Liners ship record number of containers in May; high rates, demand to continue, say analysts

Shipping lines moved the highest number of containers in a month in May amid a spike in Chinese exports as producers in China rushed to beat upcoming US tariffs on goods made there, and more ships were deployed into service on longer routes around Africa.

The resulting congestion at Asia’s ports and jump in shipping rates are expected to continue until September at least, with retailers bringing forward orders to avoid bottlenecks and supply shortages during the year-end holiday season, analysts said.
Demand for container shipping hit an all-time record high in May, with 15.9 million twenty-foot containers shipped globally compared with the previous record of 15.7 million in May 2021, according to data provider Container Trade Statistics.

Data from the same source also showed that 74 million containers were shipped in the first five months of 2024, beating the record set over the same period in 2021 by 150,000.
The increase has been largely driven by record-breaking exports out of China, as concerns mount over the implementation of US tariffs on Chinese goods later in 2024.

In May, China exported a record 6.2 million containers worth of goods, representing almost 40 per cent of the world’s container volumes for the month, noted market intelligence firm Xeneta.

Around a quarter of the goods were sent from China to Europe and the US East Coast, the two major trading routes most affected by the longer sailing distances around Africa to avoid violence against commercial ships in the Red Sea.

According to maritime intelligence firm Lloyd’s List, vessel transits along South Africa have risen by 84 per cent since Yemen’s Houthis first started attacking ships sailing through the Red Sea in October 2023, while transits through the Suez Canal are down by almost 60 per cent.

Poor port facilities along the African coast have resulted in delays to the already longer sailings. Meanwhile, a move by shipping lines to omit some ports in a bid to stay on schedule has led to substantial changes in vessel arrival patterns and cargo loads at key ports in Asia, including Singapore.

Since the start of 2024, Singapore port operator PSA has seen high concentrations of vessels arriving on certain days of the week, causing a significant increase in waiting times at the port despite all of its berths being used.

Compounding this is the weather. Earlier in July, for example, rough seas off South Africa brought container traffic to a standstill in the region, while several primary ports in South Africa were closed due to strong winds.

To manage the congestion, PSA has commissioned new berths and reopened others, and on July 10 announced that it had reduced the average wait time at the Singapore port to two days or less.

Still, much of the disruption to shipping is beyond control and depends on how long the Red Sea crisis lasts, said Mr Judah Levine, an analyst at freight marketplace Freightos.

As a result, the cost shippers and consumers pay to move goods is expected to stay volatile and remain high until September at least, he said. This is compounded by an early start to the year-end peak season, as retailers and other shippers bring forward stock to avoid delays and supply shortages during the holidays.

Others anticipate potential strikes by port workers in the US and Europe later in the year and are shipping goods in advance, Mr Levine said.

Despite this, much of the additional demand seen since May has been unexpected.

“Carriers are surprised by the early increase in demand, at a time when available supply has been deployed to manage the situation in the Red Sea,” said Mr Levine.

According to recent data from freight forwarder Flexport, shipping lines have deployed more than 90 per cent of their capacity into service since May, which has contributed to higher freight rates.

Mr Levine said that shipping lines such as Hapag-Lloyd and Maersk have already begun implementing peak-season surcharges of between US$1,500 (S$2,020) and US$2,400 per container, adding to what shippers are already paying to move containers.

According to Freightos, it now costs about US$6,000 to move a container from China to the US West Coast, and around US$7,500 to the US East Coast, before including peak-season surcharges.

Analysts at Xeneta warn that the high global demand “has given shipping lines the opportunity to pick and choose which containers to load onto ships and seen shippers finding themselves paying higher rates and surcharges to secure space for their cargo”.

They warn that liners will take advantage of that situation and increase revenue by redeploying capacity away from smaller trading routes, to the more lucrative major routes where demand is higher.

This will consequently reduce capacity on the smaller trades and increase rates for these too.

According to Xeneta, average spot rates for cargo leaving Asia for the US have more than doubled since the end of April. Spot rates are the prices for one-off shipments that require immediate shipping and reflect the current market conditions at the time of booking.
Source: The Straits Times