Container and dry cargo shipping continue to gather momentum as seasonal patterns are suspended.
Although corona retains a stranglehold over western economies with lockdowns getting extended or even intensified, neither the container nor the[ds_preview] dry cargo trades suffered any slowdown in the opening weeks of 2021. While expectations in the container sector were bullish anyway, the strength in the dry bulk spot market – including breakbulk/project shipping and shortsea trades – took many by surprise.
Looking at our market compass on the righthand page, nearly all segments are firmly trading in the green. Twelve months ago it was the exact opposite, with all indices and assessments on a downward slope (most of them by double-digit percentages) except container spot rates.
This time continued strong consumer appetite for merchandise coupled with inventory replenishment across retailing and manufacturing keeps pushing container markets over the fever pitch. At the same time, commodity demand in China set the stage for a market opening in dry cargo shipping unlike anything seen over the past years.
Full orderbooks
The backlog in transport demand coupled with a growing export rush ex China ahead of the Lunar New Year has kept utilisation levels in container shipping at maximum levels. Sailings continue to be fully booked several weeks ahead – at least in the US and Europe import trades – with more and more market participants taking the view that the situation will not relax until the end of the first quarter.
Spot freight rates started the year at multiples compared with a year ago and the first week saw another substantial push upwards. More than ever, the primary limiting factor and driver for freight rates is shortage of ocean containers. Lack of equipment is even preventing carriers from launching planned new services, brokers report. Yet, liner operators have no vessels to spare – quite the opposite. Round-trip times on many routes are delayed due to severe port congestion in key locations, so they require more ships to maintain the same weekly schedules as before. However, with the charter market pretty much sold out and spot availability down to »less than a handful of ships«, as one major broking house kept pointing out, additional tonnage, especially large and very large, remains elusive. As a result, a number of sailings simply had to be blanked by carriers during January, according to Alphaliner.
More and more carriers are gaining enough faith in the market again to initiate newbuilding programmes. MSC, Hapag-Lloyd and Ocean Network Express (ONE) already stepped up to the plate while others are biding their time.
At least 20 more 15,000-16,000TEU ships are currently being negotiated by operating owners, plus a few projects for 13,000-16,000TEU by non-operating owners, market sources say. Further, a few Asian operators are said to be discussing midsize tonnage between 1,700 and 2,800TEU with yards in the region.
Bulkers waiting off China
For dry bulk shipping, the start of the first quarter saw rates stage a rally just when most were bracing themselves for the typical seasonal lull. Key factors underpinning the market were much higher iron ore volumes into China in the first half of January combined with a spike in thermal coal demand related to extreme cold weather. China’s power to move the markets only seems to have grown.
As in the container markets, the tonnage tightness is much exacerbated by port congestion. According to IHS Markit, the number of bulkers anchored off norther Chinese ports reached an average of 372 in week 3 compared with an average of just 130 a year ago. As a result, fewer ships are able to ballast back or make the backhaul, causing tonnage supply across the Atlantic to get worse and worse. The capesize and panamax segments were affected the most but even the less volatile supramax and handysize sectors began to show notable gains in loading regions west of Suez from the middle of January. Rate levels may not stay at these levels but looking at the FFA market, expectations for February and for March are still reasonably good.
Michael Hollmann
