Shipping Companies Launch More Blank Routes to Support The Decline in Spot Freight Rates

Affected by the global epidemic, war conflicts, port congestion and other factors, China's export demand has slowed down, and container spot freight rates are facing increasing pressure. The 2M Alliance is preparing to cancel three voyages from Asia to Northern Europe next month.

2M partners MSC and Maersk have cancelled the Griffin/AE55 sailing in the first week of May and will cancel two sailings on their key Shogun/AE1 service in the coming weeks.

MSC attributed the cancellation to "continued challenging market conditions resulting in congestion and delays across the supply chain" and said it would accept bookings for "other services".

According to the latest data released by Drewry on the 22nd, in the next 5 weeks (weeks 17-21), the three major shipping alliances in the world have successively cancelled several voyages. 18 voyages reached; the fewest Ocean Alliance cancelled 12.5 voyages; a total of 55 voyages.

Drewry said that despite the normal operation of the Shanghai port, Shanghai, the world's largest port, is still under lockdown, resulting in unpredictable changes in shipping schedules and further straining the supply chain. Shippers are currently forced to find other alternatives to divert cargo to the neighboring ports of Ningbo and Guangzhou. Ocean carriers such as Maersk, Hapag-Lloyd and ONE have decided to move dangerous goods and reefer containers to other discharge ports.

It is worth noting that Maersk has issued an announcement on the 22nd that the congestion of Shanghai Port's dangerous goods yard has gradually eased. In the past week, all imported dangerous goods of IMO 2.2 and 3 categories in Shanghai have been successfully received and unloaded. Maersk expects that dangerous goods currently in transit will also be offloaded as planned. In view of the latest situation, from today (April 22, 2022), Maersk will reopen the port of destination for booking of IMO Class 2.2 and Class 3 dangerous goods in Shanghai.

Drewry suggested that the ongoing uncertainty and low predictability in the current shipping market make it difficult for shippers to plan ahead. To eliminate potential supply disruptions, businesses should seek to build positive relationships and encourage open lines of communication with freight forwarding partners.

Of a total of 725 scheduled sailings on major routes such as the transpacific, transatlantic, Asia-Nordic and Asia-Mediterranean, 78 sailings were cancelled between week 17 and week 21 next year, a cancellation rate of 11%. According to Drewry's data, 64% of blank sailings during this period (up from 58% in the previous period) will occur on trans-Pacific eastbound trade routes, primarily to the U.S. West Coast.

Loadstar said the suspension of 2M and the other two alliances is seen as an effort to stem the decline in freight rates as freight orders from China have plummeted due to the coronavirus lockdown and intermodal restrictions. According to Loadstar, export orders in the next few weeks will drop by more than one-third. Although Shanghai has resumed production, some factories and warehouses are still closed, and trucking efficiency is still limited.

On the 22nd, Ningbo's Container Freight Index (NCFI) commented that some operators from Asia to North Europe have begun to "cut prices" to increase bookings of space, but so far, the impact on the spot freight index is very small, which is similar to that after the Spring Festival. This is in line with the usual weak demand in the off-season before the peak season begins.

Asia-North Europe: Xeneta's XSI Nordic Freight Index fell 4% to $10,849/FEU, while Drewry's WCI and Baltic Freight Index (FBX) fell around 2% to $10,364/FEU and $11,659/FEU, respectively .

Asia-North America: Meanwhile, in the trans-Pacific region, spot rates remained stable this week, with the WCI (Drewry) and XSI (Xeneta) US West Coast freight indices barely changing at $8,758 and $8,595, respectively /FEU, the Baltic Freight Index FBX (including premiums) is $15,552/FEU.

Lars Jensen of Vespucci Maritime said the "baseline assumption" was that freight rates would "continue to decline by about 5% before starting to recover towards the peak season".

The number of imported containers arriving at the port of Los Angeles is down about 20% this week compared to the same period in 2021, the company's data platform Signal shows. The company also said that shipments arriving at the LA port next week will be down about 16% from a year earlier. At the same time, the reduction in imports has significantly reduced vessel wait times, with Signal data recording an average wait time of 2.7 days for vessels to berth and work at the Port of Los Angeles.

However, CNBC senior editor Lori Ann LaRocco warned that with Shanghai fully reopening, the wave of containers will arrive on the U.S. West Coast weeks before current labor contracts expire, and could face the threat of strikes if history repeats itself. "This wave of containers will hit the West Coast in June/July, the final weeks of the ILWU labor contract," she warned.