For decades, since 1960s, the growth in container shipping volumes have outpaced global economic growth. At times, growing four times as fast as global GDP, reduced to just two after 2008 crisis and now it is down to less than 1.5. In coming years, in the light of on-going trade war and near-shoring, it could potentially come down to just 1.
Hyundai Heavy Industries (HHI) and Nihon Shipyard Ltd have been contracted by Ocean Network Express (ONE) to build its first containership newbuilding. Orders have been placed for the Japanese joint venture container, which will be split equally between HHI and Nihon Shipyard. The container line’s newbuilding orders are intended to help lower the company’s carbon footprint.
There is still a dispute in the industry about whether to use LNG as a fuel, which may lead to zero emissions, or to go straight to green fuels. The newbuilds were pre-programmed to run on ammonia or methanol as well as carbon capture and storage.
ONE will be able to expand its long-term exploration of alternative fuels and decarbonization technologies in the future. It remains fully committed to attaining carbon neutrality in order to achieve sustainable marine transportation.
Shanghai port is assisting in the stabilization of port operations both during and after the epidemic, and will make every effort to maintain Shanghai’s status as it is the world’s busiest container port.
The US Department of Transportation has worked with ports to propose a container dwell fee to reduce port congestion, launched a trucking action plan to recruit and retain more drivers, funded pop-up container yards to get goods from ships to shelves faster while supporting agricultural exporters, moved supply chain operators toward 24/7 operations, and launched Freight Logistics Optimization Works (FLOW), a data sharing effort with Target, FedEx, UPS, True Value, and others.
The US-China tariff war has hit container volumes between the two most important region Stand freight traffic is down by ~7% (Jan-Sep 2019). Vietnam has emerged as the biggest beneficiary of this and its exports have jumped by ~32% in the same period.
Ocean freight rates are among the biggest indicators of global trade health, higher rates equate to higher freight demand and vice-versa. Another important metric is the number of containers in global circulation. There were ~ 22 Million 20-foot-equivalent units (TEU) containers in circulation as of Sep 2019.
As od Sep 2019, the freight rates have been declining in all US and European trade routes for past few months. The freight rate between Shanghai to the US east coast was ~$2,700 for a 40Ft container in Aug 2019, ~24% lower than same period last year. As this is the time when retailers and distributors stock up good for upcoming holiday season, the declining rate are certainly not at all a good sign.
The additional 71 ultra large ships (14,500 TEU+ capacity), which will be delivered by 2021 end will further bring down the rates.
On January 1, 2020, the International Maritime Organization (IMO)’s rules on sulphur emission come into force – it will have a significant impact on the shipping industry. This legislation will ban any penalize and ban any ship emitting more than 0.5% of sulphur in its fuel, a sharp cut of 3% from present level. Therefore, planning for this low sulphur exhaust implementation will be one of the container shipping industry’s biggest challenges in 2019.
The volume carried by container shipping is expected to be double by 2030. However, in the few years, the industry has been operating at a loss. If we look at YTD 2019, global container shipping volumes were just ~1.3% higher than in the same period of 2018.
Following two years of deep consolidation which has resulted in an oligopoly status on major trade routes, consisting of just three main alliances –2M, THE Alliance, Ocean Alliance.
Source: Internal database
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