Weekly Supply Chain Update: 17

Despite Steady Decline, Asia-Europe and Pacific Freight Rates Remain Elevated Above Pre-Crisis Levels

Drewry's WCI spot rates continue to show a steady decline in headhaul rates from Asia to Europe and North America. Rates from Asia to Northern Europe have dropped by $3,500 per FFE since their July peak, and rates to the Mediterranean have decreased by $2,800 per FFE. However, it's essential to view these numbers in context. Despite the significant drop, rates to Northern Europe remain $1,600 per FFE higher than they were at the end of April, just before the peak season, and $3,200 per FFE higher than before the Red Sea crisis. Rates to the Mediterranean show a similar trend. A similar trend is evident on the Pacific trade lanes, where rates on the US West Coast (USWC) have dropped by $1,900 per FFE from their peak, and the US East Coast (USEC) has seen a decline of $3,200 per FFE. Despite these reductions, both trade routes still maintain rates that are $3,500 per FFE higher than pre-Red Sea crisis levels.

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Maersk and Hapag-Lloyd Expand Fleets in Preparation for Gemini Cooperation Launch in 2025

Maersk and Hapag-Lloyd are actively expanding their fleets ahead of the February 2025 launch of their joint venture, Gemini Cooperation. Maersk has secured several ships for charter, including the 2,478 TEU Portsmouth for two years at $24,250/day and other vessels for shorter periods at daily rates ranging from $17,500 to $20,500. Linerlytica reports Maersk’s forward charters into 2025 are part of efforts to meet tonnage needs for the Gemini Cooperation. Hapag-Lloyd, meanwhile, clarified that its charter of the 10,100 TEU Laem Chabang Express in 2022 was part of a broader fleet expansion and unrelated to Gemini. The Gemini Cooperation will focus on a hub-and-spoke model, using shuttle services alongside mainliner routes, with 13 new shuttle services planned for Europe and 12 for Asia.

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Ship Recycling Drops to Historic Lows in 2024 Amid Strong Freight Demand, But Expected to Rise with Climate Regulations

So far in 2024, only 45 ships have been recycled, totaling 2.5 million deadweight tonnes (DWT), a 42% year-on-year drop and the second-lowest level in 16 years. High demand and strong freight rates have delayed ship recycling, with the Capesize and Supramax segments experiencing the largest declines. Fleet renewal has slowed due to low deliveries, a small order book, and competition for shipyard slots driven by container, LNG, and tanker orders. While the dry bulk fleet is the oldest since 2011, only 9% of capacity is 20 years or older. Future recycling is expected to increase as climate regulations and market conditions prompt the phasing out of older ships, particularly as energy and fuel efficiency become more crucial.

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Carriers Introduce Surcharges in Anticipation of Potential U.S. East and Gulf Coast Port Strikes Amid Ongoing Labor Disputes

Carriers are introducing surcharges in preparation for a potential strike at U.S. East and Gulf Coast ports due to stalled negotiations between the International Longshoremen’s Association and the US Maritime Alliance. MSC, CMA CGM, and Hapag-Lloyd have announced surcharges starting in October, ranging from $800 to $1,500 per container, depending on the box size and carrier. These charges aim to mitigate potential disruptions during the strike, which could cause significant port congestion. Maersk warns that even a brief strike could lead to weeks of delays, with Sea-Intelligence projecting that a one-week strike could take until mid-November to clear, while a two-week strike could extend disruptions into 2025. Carriers expect strong demand through the peak season, particularly in North and Latin America, but remain concerned about the global supply chain's fragility.

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Maersk Removes Peak Season Surcharge for Shipments from China to Southeast Asia Effective 1 October 2024

Maersk has announced the removal of the Peak Season Surcharge (PSS) for both dry and reefer cargo shipments originating from all Chinese ports and bound for Indonesia, Malaysia, Singapore, and Brunei. This change will take effect from 1 October 2024.