Weekly Supply Chain Update: 5

Significant Surge in Transit Times for Asian Shipping Routes to Mediterranean and Europe

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Since the Red Sea crisis began (January-March 2024), Sea-Intelligence has reported the average minimum transit time from North and South East Asia to the East, West, and Central Mediterranean has increased by 39%, compared to a six-month baseline period (July-December 2023). The Asia-North Europe routes saw a lower increase, averaging 15%. The most significant increases in transit times were for connections to the East Mediterranean (61%-63%) and Central Mediterranean (39%-40%), due to the longer detour. Connections to North Europe, particularly the Baltics, experienced the smallest impact, with transit times increasing by 7%-11%.

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Container Shipping Rates Soar by 28.8% Amid Asian Port Congestion and Red Sea Geopolitical Risks

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Since early May, container shipping rates have surged by 28.8% due to Asian port congestion, high US import demand, reduced Asia to Europe capacity, and ongoing geopolitical risks in the Red Sea. Drewry Shipping reported a 2.6% week-on-week decrease in average container freight rates from 25 January to early May. Short-term issues like Asian port congestion, empty container repositioning, and a capacity squeeze on European trades, primarily due to Red Sea diversions, are driving the rate increases. Despite delivering 1.14 million TEUs of new capacity this year, the three mega-alliances still need 36 ships to fully staff their 25 Asia-Europe loops.

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China's Break Bulk Shipping Market Booms with Rising Rates and Port Expansions

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The current break bulk shipping export market in China is experiencing robust growth, with freight rates for key routes seeing significant increases. Rates for shipments from Shanghai to Southeast Asia have risen by approximately 15% year-on-year, now averaging around $35-40 per metric ton, driven by strong demand for steel and construction materials. Similarly, routes from Tianjin to African ports have seen rates climb by about 20%, reaching $45-50 per metric ton, reflecting the high demand for Chinese machinery and infrastructure components. Port growth in China has been notable, with significant expansions and upgrades to handle increased break bulk cargo volumes. The Port of Tianjin has also seen a 12% increase in break bulk throughput, thanks to enhanced logistical operations and improved infrastructure. This development underscores China's strategic focus on maintaining its dominance in the global break bulk shipping market, despite challenges such as port congestion and geopolitical tensions.

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Paris MoU Warns of Rising 'Dark Fleet' Amid Stricter Enforcement Calls on Shadow Tankers

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The Paris MoU has raised alarms about flag states trying to avoid ship detentions in the growing "dark fleet," which has expanded since the Russia-Ukraine conflict. The IMO and other organisations call for stricter enforcement against shadow tankers involved in smuggling Russian and Iranian oil. The UK parliament and the International Group of P&I Clubs criticise the oil price cap for being ineffective, causing more ships to join the shadow fleet. The EU and NATO countries, especially Greece and Sweden, are cracking down on these fleets due to environmental and security concerns. Allianz reports that shadow fleet vessels are poorly maintained and high-risk, with many incidents recorded. Despite control efforts, the shadow fleet now comprises 13.7% of global tanker tonnage, requiring gradual regulation to prevent market disruption.

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CMA CGM See Declining Q1 EBITDA Margins Amid Market Shifts

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CMA CGM's Q1 2024 results show a drop in their EBITDA margin to 20.2%, down from 27.0% in Q1 2023. Maersk experienced a sharper decline, with their EBITDA margin falling from 28.4% to 12.9% in the same period. Both companies have significant exposure to the shipping market, with CMA CGM deriving 66.4% and Maersk 64.8% of their revenue from shipping. CMA CGM's volume increased by 11.7%, surpassing the global market growth of 9.2%, indicating a gain in market share. However, their revenue per TEU dropped by -20.7%, more than the global average decline of -13.2%. In logistics, CMA CGM's EBITDA margin improved to 9.3%, up from 8.7% last year, while Maersk's margin fell from 9.1% to 7.6%. Logistics contributed 32.8% to CMA CGM's total revenue, compared to 28.4% for Maersk. These results highlight differing trends and strategic focuses between the two companies.