Yang Ming Marine Transport chairman Cheng Cheng-mount has said that record-high newbuilding orders and the reduction in vessel queues on the US West Coast is threatening a sharp correction in freight rates.
The Shanghai Containerized Freight Index closed at 4,177.30 on 29 April, down 18.68 points from the previous week, marking a nine-month low.
Mr Cheng said at a media briefing that Yang Ming must improve its financials to brace for freight normalisation.
He went on to say that the lockdowns in China and the Russia-Ukraine war could ease the logistical bottlenecks as lines blank sailings. The number of ships currently waiting in US West Coast ports has fallen to fewer than 40 from more than 100 earlier this year.
The waiting time at Shanghai port is two to three days, compared to 10-14 days in the US.
Mr Cheng said: “The impact of the Shanghai lockdown on shipping mainly depends on whether the goods can be received or not, and whether they can be shipped out. Yang Ming’s operations aren’t affected, and our transpacific vessels have been fully loaded.”
However, a confluence of factors will determine vessel supply and demand, analysts told WPO.
Linerlytica analyst Tan Hua Joo noted that congestion remains high at other US West Coast ports, including Oakland and Seattle, while US East Coast congestion is rising, especially in New York and Norfolk.
He added: “What is causing the rate correction is the shortfall in demand caused by the China lockdowns.”
Xeneta’s chief analyst Peter Sand said that fleet inefficiency is the most crucial factor.
He explained: “Globally, delays average 7.1 days – ‘artificially’ tipping the balance of the market. More than fleet additions, the impact of easing the current strained supply chains will decide the pace of freight rate declines.”
Mr Cheng also pointed out that it is uncertain if the market can digest the new ships built over the past few years, noting that 2023 vessel supply growth is expected to double from this year, outpacing demand growth.
Vespucci Maritime CEO Lars Jensen explained that several factors affect vessel supply and demand.
“The easing (in congestion) we have seen appears to have levelled off in recent weeks.Nominally, there is a substantial amount of capacity to be delivered in 2023 and 2024, but this will be partially offset by an expected increase in scrapping, there has been virtually no scrapping in the past two years, and also partially offset by the new IMO 2023 environmental regulations that will cause some vessels to have to go slower.
“Freight rates will at some point see a correction – they will not continue to stay at these highly elevated levels, but this is also a process that will take some time.”
