Container Ships Now Piling Up At Anchorages Off China's Ports

According to eeSea, a company, over 60 container ships full of imported cargo are stuck off the coast of Los Angeles and Long Beach, but more than double that - 154 on Friday - are waiting to load export cargo off Shanghai and Ningbo in China, the forwarder plans analyzed.
The number of container ships anchored off Shanghai and Ningbo has risen sharply in recent weeks. There are now 242 container ships waiting for berths across the country.
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Whether due to high export volumes, Typhoon Chanthu or COVID, the increasing traffic jams in China are another wild card for transpacific trade.
Volatile trade flows
Congestion in Chinese ports that slow the flow of exports is bad news for US importers, but could temporarily ease pressure on the ports of Los Angeles and Long Beach.
Ship positions from Friday (Map: eeSea)
When operations in the Chinese port of Yantian were severely restricted by a COVID outbreak in June, the ships anchored in San Pedro Bay, California, declined. The problem for the California ports was that the temporary pardon was soon followed by an increase in delayed cargo.
"The devil in these things is the whiplash effects," eeSea founder Simon Sundboell told American Shipper. “What you'd rather have is more stability, not these fluctuations, and I think everyone fears that the fluctuations will become even more volatile. When the system is already so tight, all of these unexpected events can be a causative factor in traffic jams. "
Ships follow the money
A main reason for congestion on both sides of the Pacific Ocean: land-based capacity (terminals, trucks, trains, warehouses) is limited, but the shipping capacity of a single maritime route is very flexible.
Although the number of ships in the world is limited, operators can move ships to where they make the most money. And the Trans-Pacific is now a particularly lucrative business: spot rates including premiums can exceed $ 20,000 per 40 foot equivalent unit (FEU).
"These systems [ships] are so super mobile," said Sundböll. “What is happening now is the opposite of what the industry has been following for the past 20 years. Five years ago people wondered: How can the Trans-Pacific exchange rate go from $ 2,000 to $ 1,500 [per FEU] in just six days? It was because you could take a ship from one place and go somewhere else and suddenly there was more ships and a price war and prices were falling.
"Now we're seeing the opposite," he said. As ship operators accumulate more capacity in the Trans-Pacific, congestion increases, delays increase, the incentive for shippers to pay premiums is supported, and all-in rates remain at record highs.
Increasing number of services
According to eeSea, the number of Far East-West Coast services has increased from 48 in January to 67 this month. In contrast, the number of services on this lane stayed fairly constant at 42-46 over the past year.
Data for October-December 2021 based on current schedules. Graphic: American shipper based on data from eeSea
In addition, ships from other trading areas are pulled as “extra loaders” (ships that make one-off trips). In some cases, multiple ad hoc ships make multiple tours - a mix of an additional loader and a liner service.
"We are definitely seeing airlines pulling ships from Asia-Middle East and Asia-Africa and bringing them into trans-Pacific trade," said Sundböll.
“Whether for a round trip as an additional loader or whether it will be semi-permanent, I don't think the freight forwarders know each other at all. They are just playing with the market and if it makes economic sense to ship a ship from the Middle East and to the Transpacific, they'll do it, be it for a month, three months or six months, which is why nobody knows how to network this in six Months will look like.
“The line managers in Copenhagen, Geneva and Marseille look at the yields per container and the costs per container. And not just per container. You look at it per day per container TEU [twenty-foot equivalent per] mile. "
Transpacific ships are getting smaller
Another driver for the increasing traffic jams in the transpacific region: Not only are there more ships, the ships are also becoming smaller, so that more ships are needed to transport the same TEU.
According to eeSea, the average capacity of the ships in service on the Asia West Coast was 8,601 TEU in January and is currently 7,125 TEU, which corresponds to a decrease of 17%.
Data for October-December 2021 based on current schedules. Graphic: American shipper based on data from eeSea
American Shipper recently analyzed the average size of ships anchored or drifting off Southern California compared to Q1 anchorage peak on Feb.1 and found a similar decrease: from 8,060 TEU to 6,184 TEU, or 24%.
A smaller average ship size "would definitely slow things down further," said Sundböll.
Some operators have expanded their transpacific capacities by buying ships on the used market or leasing them on the charter market. Most of the ships offered for sale or charter in 2021 were in smaller size classes.
The change in capacity of the liner shipping companies from other shipping areas also pulls the average size down, since the exploited shipping areas use ships with lower capacity. "The reason smaller ships arrive is because they take them from the Middle East and Africa," said Sundböll.
How does it end?
Ship operators can put as many ships in the Transpacific as they want in order to achieve record courses and leave other voyages too short. But ultimately the imbalance will correct itself.
"It's becoming something that balances itself," explained Sundboell, noting that the prices on these voyages would rise so much that they would lure ships back if ships were removed from other trades.
"At some point, the speeds of the voyages you are leaving become too fast or the pre-anchoring costs become too high [in terms of future cargo lost]," said Sundböll.
In the first quarter, when the anchorages at Los Angeles / Long Beach filled up, the airlines were unable to get enough ships back to Asia in time to load cargo, so they had to "empty" (cancel) a large number of crossings which reduced the congestion in the second quarter.
Given the extreme anchorage situations both off China and Southern California, a repeat of the bare-sail scenario seems likely in the fourth quarter - a worrying prospect for importers.
Lack of visibility
But even companies like eeSea that track empty trips can't definitely say what will happen in the fourth quarter.
In the first half of 2020, when airlines were hiding their trips due to lockdown-induced declines in demand, they announced the cancellation of trips months in advance, which was an important signal for the market. There is much less announcement this year because empty trips are caused by traffic jams, not by lower demand for appointments.
According to Sundböll: "There are eight empty trips [on the west coast of Asia] in November and three in December, but that's only because the airlines have not yet confirmed them to the carrier."
Pre-COVID, he said, airlines believed they were bound by long notice periods for service changes. "But Corona gave them a platform to take capacity at short notice," said Sundböll. “Now they are trying to build more capacity, but they have definitely taken the liberty of being more volatile with both their capacity and the 'forecast' of their service.
“And I think that's the source of the frustration among the BCOs [useful cargo owners; the shippers]. A BCO hates having to get used to the fact that the ship is always 10 days late - or not even knowing when it's coming. I don't think that's what the airlines are aiming for, but they have certainly found room to change services in the short term that they have never had before. "
Click here for more articles by Greg Miller
Related articles:
How many freight containers are there off the California coast?
Record broken: 73 container ships get stuck off California
In the Eye of the Barrage: Questions and Answers with Gene Seroka. from Port of LA
Shipping chaos gives top importers a "massive competitive advantage"
Worldwide demand is not booming. Why are the shipping costs so high?
Image by Erich Westendarp from Pixabay
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