With shipping liners failing to find available ships to charter and secondhand ship costs at an all-time high, liners have discovered an alternative option to maximize their capacity: sail faster.
The global average speed of container ships has risen to 14.9 knots this month, verging on the highest monthly average since 2012. Annual overall speed is up 6%. Liners have discovered that in speeding up their sail times, they can move more cargo without needing to obtain additional chartering ships.
But with faster speeds comes faster fuel consumption, and marine bunker fuel costs are high as is. There is also the limitation of container shipping following a set schedule, and the potential burden of speeding up sailtimes only for the ship to wait at a port due to congestion. Still, for liners desperate for a solution, the pros seem to outweigh the cons.
“Under normal circumstances, carriers would never do this, because bunker consumption is such a major cost factor,” said Simon Sundboell, CEO of shipping data provider eeSea. “But if you’re talking about rates of $12,000 [per forty-foot equivalent unit], you will do it. If nothing else, speed increases seem necessary in order to counterbalance time lost at U.S. ports. It is a temporary means to combat congestion, if nothing else.
Increase on Transportation Fees for Low-value Commodities
Ocean freight experts are noticing that a substantial number of importers are unable to keep up with increasing transportation costs within the trans-Pacific shipping market. For importers of low-value goods, ocean and inland costs are now accounting for 20 percent or more of the goods’ retail value. Freight value of the cargo has jumped from 6 percent to 25 percent.
Alan Murphy, chief executive officer of maritime consultancy Sea-Intelligence Maritime Analysis, said importers of appliances, assembled furniture, and automobile parts could be seeing ocean freight rates range between 20 to 50 percent of the value of their cargo, depending on whether the goods are low- or high-value.
Container Shipping Rates Rise
Over the previous two weeks, container shipping rates from Asia to the U.S. and Europe have also increased substantially. This is due to a number of factors including but not limited to: a shortage of containers carrying American imports, as well as the goods now flooding into the biggest U.S. gateway for seaborne trade at five times the volume of steel boxes full of exports.
The Port of Los Angeles, for example, on Wednesday said loaded container imports totaled 467,763 20-foot equivalent units in June, while exports fell to 96,067—the lowest level since 2005. L.A. port Executive Director Gene Seroka said during a press briefing that the demand for consumer goods looks to stay solid for the remainder of 2021.
Port Manatee will experience a “boost” in Steel Exports
Port Manatee is anticipating a big boost in exports of recycled steel materials following acquisition of a port-adjacent 25.5-acre facility by a new subsidiary of Peru-based steelmaker Aceros Arequipa. The new electric-arc furnace mill in Pisco will require 1.3 million tons of raw steel per year, nearly thrice the amount required initially at the production facility.
Chicago Rail Depots are the most recent Chokepoints
While retailers and manufacturers rush to restock inventories in the midst of post-COVID economic recovery, terminals such as Union Pacific Corp. and BNSF Railway Co. have responded by limiting container shipments into their already-overflowing ports.
The situation is yet another bottleneck plaguing supply chains in the past year, following events such as the grounding of the Ever Given in the Suez, backlogs at the Yantian port in Shenzhen, China, and a myriad of other incidents.
Chicago’s location has made it a prime distribution hub; it’s located within a 500-mile truck journey of about one third of the U.S. population. This, in turn, has led to strain on its facilities. Freight railroads fight to meet demand as the amount of containers arriving greatly outnumber the rate at which they are processed and transported onward. The strains are being exacerbated by labor and equipment shortages across the shipping, trucking and rail industries.