Maritime, told a webinar in late April that the shortage of capacity and equipment was mainly caused by congestion in the U.S., exacerbated by the temporary Suez Canal blockage. He termed it a “temporary shortage.”   

“In 2019 there were enough vessels and containers in the world, but in 2020, when we moved less cargo than in 2019, there were all these shortages,” he said. The “physical number of containers or ships” are not the problem, he argued. Rather, it’s a need to rebalance the market after getting rid of the congestion bottlenecks.” 

Empties also leaving East Coast ports 

While U.S. ag exporters continue to fret that their freight keeps getting way laid at the ports or their bookings denied or delayed as the ocean carriers favor shipping empty containers back to China, the issue is not just a problem seen at the West Coast ports serving the Trans Pacific trade. 

The Port of New York and New Jersey reported in March empty returns of containers climbed by 77.5% in March compared to a year earlier, amounting to 267,542 TEUs. Imports were also up 44.%, at 393,159 compared to 271,511 in March of last year.  Exports dropped 7.4%, down to 126,699 compared to 136,780 a year ago.