Container Ships Now Piling Up At Anchorages Off China's Ports
There are over 60 container ships full of import cargo stuck offshore of Los Angeles and Long Beach,but there are more than double that β 154 as of Friday β waiting to load export cargo off Shanghai and Ningbo in China,according to eeSea, a company that analyzes carrier schedules.
The number of container ships anchored off Shanghai and Ningbo has surged over recent weeks. There are now 242 container ships waiting for berths at countrywide.
Whether it's due to heavy export volumes, Typhoon Chanthu or COVID, rising congestion in China is yet another wild card for the trans-Pacific trade.
Volatile trade flows
Congestion in Chinese ports that slows the flow of exports is bad news for U.S. importers but it could temporarily alleviate pressure on the ports of Los Angeles and Long Beach.
When operations at the Chinese port of Yantian were heavily curtailed by a COVID outbreak in June, ships at anchor in California's San Pedro Bay declined. The problem for California ports was that the temporary reprieve was soon followed by a surge of delayed cargo.
"The devil in these things is the whiplash effects," Simon Sundboell, founder of eeSea, told American Shipper. "What you'd rather have is more stability, not these swings, and I think what everybody fears is that the swings will become even more volatile. When the system is already this stretched, all of these unexpected events can be a causal factor in congestion."
Ships follow the money
A major driver of congestion on both sides of the Pacific Ocean: Landside capacity (terminals, trucking, rail, warehousing) is limited, but the vessel capacity of a single ocean trade lane is highly flexible.
While the number of ships in the world is finite, operators can shift ships to wherever they make the most money. And the trans-Pacific is now a particularly lucrative trade: Spot rates including premiums can top $20,000 per forty-foot equivalent unit (FEU).
"These assets [ships] are so super-mobile," said Sundboell. "What's happening now is the opposite of what dogged the industry for the past 20 years. Five years ago, people were asking: How can the trans-Pacific rate drop from $2,000 to $1,500 [per FEU] in the space of just six days? It was because you could take a vessel from one place and sail it someplace else, and suddenly there were more ships and a price war and rates dropped.
"Now we're seeing the opposite," he said. As ship operators pile more capacity into the trans-Pacific, congestion rises, delays mount, the incentive for shippers to pay premiums is supported, and all-in rates remain at record highs.
Surging number of services
According to eeSea, the number of Far East-West Coast services has surged from 48 in January to 67 this month. In contrast, the number of services on this lane stayed fairly steady last year, at 42-46.
Data for October-December 2021 based on current schedules. Chart: American Shipper based on data from eeSea
In addition, ships are being drawn from other trades to serve as "extra loaders" (ships that perform one-off voyages). In some cases, multiple ad hoc ships are doing multiple round trips β a hybrid of an extra loader and a scheduled service.
"We're definitely seeing carriers pulling ships from Asia-Middle East and Asia-Africa and putting them into the trans-Pacific trade," said Sundboell.
"Whether it's for one round trip as an extra loader or whether it becomes semipermanent, I don't even think the carriers know themselves right now. They're just playing the market and if it makes more economic sense to take a ship from the Middle East and put it in the trans-Pacific, they'll do it, whether it's for one month, three months or six months, which is why nobody knows what this network is going to look like six months from now.
"The line managers in Copenhagen and Geneva and Marseilles are looking at yields per container and costs per container. And not just per container. They're looking at it per day, and per container-TEU [twenty-foot equivalent per]-mile."
Trans-Pacific ships getting smaller
Yet another driver of increased trans-Pacific congestion: There are not only more ships, but the ships are getting smaller, meaning that more vessels are needed to carry the same TEUs.
According to eeSea, the average capacity of ships serving Asia-West Coast services was 8,601 TEUs in January and is 7,125 TEUs currently, a decrease of 17%.
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