Transportation Roundup: Container futures coming (again); aim to ease freight rate volatility

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

A new attempt to bring futures contracts that aim to provide a tool to lessen severe ocean freight rate volatility will get underway in late February. Six freight futures contracts will be traded on the Chicago Mercantile Exchange (CME) that will provide shippers a means to hedge future freight rates. 

The six daily Freightos Baltic Index (FBX) indices will cover trade routes in the Trans Pacific and Asia-Europe trade lanes, and be used to settle the CME Group’s freight futures. 

“Importers and exporters, forwarders and shipping lines impacted by volatile ocean container rates will now be able to mitigate their freight price risk,” the Baltic Exchange said in a Dec. 16 press release. 

While the futures contracts aim to address volatility in freight rates (Trans Pacific import rates have reportedly fluctuated wildly from $4,222 to $20,586 over the past year) there is no guarantee the contracts will help drive rates back lower. There has been some easing of the high import spot rates of late. 

This is not the first-time freight futures contracts have been attempted. Investment banker Morgan Stanley launched a container futures contract effort in 2010, aided by freight forwarder TSC in the agriculture shipping market. At that time, the initiative did not gain substantial use in the market. 

For more detailed coverage in maritime media, go to Splash247 ; or here for Gcaptain.com; and here in the Journal of Commerce (JOC).  

Congestion easing outlook? Not until at least mid-2022, says Maersk
The world’s largest ocean shipping line – A.P. Moller-Maersk – forecasted last week that the container shipping’s congestion and equipment shortages will continue throughout many global markets through at least mid-2022, reports Container News. 

A variety of factors are contributing to congestion, including operational preventive measures for COVID-19; limited trucking and chassis availability in the U.S.; high demand for consumer products in many markets, including India; shortage of labor and limited port infrastructure. 

Nevertheless, the waiting time for ships at several ports in the Indian subcontinent and Middle East is two days or less, much less than Los Angeles and Long Beach, where 90 vessels were at anchor waiting to berth. 

Prominent Danish maritime consulting agency Sea-Intelligence last week also said data on congestion it has analyzed from major Alliance ocean carrier HMM indicates that congestion peaked in September 2021, then briefly improved in early October, only to climb back to a record high plateau based on a scoring system it developed.  

The data trend suggests the congestion is worsening in North America and Europe. It is likely to get worse, before it gets better – particularly over the next six weeks – if demand keeps growing to get ahead during the run-up to the Chinese-New Year, the period where manufacturing in China normally slows down. Go here for more details. 

Worth noting: A mid-2022 timeframe for congestion easing will be past the normal time frame for shippers and NVOCC freight forwarders to negotiate their contracts with the ocean carriers. 

Seattle-Tacoma ports see increased volume in November; Los Angeles on track for annual record
The Northwest Seaport Alliance (NWSA) ports of Seattle and Tacoma posted a container through-put increase of 7.8% in November, compared to a year prior.  

NWSA handled 325,604 TEU of containers, with imports up 4.6% at 133,827 TEU. Exports also climbed by 7.1% at 130,034 TEU. However, 45.3% of those were empty container exports, not loaded with freight. For the current year, NWSA’s volume has grown by 15.4% at 3,482,104 TEU overall. Go here for more NWSA coverage. 

The Port of Los Angeles (POLA), the U.S.’ largest container port, handled 811,460 TEU total in November, a decrease of 8.8% from the year before – in large part due to more smaller ships arriving with fewer containers that take almost as long as the bigger ships to unload, officials said.  

Imports dropped by 13.2% compared to November 2020. Loaded exports continued to show a decline at POLA, down 36.8% to only 82,741 TEU for the month, year-over-year. Empty containers in high demand in Asia were up 10.6% at 325,275 TEU compared to 2020. 

For the year, however, Los Angeles port is projected to set a record for containers handled. Port officials anticipate the yearly volume to reach 10.7 million TEU, nearly 13% above its previous record set in 2018. Go here for more POLA coverage. 

Empties? Having a banner year. 59% of containers leave U.S. with no cargo
Container News recently reported numbers on the explosion of empty container shipments back to Asia and the problems faced by U.S. exporters, despite all the attention being given to congestion and backlogs of ships with imports waiting to berth at U.S. ports. 

“A whopping 59% of containers left the U.S. ports unattended with goods in the first 10 months of the year,” the report said, citing MarketWatch Data. 

“The better money-making opportunity pushes the ships and shipowners to rush back to Asia with empty containers and return with loaded vessels on the ‘diamond route’ surfing ‘Richie-rich’ waves of the Asia-U.S. route.”  

The U.S. trade deficit hit $705 billion through the first 10 months of the year, up 29.7% from a year earlier. Export logistical hang-ups are part of the problem. Go here for the full story. 

U.S. shipyards invited to bid to build four hybrid river containerships to serve on Mississippi
A highly-watched, ambitious project to bring container shipping to the Mississippi River took another step forward last week when American Patriot Holdings (APH) issued a request for proposals to seven U.S. shipyards, inviting them to bid to construct four hybrid container vessels designed to move at higher speeds on the river. 

APH is spearheading the effort to establish a new container terminal under development in Plaquemines Parish, Louisiana, south of New Orleans, that would serve large ocean-going container ships; as well as unique, advanced-technology river-going container vessels.  

The design incorporates an Exoskeleton Structure to help reduce weight and was developed by Naviform Consulting and Research. It is said to be designed to operate at over twice the current river traffic speeds – 13 mph against a current of 4 to 5 mph — and has a patented, minimum wake bow to help prevent shore erosion. 

The vessels will be 595 feet long, with a beam of 106 feet and can operate at a maximum depth of nine to 10 feet. The vessels’ capacity is reportedly 1,864 TEU.  

The bids from the shipyard are due by Feb. 11, and APH anticipates awarding the construction contract by April 1. The initial four vessels are reportedly expected to begin service between Plaquemines port and a new terminal to be built in Memphis by April 2024. A second design vessel is also in the works intended to serve the river and its tributaries. 

Go here for more detailed coverage in Maritime Executive, and here in Maritime Magazine. 

‘Amazing’ transit times: From China, it’s faster to reach New York than LA
That was the headline for a feature story December 15 by Freightwaves and MSNBC reporter Lori Ann LaRocco. The lead paragraph reads: 

“Time is the most valuable commodity in the world of trade. It’s priceless. A new report out on transit times from digital freight forwarder Shifl shows the impact the massive congestion off the coast of Los Angeles and Long Beach has had on transit times.” 

Indeed, increased transit times become a huge worry for Specialty Soya and Grains Alliance member exporters trying to manage their grain and oilseed ingredient shipments to serve their food manufacturing customers in Asia and Europe.  

Go here for the full story.