Asia | US news digest. 24 May
Post Covid growth in consumer demand calls for expansion across US-Asia supply chain: from retailers’ increased inventory stock to building bigger tonnage vessels.
Covid crises brought massive disruptions in US international ocean transport system causing months of congestion of freight vessels in ports, costing importers and exporters billions in higher shipping costs, demurrage and detention charges and lost business.
Congestion of freight vessels in a terminal may lead to potentially hazardous situations. Last Thursday, May 20, X-Press Pearl, a cargo vessel carrying 25 tons of nitric acid, caught fire while having been anchored at Sri Lankan marine terminal of Colombo for three months.
Last week the US National Industrial Transportation League (NITL) has called upon Congress to revise the Shipping Act, and submitted a proposal outlining the need for tougher codified standards for contractual and business practices by ocean carriers, as well as expanding the FMC’s authority to act upon complaints against anticompetitive agreements with ocean carriers. The World Shipping Council called this proposal “unnecessary and unworkable”, adding that a proposed act would “turn the Shipping Act from overseeing a primarily market-led regime to a “government-managed system”.
In addition, last week the United Fresh Produce Association expressed concern over one more challenge that US produce exporters are facing this year: the rising shortage of pallets. After several shocks throughout the year such as trade wars, capacity constraints and others, importers and distributors have started setting up buffer stocks and increasing inventory dwell times. This trend have sent new pallets prices surging up to 400%.
Retailers across US have also been gearing up to meet supply chain challenges such as high demand for products, tight transport capacity and delays with freight forwarding by extending lead time for orders and increasing their inventory stocks. Last week Walmart reported that in the first quarter its “ inventory was up 16% YoY as the company tries to keep up with high sales levels, and avoid the out-of-stock situations that plagued the retailer last year”.
As consumer demand remains high, retail restocking is keeping ships full across all US gateways and the transpacific shipping rates are expected to be up for some time. According to NRF, imports to the US in the first half of 2021 are forecast to be 12.7m teu, which puts 2021 on track to beat 2020’s full-year total of 22m teu. Last week, Asia-US west coast rates were more than four times higher than the same week in 2019.
Amid continued shortage of tonnage across all sizes, charterers are increasingly forced to fix tonnage on a forward basis for as far as Q2 of 2022. Hamburg’s New ConTex boxship charter index indicates 317.3% year-on-year growth.
In the wake of continuing delays across the whole supply chain network, 2M Alliance has adjusted its sailing program on its Transpacific West Coast US & Canada services to correspond with the actual departure dates from Asia. Nevertheless, MSC has assured its customers that they could continue to place bookings as the company was also arranging alternative services.
According to experts’ research, ship orders in the year to date have seen the highest volumes since 2014, whereas particularly high surge in volume is marked in boxship orders, with 218 vessels of 2.2m teu and 22.9m dwt contracted in the year so far. Chinese and South Korean yards have taken the majority of orders in 2021 so far, each accounting for 46% of the global total in dwt terms.
South Korean based liner operator HMM is getting a US$30 million financing from Korea EXIM Bank KEB in order to commission twelve more 13,000TEU vessels and expand its container fleet by 80, 000 teu bringing the total to 880,000 teu by August, 2021.
According to statistics gathered China Ports and Harbors Association, container volume at eight major Chinese ports showed 15% year-on-year growth in late April, with export container volume increasing 17.5%,.
A new Aver Ace ship by Taiwanese owned Evergreen with 23,992-teu capacity is set to deliver from Samsung Heavy Industries in July, which will break the world’s largest boxship record. The ship, featuring a new green look, will be deployed on Evergreen’s CEM service connecting Asia with North Europe.
