<div class="phx-topic abstract-wrapper">US cold-chain cargoes fell more than 20 percent through May as the combination of high freight rates, poor reliability of ocean carrier service, and lack of equipment took a toll on foodstuff freight.</div>

US cold-chain cargoes fell more than 20 percent through May as the combination of high freight rates, poor reliability of ocean carrier service, and lack of equipment took a toll on foodstuff freight.

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<div>Still-elevated ocean freight rates, irregular service, and equipment shortages have taken a toll on US refrigerated (reefer) container volumes in 2022, and shippers shouldn’t expect any significant relief from these pressures until next year at the earliest, according to reefer shippers, ports, and analysts.Through May, total US reefer volumes fell 21.8 percent year over year to just shy of 1.15 million TEU, according to data from PIERS, a sister company of JOC.com within S&amp;P Global. That comes after volumes rose 3.3 percent for the full year in 2021 and 8.1 percent in 2020.Exports have been hit the hardest, plummeting 48.2...

Still-elevated ocean freight rates, irregular service, and equipment shortages have taken a toll on US refrigerated (reefer) container volumes in 2022, and shippers shouldn’t expect any significant relief from these pressures until next year at the earliest, according to reefer shippers, ports, and analysts. Through May, total US reefer volumes fell 21.8 percent year over year to just shy of 1.15 million TEU, according to data from PIERS, a sister company of JOC.com within S&P Global. That comes after volumes rose 3.3 percent for the full year in 2021 and 8.1 percent in 2020. Exports have been hit the hardest, plummeting 48.2 percent during the first five months of the year, while imports fell just 2.6 percent compared with the same period in 2021. William Duggan, North American cold chain adviser at consultancy Eskesen Advisory, said higher ocean freight rates — not lower demand — are holding back reefer volumes, particularly imports of price-sensitive fruits and vegetables from South and Central America. Skyrocketing transportation costs are prompting some food shippers to forgo harvesting their products or seek out domestic buyers, rather than selling products overseas, he said. Rates for seasonal reefer cargoes such as melons and grapes have been further strengthened by a need for more capacity in a shorter shipping window. Click to enlarge “If a grower can’t pass on these increases, sometimes they leave product in the ground and don’t ship,” Duggan told JOC.com. “The other option is just to break even to stay with a customer. Depending on the commodity and the cost to get it to market, all these factors come into play.” Reefer container supply remains tight, adding to cost pressures. Some reefers are stuck at warehouses or ports after being pulled into service carrying dry cargo during the height of the pandemic-induced surge in US imports from Asia. Others had to be pulled out of service entirely due to damage from China’s use of chlorine to disinfect inbound containers from COVID-19. “Containers are sitting on trains and warehouses, or otherwise not in position for shippers, so it’s taking those containers out of the market,” Duggan said. “It’s still a very tight supply of refrigerated containers.” Shortages of other assets, including generator-equipped chassis, and a lack of cold storage capacity near ports has further limited the overseas reach of US exporters of perishables and other temperature-sensitive products, said Lowell Randel, senior vice president of government and legal affairs at the Global Cold Chain Alliance. “All of those factors are challenges for cold chain industry,” Randel said. “There’s been some improvement here and there, but for most of our members, those are issues that are still persisting.” Cold chain reaction Along with higher rates, reefer shippers have faced service and capacity changes that have slowed activity. Carriers’ skipping US ports on Caribbean and South American services has severely limited the capacity available to beef and protein exporters in Texas, evidenced by a 50.6 percent drop in reefer exports from Houston through May. Port congestion and vessel backlogs have also played a role in reefer volume declines. During a presentation at a June conference, food importer Driscoll’s said that during 2019 and 2020, it took anywhere from 16 to 28 days to bring fresh fruit from South America to Southern California. But long lines ships at anchor outside the ports of Los Angeles and Long Beach and backlogs of imports on terminals caused transit times to rise to between 54 and 64 days in 2021 and 2022. Those longer inbound transits have knock-on effects for reefer exports as well. If, for example, a customer knows it could take an extra 30 days to receive oranges from California, they might decide to source them from Spain or other countries, Duggan explained. “We had massive problems on the export of fresh cargo,” he said. “They just couldn’t take the long delays of waiting to go out, so you lose the sale of the export. For the cargo to sit at the port for a week, you are basically done on shelf life.” One relief valve for reefer shippers has been the availability of breakbulk cargo ships that can handle frozen pallets instead of refrigerated containers. Duggan said this business “has taken off as an alternative for those without equipment or facing rate increases” and has helped US food exporters reach overseas markets. Still, this is a niche sector that can only serve a small percentage of reefer shippers, he noted. Investing in assets Ports and other entities have sought to relieve some of the pressure facing reefer shippers by providing additional assets. The Port of Houston, for example, is leasing about 1,500 genset chassis that can be used to store reefer containers at the port, a stop-gap measure until the port builds a rack power system. The Port of Philadelphia is planning to build a 200,000-square-foot refrigerated warehouse near the port, adding to its approximately 360,000 square feet of on-dock cold storage, according to Sean Mahoney, director of marketing at the port. A major gateway for fresh food imports into the US, Philadelphia bucked the overall downtrend in reefer volumes, with imports rising 17.4 percent in the first five months of 2022. Mahoney attributed the growth in part to the opening of several “repacking” warehouses near the port. In addition to traditional cold storage, these facilities also sort and package bulk fruits and vegetables for retail distribution. Mahoney said assets and services geared toward the specific needs of cold-chain shippers have attracted more of them to the region, noting that Philadelphia is the only US port with an on-dock US Department of Agriculture inspection site. The port also plans to add to its 2,500 reefer plugs in the coming years and is considering repurposing a breakbulk site to handle growing reefer volumes. “We’re investing in cold chain, as are private companies,” Mahoney said. “People are eating healthier, so that means more fresh food imports.” Duggan agreed that food consumption trends and year-end availability of seasonal produce favor reefer shipping, but he warned that capacity constraints and growing demand will keep costs elevated. The north–south trades, particularly for seasonal items such as grapes and melons, could see freight rates continue to rise into 2023, even as rates on other lanes subside. “There’s no indication that rates will go down, rather that they’re only going to go up,” Duggan said. “Reefer didn’t see the large increases that dry cargo did. But now reefer is in play and, despite the equipment coming back into the market, reefer rates are still going up.” Contact Michael Angell at michael.angell@ihsmarkit.com and follow him on Twitter: @michael_angell .

Supply chain

Spotty service, container shortages put US reefer trade on ice

<div class="phx-topic abstract-wrapper">An estimated 30% of Asia-Europe air cargo is routed via the Middle East, so the sudden closure of airspace in the Persian Gulf has left forwarders scrambling for capacity on freighters and passenger aircraft out of Asia. </div>

An estimated 30% of Asia-Europe air cargo is routed via the Middle East, so the sudden closure of airspace in the Persian Gulf has left forwarders scrambling for capacity on freighters and passenger aircraft out of Asia.

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<div class="phx-topic">Air cargo out of Asia is capitalizing on airlines relocating capacity from the war-torn Middle East, but the rising demand for direct flights to Europe is being quickly snapped up by forwarders. An estimated 30% of Asia-Europe air cargo is routed via the Middle East and the sudden closure of airspace in the Persian Gulf left forwarders scrambling for capacity on freighters and passenger aircraft out of Asia. Darren Greene, head of air, ocean and customs at EFL Distribution, the Irish partner of Hong Kong-based U-Freight Group, said there was heavy demand for space on air freight services being rerouted through London, Frankfurt and Istanbul. “In addition to rising surcharges, freighter aircraft capacity is tightening significantly, with space becoming increasingly scarce on these new routes,” Greene told the Journal of Commerce. To handle the demand, Hong Kong-based Cathay Pacific has redirected capacity from canceled Dubai and Riyadh services to London, Paris and Zurich while increasing the size of aircraft on its Asia-Europe routes. Singapore Airlines has also suspended all flights to Dubai and increased its European services. While the additional capacity is predominantly aimed at providing lift for passengers unable to fly via the Middle East, the long-haul aircraft offer considerable below-deck cargo space. <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="1f8878b6-9e77-46fc-bdf5-c1982da8007e"></dynamic-object></div>Despite the capacity additions from Asian carriers and European airlines adding Asia-Europe flights, rates that leveled off last week have started to climb again, possibly on reports of growing backlogs at key hubs and rising fuel costs, according to Freightos. Data from the online rate marketplace showed Southeast Asia-Europe prices are up 17% from last week at $5/kg, China-Europe rates jumped 25% to $5.01/kg, and China-US prices rose 9% to $7.28/kg. “While base freight rates remain stable, the introduction of fuel and war risk surcharges has created significant cost constraints,” Greene said. <h3>Fuel price rise outstripping rate increases </h3>The rate increases are being outstripped by rising fuel prices that before the war made up around 30% of an airline’s total operating costs. Global average jet fuel prices increased to $197 per barrel for the week ended March 20, up 25% on the previous week and more than double the last week of February, according to the latest price data published by the International Air Transport Association (IATA). Carriers have responded with fuel surcharges that are being revised regularly. Cathay Pacific tripled its fuel surcharge in mid-March to HK$12.9 per kilogram ($1.65) that will be valid until March 31. “If the steep increase of fuel costs cannot be effectively mitigated, we would not be able to sustain the effective operations of our network,” Cathay Pacific said in a statement Thursday. “To enable a more agile response to the volatile jet fuel prices, we will review and revise the fuel surcharge every two weeks to better capture jet fuel price movements in either upward or downward direction,” the carrier said. “This increased frequency of review is intended as a temporary measure and will be revisited when the Middle East situation stabilizes.” Singapore Airlines is charging CNY15/kg ($2.17) on long-haul shipments originating in China. Lufthansa Cargo will raise its fuel surcharge from €1.20/kg to €1.45 ($1.39 to $1.68) from March 30. Korean Air Cargo announced an "urgent adjustment" to its fuel surcharge policy effective April 1 without giving a surcharge price for cargo, while Maersk Air Freight has implemented emergency fuel surcharges and intermodal fuel fees because of the volatility in jet fuel prices. Contact Greg Knowler at <a href="mailto:greg.knowler@spglobal.com">greg.knowler@spglobal.com</a>. </div>

Air cargo out of Asia is capitalizing on airlines relocating capacity from the war-torn Middle East, but the rising demand for direct flights to Europe is being quickly snapped up by forwarders. An estimated 30% of Asia-Europe air cargo is routed via the Middle East and the sudden closure of airspace in the Persian Gulf left forwarders scrambling for capacity on freighters and passenger aircraft out of Asia. Darren Greene, head of air, ocean and customs at EFL Distribution, the Irish partner of Hong Kong-based U-Freight Group, said there was heavy demand for space on air freight services being rerouted through London, Frankfurt and Istanbul. “In addition to rising surcharges, freighter aircraft capacity is tightening significantly, with space becoming increasingly scarce on these new routes,” Greene told the Journal of Commerce. To handle the demand, Hong Kong-based Cathay Pacific has redirected capacity from canceled Dubai and Riyadh services to London, Paris and Zurich while increasing the size of aircraft on its Asia-Europe routes. Singapore Airlines has also suspended all flights to Dubai and increased its European services. While the additional capacity is predominantly aimed at providing lift for passengers unable to fly via the Middle East, the long-haul aircraft offer considerable below-deck cargo space. Despite the capacity additions from Asian carriers and European airlines adding Asia-Europe flights, rates that leveled off last week have started to climb again, possibly on reports of growing backlogs at key hubs and rising fuel costs, according to Freightos. Data from the online rate marketplace showed Southeast Asia-Europe prices are up 17% from last week at $5/kg, China-Europe rates jumped 25% to $5.01/kg, and China-US prices rose 9% to $7.28/kg. “While base freight rates remain stable, the introduction of fuel and war risk surcharges has created significant cost constraints,” Greene said. Fuel price rise outstripping rate increases The rate increases are being outstripped by rising fuel prices that before the war made up around 30% of an airline’s total operating costs. Global average jet fuel prices increased to $197 per barrel for the week ended March 20, up 25% on the previous week and more than double the last week of February, according to the latest price data published by the International Air Transport Association (IATA). Carriers have responded with fuel surcharges that are being revised regularly. Cathay Pacific tripled its fuel surcharge in mid-March to HK$12.9 per kilogram ($1.65) that will be valid until March 31. “If the steep increase of fuel costs cannot be effectively mitigated, we would not be able to sustain the effective operations of our network,” Cathay Pacific said in a statement Thursday. “To enable a more agile response to the volatile jet fuel prices, we will review and revise the fuel surcharge every two weeks to better capture jet fuel price movements in either upward or downward direction,” the carrier said. “This increased frequency of review is intended as a temporary measure and will be revisited when the Middle East situation stabilizes.” Singapore Airlines is charging CNY15/kg ($2.17) on long-haul shipments originating in China. Lufthansa Cargo will raise its fuel surcharge from €1.20/kg to €1.45 ($1.39 to $1.68) from March 30. Korean Air Cargo announced an "urgent adjustment" to its fuel surcharge policy effective April 1 without giving a surcharge price for cargo, while Maersk Air Freight has implemented emergency fuel surcharges and intermodal fuel fees because of the volatility in jet fuel prices. Contact Greg Knowler at greg.knowler@spglobal.com .

Asia-Europe

Air Cargo

Demand for direct Asia-Europe air cargo fills rerouted Middle East flights

<div class="phx-topic abstract-wrapper">Stocks that were already in the fuel supply chain and en route to refueling hubs when the Middle East conflict started have now been delivered, and those ports are running down their inventories.</div>

Stocks that were already in the fuel supply chain and en route to refueling hubs when the Middle East conflict started have now been delivered, and those ports are running down their inventories.

<div class="phx-topic">The availability of bunker fuel in Asia for ocean carriers is manageable for now but beginning to tighten, and global suppliers warn that shortages will be felt around the world should the Strait of Hormuz remain closed to ship traffic for much longer. Meanwhile, carriers are deploying a range of strategic operational and financial measures to mitigate the potential fuel shortages and the rising prices that will result. These include slow steaming to conserve fuel, filling ships in the US and Europe and transferring bunkers to Asia, and levying emergency fuel surcharges to recover rising costs. The implications of widening fuel shortages on container shipping operations could be profound, according to Erik Deventak, chief technology and data officer at rate benchmarking platform Xeneta. “In a worst-case scenario, any bunker shortage will hit supply because a carrier cannot run as many ships,” he said. “There’s no way around it and carriers will eventually need to reduce supply, likely through blank sailings.” While Deventak added a caveat — “realistically, no one is fully aware of what the scale of the bunker shortages could be” — he said the carriers would need to be selective on which services they were prepared to operate and which would be suspended. Hapag-Lloyd spokesperson Tim Seifert said the impact on the carrier’s operations so far was “limited and manageable,” but that Hapag was taking contingency measures to mitigate potential shortfalls. “We are taking on more fuel in ports where we would normally buy less to keep stock levels high,” he said. “As a fallback, we are considering bunker-only calls, but this has not been necessary so far.” About one-fifth of the world’s crude oil and refined products — 20 million barrels per day — is exported via the Strait of Hormuz, but that slowed to a trickle after the US and Israel began air strikes on Iran on Feb. 28. Export volumes of crude and refined products exiting the strait are currently at less than 10% of pre-war levels, forcing fuel suppliers across the region to reduce or shut down production. Bunker stocks that were already in the fuel supply chain and en route to refueling hubs when the war started have now been delivered, and those ports are running down their inventories. With Hormuz essentially unavailable to commercial shipping, there is no replenishment inbound. “If the Strait of Hormuz were to remain inaccessible, we would expect the market to tighten further — not only across Asia, but also into Europe and potentially parts of Africa,” Mikkel Kannegaard, head of global supply at Bunker Holding Group, the world’s largest bunker fuel supplier and trader, told the Journal of Commerce. “In Asia, availability remains acceptable so far, although supply uncertainty and backwardation are pushing up the delivery premiums,” he added. “At this stage, supply in Singapore and China appears to be holding up and looks manageable into April.” Backwardation is a market structure in which the spot price of a commodity is higher than its futures price, which can be a sign of supply disruptions. <h3>Emergency reserves inbound </h3>To address disruptions to oil markets stemming from the war in the Middle East, the 32 member countries of the International Energy Agency (IEA) on March 11 agreed to make 400 million barrels of oil from their emergency reserves available to the market. While the market has welcomed the measure, the fuel-strapped markets in Asia will not see the emergency reserves for at least two months, according to Sebastiaan Kosman, founder of bunker fuel analytics firm Spotbarge. “Even if you ship the oil now from the Amsterdam, Rotterdam, Antwerp area [known as ARA] to Asia, it will take two months to get the product loaded, shipped and refined,” Kosman said. Container shipping uses a range of different fuels, predominantly very low sulfur fuel oil (VLSFO), high sulfur fuel oil (HSFO) and low-sulfur marine gasoil (MGO). Liquefied natural gas (LNG) demand is increasing as more dual-fuel ships hit the water, but its usage depends on its price differential compared with conventional fuels, particularly MGO. Bunker fuel prices soared when the war began but have fallen over the past few days. The March 24 prices from Singapore assessed by industry platform Ship &amp; Bunker show VLSFO up 71% since late February at $894 per metric ton but down 10% since the start of the week. MGO is up 151% at $1,784/metric ton but has fallen 8% this week. The largest pricing decline was from HSFO. After rising 146% since the end of February to a high of $1,073/mt on March 9, the heavy fuel dropped steadily to $712/mt by March 24. Rotterdam fuel prices have also fallen this week and are substantially lower than Singapore. As of March 24, VLSFO was at $757/mt, up 54% compared with Feb. 27; MGO at $1,334/mt was almost double the pre-conflict level, and HSFO was up 63% at $714/mt, according to Ship &amp; Bunker. Kosman said Singapore’s crude oil comes from the Middle East and the supply chain disruption was widening the bunker fuel price differential between Singapore and Rotterdam. “That already gives you indication that Singapore is really tight,” he noted. “If Hormuz remains closed in the long term, bunkers in Singapore, Korea or Japan will be empty way earlier than terminals in Antwerp and Rotterdam.” <h3>Offsetting fuel price impact </h3>To recover bunker costs that comprise half their operating expenses, <a href="https://www.joc.com/article/war-reignites-tussle-between-ocean-carriers-cargo-owners-over-fuel-surcharges-6188632">carriers have rolled out emergency fuel surcharges</a> on top of the quarterly bunker adjustment factors (BAFs) that were no match for fuel prices that doubled in two weeks. Analysts at investment bank Jefferies said in a note to customers this week that rates would need to strengthen by 15% to fully offset the impact of rising fuel prices, which would be challenging given the <a href="https://www.joc.com/article/scrapping-strategy-looms-large-in-2026-as-carriers-manage-growing-oversupply-6168918">excess capacity in the market.</a>On Monday, the US Federal Maritime Commission <a href="https://www.joc.com/article/fmc-rejects-requests-by-carriers-to-waive-waiting-period-for-middle-east-surcharges-6191881">unanimously rejected separate requests from four ocean carriers</a> to waive a 30-day notice period to implement surcharges tied to the war in the Middle East, forcing the four to wait until early April to charge their shipper customers. <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="ef167537-108b-4e1b-ac11-43e99f815839"></dynamic-object></div>Meanwhile, spot rates on the Asia outbound trade lanes rose through March but have softened on Asia-Europe and flattened or even fallen on some trans-Pacific routes, according to the various pricing indexes tracked by the Journal of Commerce. Asia-North Europe rates this week are 41% above their pre-war levels at $2,800 per FEU, while Asia-Mediterranean rates are up 34% at $3,800/FEU, according to Platts, a sister company of the Journal of Commerce within S&amp;P Global. However, prices on both trade lanes softened in the past week. Although rates from Asia to the US West and East coasts rose in the first week of the war, they have since fallen below Feb. 28 levels. Deventak said although the rising price of fuel will drive up the price of shipping in the short term, he noted that the underlying market fundamentals remained in place — an oversupply of vessel capacity and demand that has been softened by a weak global economy. “We have seen the initial shock to container shipping, but the ultimate supply and demand structure has not massively changed since the conflict escalated, and it is this supply-demand balance that carries most weight in driving freight rates rather than carriers’ costs,” he said. Contact Greg Knowler at <a href="mailto:greg.knowler@spglobal.com">greg.knowler@spglobal.com</a>.</div>

The availability of bunker fuel in Asia for ocean carriers is manageable for now but beginning to tighten, and global suppliers warn that shortages will be felt around the world should the Strait of Hormuz remain closed to ship traffic for much longer. Meanwhile, carriers are deploying a range of strategic operational and financial measures to mitigate the potential fuel shortages and the rising prices that will result. These include slow steaming to conserve fuel, filling ships in the US and Europe and transferring bunkers to Asia, and levying emergency fuel surcharges to recover rising costs. The implications of widening fuel shortages on container shipping operations could be profound, according to Erik Deventak, chief technology and data officer at rate benchmarking platform Xeneta. “In a worst-case scenario, any bunker shortage will hit supply because a carrier cannot run as many ships,” he said. “There’s no way around it and carriers will eventually need to reduce supply, likely through blank sailings.” While Deventak added a caveat — “realistically, no one is fully aware of what the scale of the bunker shortages could be” — he said the carriers would need to be selective on which services they were prepared to operate and which would be suspended. Hapag-Lloyd spokesperson Tim Seifert said the impact on the carrier’s operations so far was “limited and manageable,” but that Hapag was taking contingency measures to mitigate potential shortfalls. “We are taking on more fuel in ports where we would normally buy less to keep stock levels high,” he said. “As a fallback, we are considering bunker-only calls, but this has not been necessary so far.” About one-fifth of the world’s crude oil and refined products — 20 million barrels per day — is exported via the Strait of Hormuz, but that slowed to a trickle after the US and Israel began air strikes on Iran on Feb. 28. Export volumes of crude and refined products exiting the strait are currently at less than 10% of pre-war levels, forcing fuel suppliers across the region to reduce or shut down production. Bunker stocks that were already in the fuel supply chain and en route to refueling hubs when the war started have now been delivered, and those ports are running down their inventories. With Hormuz essentially unavailable to commercial shipping, there is no replenishment inbound. “If the Strait of Hormuz were to remain inaccessible, we would expect the market to tighten further — not only across Asia, but also into Europe and potentially parts of Africa,” Mikkel Kannegaard, head of global supply at Bunker Holding Group, the world’s largest bunker fuel supplier and trader, told the Journal of Commerce. “In Asia, availability remains acceptable so far, although supply uncertainty and backwardation are pushing up the delivery premiums,” he added. “At this stage, supply in Singapore and China appears to be holding up and looks manageable into April.” Backwardation is a market structure in which the spot price of a commodity is higher than its futures price, which can be a sign of supply disruptions. Emergency reserves inbound To address disruptions to oil markets stemming from the war in the Middle East, the 32 member countries of the International Energy Agency (IEA) on March 11 agreed to make 400 million barrels of oil from their emergency reserves available to the market. While the market has welcomed the measure, the fuel-strapped markets in Asia will not see the emergency reserves for at least two months, according to Sebastiaan Kosman, founder of bunker fuel analytics firm Spotbarge. “Even if you ship the oil now from the Amsterdam, Rotterdam, Antwerp area [known as ARA] to Asia, it will take two months to get the product loaded, shipped and refined,” Kosman said. Container shipping uses a range of different fuels, predominantly very low sulfur fuel oil (VLSFO), high sulfur fuel oil (HSFO) and low-sulfur marine gasoil (MGO). Liquefied natural gas (LNG) demand is increasing as more dual-fuel ships hit the water, but its usage depends on its price differential compared with conventional fuels, particularly MGO. Bunker fuel prices soared when the war began but have fallen over the past few days. The March 24 prices from Singapore assessed by industry platform Ship & Bunker show VLSFO up 71% since late February at $894 per metric ton but down 10% since the start of the week. MGO is up 151% at $1,784/metric ton but has fallen 8% this week. The largest pricing decline was from HSFO. After rising 146% since the end of February to a high of $1,073/mt on March 9, the heavy fuel dropped steadily to $712/mt by March 24. Rotterdam fuel prices have also fallen this week and are substantially lower than Singapore. As of March 24, VLSFO was at $757/mt, up 54% compared with Feb. 27; MGO at $1,334/mt was almost double the pre-conflict level, and HSFO was up 63% at $714/mt, according to Ship & Bunker. Kosman said Singapore’s crude oil comes from the Middle East and the supply chain disruption was widening the bunker fuel price differential between Singapore and Rotterdam. “That already gives you indication that Singapore is really tight,” he noted. “If Hormuz remains closed in the long term, bunkers in Singapore, Korea or Japan will be empty way earlier than terminals in Antwerp and Rotterdam.” Offsetting fuel price impact To recover bunker costs that comprise half their operating expenses, carriers have rolled out emergency fuel surcharges on top of the quarterly bunker adjustment factors (BAFs) that were no match for fuel prices that doubled in two weeks. Analysts at investment bank Jefferies said in a note to customers this week that rates would need to strengthen by 15% to fully offset the impact of rising fuel prices, which would be challenging given the excess capacity in the market. On Monday, the US Federal Maritime Commission unanimously rejected separate requests from four ocean carriers to waive a 30-day notice period to implement surcharges tied to the war in the Middle East, forcing the four to wait until early April to charge their shipper customers. Meanwhile, spot rates on the Asia outbound trade lanes rose through March but have softened on Asia-Europe and flattened or even fallen on some trans-Pacific routes, according to the various pricing indexes tracked by the Journal of Commerce. Asia-North Europe rates this week are 41% above their pre-war levels at $2,800 per FEU, while Asia-Mediterranean rates are up 34% at $3,800/FEU, according to Platts, a sister company of the Journal of Commerce within S&P Global. However, prices on both trade lanes softened in the past week. Although rates from Asia to the US West and East coasts rose in the first week of the war, they have since fallen below Feb. 28 levels. Deventak said although the rising price of fuel will drive up the price of shipping in the short term, he noted that the underlying market fundamentals remained in place — an oversupply of vessel capacity and demand that has been softened by a weak global economy. “We have seen the initial shock to container shipping, but the ultimate supply and demand structure has not massively changed since the conflict escalated, and it is this supply-demand balance that carries most weight in driving freight rates rather than carriers’ costs,” he said. Contact Greg Knowler at greg.knowler@spglobal.com .

Port News

Container lines

International ports

Container Shipping News

Maritime

Bunker fuel shortages in Asia at tipping point as war disruption continues

<div class="phx-topic abstract-wrapper">The American Trucking Associations’ February truck tonnage report showed a 2.6% month-over-month increase, making it the largest sequential gain in three years.</div>

The American Trucking Associations’ February truck tonnage report showed a 2.6% month-over-month increase, making it the largest sequential gain in three years.

<div class="phx-topic">Soaring diesel fuel prices and the nationwide crackdown by the federal government on non-domiciled commercial drivers is tightening truckload capacity in the US, putting a floor under rates. And new data showing that demand may be perking up has raised hopes in the trucking industry, albeit cautiously, that the freight recession going on four years could be nearing an end. Still, trucking executives say for any recovery to be long-term, demand needs to show steady and solid growth over several months. The American Trucking Associations’ (ATA’s) February truck tonnage report showed a 2.6% month-over-month increase, making it the largest sequential gain in three years, according to Bob Costello, the group’s chief economist. On a year-over-year basis, the increase was 2.1%. “February’s robust gain is great to see, but the size of the gain is likely magnified due to lower industry capacity,” Costello said in a statement. “Particularly after a very prolonged freight recession, improving volumes in any manner is welcomed.” Capacity, meanwhile, is being crimped by diesel prices that have rocketed higher since the war in the Middle East began Feb. 28, forcing many small and midsize drivers to park their trucks given the fast-rising expense. The average price of on-highway diesel in the US jumped to almost $5.38 per gallon as of March 23, up 30 cents in one week and $1.80 higher than it was a year ago. Prices in California were at $6.87/gal. The sudden and steep increase in diesel is impacting capacity, according to Dean Croke, principal analyst for DAT Freight &amp; Analytics. “Diesel is up about $1.30 a gallon since the war started and that’s really crushed a lot of the small carriers because they haven’t been able to get the full fuel surcharge built into the loads,” Croke said. “A lot of carriers are saying they’re going to sit this out until things stabilize.” The latest information on rates from DAT showed that for the week ending March 21, dry van spot rates were flat week to week at $1.92 per mile. Reefer spot rates increased to $2.32 per mile, up 2 cents, and flatbed spot rates moved 3 cents higher to $2.34 per mile. DAT said as fuel surcharges have increased 44% to 64 cents per mile, carriers are struggling to negotiate load-by-load rate increases that fully offset the higher prices for diesel. “Capacity is tightening. It is putting a floor on rates that we’ve not seen in many years,” Croke said. “I suspect as you get into the spring building, construction and nursery season volume bump, you’ll see rates start to move up again.” <h3>CDLs culled in California </h3>Adding to the tightening capacity is the <a href="https://www.joc.com/article/capacity-cuts-fuel-shocks-provide-openings-for-trucking-and-rail-6188739">US Department of Transportation’s crackdown</a> on non-domiciled commercial driver’s licenses (CDLs) while toughening standards around the English language proficiency of all drivers. The Federal Motor Carrier Safety Administration (FMCSA) has canceled an estimated 13,000 CDLs in California. Raman Dillon, president of the 2,000-member North American Punjabi Trucking Association, said the loss of those drivers and high diesel prices will continue to tighten capacity in the state. “The drivers are suffering and the impact on the public and the supply chain has yet to be seen,” Dillon told the Journal of Commerce. “These CDLs were not picked up at a convenience store, they were issued by the government. You cannot say that every one of the 13,000 drivers they took out is a bad driver... “We feel like we are being made scapegoats, but it will tighten capacity, because our industry has a shortage of good drivers,” he added. Dillon agreed with Croke that high diesel prices will push drivers to the sidelines, at least for the time being, tightening capacity and impacting shippers by making it more costly and harder to find dependable ways to move freight. “We have diesel in some places being sold for seven dollars or more a gallon, and that’s a surcharge that you and me, we’re going to pay,” he said. “Everything is going to get more expensive.” <a href="https://www.joc.com/article/house-committee-advances-bill-targeting-non-domiciled-commercial-drivers-licenses-6188801">Legislation making its way through Congress</a>, meanwhile, contains several provisions that go far beyond the scope of the FMCSA’s rule restricting non-domiciled CDLs, which the agency estimates could remove up to 194,000 drivers from the market over five years. Still, the trucking industry is <a href="https://www.joc.com/article/impact-of-non-domiciled-cdl-enforcement-splits-us-trucking-sector-6135184">split on whether the federal regulations will significantly impact trucking and drayage capacity</a> amid the more than four-year freight recession. Contact Dan Ronan at <a href="mailto:contactdanronan@gmail.com">contactdanronan@gmail.com</a>.</div>

Soaring diesel fuel prices and the nationwide crackdown by the federal government on non-domiciled commercial drivers is tightening truckload capacity in the US, putting a floor under rates. And new data showing that demand may be perking up has raised hopes in the trucking industry, albeit cautiously, that the freight recession going on four years could be nearing an end. Still, trucking executives say for any recovery to be long-term, demand needs to show steady and solid growth over several months. The American Trucking Associations’ (ATA’s) February truck tonnage report showed a 2.6% month-over-month increase, making it the largest sequential gain in three years, according to Bob Costello, the group’s chief economist. On a year-over-year basis, the increase was 2.1%. “February’s robust gain is great to see, but the size of the gain is likely magnified due to lower industry capacity,” Costello said in a statement. “Particularly after a very prolonged freight recession, improving volumes in any manner is welcomed.” Capacity, meanwhile, is being crimped by diesel prices that have rocketed higher since the war in the Middle East began Feb. 28, forcing many small and midsize drivers to park their trucks given the fast-rising expense. The average price of on-highway diesel in the US jumped to almost $5.38 per gallon as of March 23, up 30 cents in one week and $1.80 higher than it was a year ago. Prices in California were at $6.87/gal. The sudden and steep increase in diesel is impacting capacity, according to Dean Croke, principal analyst for DAT Freight & Analytics. “Diesel is up about $1.30 a gallon since the war started and that’s really crushed a lot of the small carriers because they haven’t been able to get the full fuel surcharge built into the loads,” Croke said. “A lot of carriers are saying they’re going to sit this out until things stabilize.” The latest information on rates from DAT showed that for the week ending March 21, dry van spot rates were flat week to week at $1.92 per mile. Reefer spot rates increased to $2.32 per mile, up 2 cents, and flatbed spot rates moved 3 cents higher to $2.34 per mile. DAT said as fuel surcharges have increased 44% to 64 cents per mile, carriers are struggling to negotiate load-by-load rate increases that fully offset the higher prices for diesel. “Capacity is tightening. It is putting a floor on rates that we’ve not seen in many years,” Croke said. “I suspect as you get into the spring building, construction and nursery season volume bump, you’ll see rates start to move up again.” CDLs culled in California Adding to the tightening capacity is the US Department of Transportation’s crackdown on non-domiciled commercial driver’s licenses (CDLs) while toughening standards around the English language proficiency of all drivers. The Federal Motor Carrier Safety Administration (FMCSA) has canceled an estimated 13,000 CDLs in California. Raman Dillon, president of the 2,000-member North American Punjabi Trucking Association, said the loss of those drivers and high diesel prices will continue to tighten capacity in the state. “The drivers are suffering and the impact on the public and the supply chain has yet to be seen,” Dillon told the Journal of Commerce. “These CDLs were not picked up at a convenience store, they were issued by the government. You cannot say that every one of the 13,000 drivers they took out is a bad driver... “We feel like we are being made scapegoats, but it will tighten capacity, because our industry has a shortage of good drivers,” he added. Dillon agreed with Croke that high diesel prices will push drivers to the sidelines, at least for the time being, tightening capacity and impacting shippers by making it more costly and harder to find dependable ways to move freight. “We have diesel in some places being sold for seven dollars or more a gallon, and that’s a surcharge that you and me, we’re going to pay,” he said. “Everything is going to get more expensive.” Legislation making its way through Congress , meanwhile, contains several provisions that go far beyond the scope of the FMCSA’s rule restricting non-domiciled CDLs, which the agency estimates could remove up to 194,000 drivers from the market over five years. Still, the trucking industry is split on whether the federal regulations will significantly impact trucking and drayage capacity amid the more than four-year freight recession. Contact Dan Ronan at contactdanronan@gmail.com .

Trucking News

Truckload

Surface

Diesel shock puts floor under trucking rates as demand shows some life

<div class="phx-topic abstract-wrapper">TotalEnergies accepted a $1 billion payment from the Trump administration to walk away from two offshore wind projects and instead reinvest the funds in fossil fuel projects along the Gulf Coast.</div>

TotalEnergies accepted a $1 billion payment from the Trump administration to walk away from two offshore wind projects and instead reinvest the funds in fossil fuel projects along the Gulf Coast.

<div class="phx-topic">The cancellation of a pair of US offshore wind projects in exchange for a $1 billion payment from the Trump administration is the latest development to chip away at renewable project cargo opportunities. But the deal could potentially drive cargo for fossil fuel projects. French energy giant TotalEnergies signed off on a March 23 agreement to accept $1 billion from the US government to give up the leases on its two offshore wind projects — Carolina Long Bay and New York Bight — and instead pivot to the buildout of gas and power production and export facilities in the US. “Considering that the development of offshore wind projects is not in the country’s interest, we have decided to renounce offshore wind development in the United States in exchange for the reimbursement of the lease fees,” TotalEnergies chairman and CEO Patrick Pouyanné said in a statement. US offshore wind projects have come under attack by President Donald Trump, who issued an executive order banning new wind power projects upon taking office in January 2025. In December, the administration’s Bureau of Ocean Energy Management (BOEM) issued stop-work orders on five East Coast offshore wind projects that are fully permitted and over halfway complete. The TotalEnergies projects were not among the five. The payout to TotalEnergies comes after the administration <a href="https://www.joc.com/article/trump-administration-seeks-to-undo-court-rulings-favoring-offshore-wind-projects-6173748">began taking steps to reverse a sweep of recent court victories</a> for the five offshore wind projects as developers rush to complete work on the projects after courts allowed work to resume. Sam Salustro, senior vice president of policy and market affairs for industry group Oceantic Network, told the Journal of Commerce that TotalEnergies’ projects were still in the pre-environmental review phase when project cargo and logistics activity is limited. “These two projects were not well advanced in the development or permitting pipeline, so impacts stemming directly from this would be negligible,” he said. Salustro said that despite the project cancellations, the long-term trajectory of the US offshore wind industry remains secure because states continue to rely on wind as a foundational power source amid rapidly rising energy demands. “This is political theater meant to obscure the fact that offshore wind capacity is being pulled out of the pipeline when energy prices are skyrocketing, even as other offshore wind projects continue delivering reliable and affordable power to the grid,” he said. Under the agreement, TotalEnergies will reinvest the refunded lease fees to finance the construction of NextDecade Corp.’s Rio Grande LNG plant under way near Brownsville, Texas, and to support the development of other US gas production and export projects. TotalEnergies’ energy pivot comes at a time when LNG export capacity in the US, which is already the world’s largest LNG exporter, <a href="https://www.joc.com/article/lng-project-cargo-poised-for-us-boom-amid-war-6185867">is expected to nearly double in the next five years</a>, according to recent analyses by the US Energy Information Administration (EIA). <h3>Wind cargo shifting to Canada </h3>For facilities such as the Port of Vancouver USA in Washington state, project cargo movement has been reflecting the move away from wind energy in the US. Alex Strogen, the port’s chief commercial officer, told the Journal of Commerce that he has observed more wind cargo moving to Canada because of the falloff in US wind projects. “This is a shift that we’ve seen gaining momentum for the past three or four years,” he said. From a ports perspective, policies under Trump and former President Joe Biden have made wind farm installations more expensive, Strogen said. He cited Biden’s Inflation Reduction Act incentivizing manufacturers to move production to the US — creating short-term capital expenses while domestic supply chains were gaining their footing — and Trump’s push to dial back permits for wind farms on federal lands. Because Canadian ports don’t have the infrastructure in place to move massive wind turbine components, one silver lining for US facilities such as the Port of Vancouver is that they have been able to capture some of Canada’s wind project cargo business. “The Port of Vancouver and the Port of Longview [Washington] have been taking advantage of the falloff of US wind projects and capitalizing on the relatively steady demand for wind farms going up historically in Alberta and Saskatchewan, and now we are seeing a shift into British Columbia as well,” Strogen said. Contact Autumn Cafiero Giusti at <a href="mailto:autumn@autumngiusti.com">autumn@autumngiusti.com</a>.</div>

The cancellation of a pair of US offshore wind projects in exchange for a $1 billion payment from the Trump administration is the latest development to chip away at renewable project cargo opportunities. But the deal could potentially drive cargo for fossil fuel projects. French energy giant TotalEnergies signed off on a March 23 agreement to accept $1 billion from the US government to give up the leases on its two offshore wind projects — Carolina Long Bay and New York Bight — and instead pivot to the buildout of gas and power production and export facilities in the US. “Considering that the development of offshore wind projects is not in the country’s interest, we have decided to renounce offshore wind development in the United States in exchange for the reimbursement of the lease fees,” TotalEnergies chairman and CEO Patrick Pouyanné said in a statement. US offshore wind projects have come under attack by President Donald Trump, who issued an executive order banning new wind power projects upon taking office in January 2025. In December, the administration’s Bureau of Ocean Energy Management (BOEM) issued stop-work orders on five East Coast offshore wind projects that are fully permitted and over halfway complete. The TotalEnergies projects were not among the five. The payout to TotalEnergies comes after the administration began taking steps to reverse a sweep of recent court victories for the five offshore wind projects as developers rush to complete work on the projects after courts allowed work to resume. Sam Salustro, senior vice president of policy and market affairs for industry group Oceantic Network, told the Journal of Commerce that TotalEnergies’ projects were still in the pre-environmental review phase when project cargo and logistics activity is limited. “These two projects were not well advanced in the development or permitting pipeline, so impacts stemming directly from this would be negligible,” he said. Salustro said that despite the project cancellations, the long-term trajectory of the US offshore wind industry remains secure because states continue to rely on wind as a foundational power source amid rapidly rising energy demands. “This is political theater meant to obscure the fact that offshore wind capacity is being pulled out of the pipeline when energy prices are skyrocketing, even as other offshore wind projects continue delivering reliable and affordable power to the grid,” he said. Under the agreement, TotalEnergies will reinvest the refunded lease fees to finance the construction of NextDecade Corp.’s Rio Grande LNG plant under way near Brownsville, Texas, and to support the development of other US gas production and export projects. TotalEnergies’ energy pivot comes at a time when LNG export capacity in the US, which is already the world’s largest LNG exporter, is expected to nearly double in the next five years , according to recent analyses by the US Energy Information Administration (EIA). Wind cargo shifting to Canada For facilities such as the Port of Vancouver USA in Washington state, project cargo movement has been reflecting the move away from wind energy in the US. Alex Strogen, the port’s chief commercial officer, told the Journal of Commerce that he has observed more wind cargo moving to Canada because of the falloff in US wind projects. “This is a shift that we’ve seen gaining momentum for the past three or four years,” he said. From a ports perspective, policies under Trump and former President Joe Biden have made wind farm installations more expensive, Strogen said. He cited Biden’s Inflation Reduction Act incentivizing manufacturers to move production to the US — creating short-term capital expenses while domestic supply chains were gaining their footing — and Trump’s push to dial back permits for wind farms on federal lands. Because Canadian ports don’t have the infrastructure in place to move massive wind turbine components, one silver lining for US facilities such as the Port of Vancouver is that they have been able to capture some of Canada’s wind project cargo business. “The Port of Vancouver and the Port of Longview [Washington] have been taking advantage of the falloff of US wind projects and capitalizing on the relatively steady demand for wind farms going up historically in Alberta and Saskatchewan, and now we are seeing a shift into British Columbia as well,” Strogen said. Contact Autumn Cafiero Giusti at autumn@autumngiusti.com .

Energy projects

Project cargo

Breakbulk News

Offshore wind cancellations set up energy project pivot in the US

<div class="phx-topic abstract-wrapper">Ocean carriers have a stronger financial backstop than past downcycles after having retired significant debt and increasing their profitability in the last five years post-pandemic, writes Executive Editor Mark Szakonyi.</div>

Ocean carriers have a stronger financial backstop than past downcycles after having retired significant debt and increasing their profitability in the last five years post-pandemic, writes Executive Editor Mark Szakonyi.

<div class="phx-topic">This container shipping downcycle is shaping up to be “shallow,” and there’s an argument to be made that so-called ship overordering may be prudent in the long term despite overcapacity rising over the next few years. Most immediately, ocean carriers have a stronger financial backstop than past downcycles, having retired significant debt after reaping $600 billion in operating profits from 2021 to 2024, said Rahul Kapoor, S&amp;P Global’s global head of shipping and analytics research. <div class="wrapper-narrow float-right-element"><img src="/images/phoenix/6192742_0.1.jpg"></img></div>Average leverage for the industry, as measured by total debt to earnings before interest and taxes (EBIT), was a mere 1% to 2% between 2021 and 2025. Comparatively, the average leverage was in the range of 7% to 8% in 2012–20. “When we look at the industry and when we look at this downturn which we are talking about, I think the industry is very well-prepared, and we have to look at that when we’re talking about the container shipping downcycle which is going to come,” Kapoor said March 2 at the Journal of Commerce’s TPM26 conference in Long Beach. “So in our view, it’s a shallow cycle.” Beyond driving record profits for the industry, the disruption during the pandemic set carriers on a more profitable course, recording EBIT margins of 21% to 22% in 2021–25, compared with EBIT in the range of just 2% to 3% in the nine prior years, he said. The data is based only on carriers that report earnings, and thus excludes Mediterranean Shipping Co. Kapoor said he expected the container shipping industry to report losses over the next two or three years. Profitability is already falling. The average operating profit of major carriers fell to 5.3% for the fourth quarter of 2025 and was the first quarterly operating loss since the first quarter of 2024, according to analyst Alphaliner. But while overcapacity will pull balance sheets into the red in the coming years, container ship orders, representing more than one-third of the existing fleet, are a better bet than they appear, Kapoor said. In a capital-intensive industry, ordering more ships, partly to prepare for tighter decarbonization regulations, makes more sense than returning the profits to shareholders, he said. “Maybe [the industry] went a bit overboard. It always does. But the balance sheets are strong,” Kapoor said. “The cash buffers are extremely strong, and the windfall profits the industry saw were better utilized.” <h3>Why this order cycle is different </h3>Since 2020, there’s been two waves of ship orders, with the first between 2021 and 2024 being driven by record profits tied to pandemic-era disruption. “They were all building and forming a long conga line with a glass of champagne in their hand, and they ordered,” Jan Tiedemann, senior analyst at Alphaliner, said at TPM26. “But now there’s a second ordering wave going on. We have to think about why that is happening because this one is clearly deliberate, and it also focuses on more and smaller ships.” Whereas the first wave of orders centered on ships with capacities of up to 24,000 TEUs, the second wave is dominated by orders of small ships with capacities under 6,000 TEUs. Non-operating common carriers are also driving the ordering of small ships. “Since roughly 2005, if you look at the fleet and the fleet growth over these 20 years, it’s gone up in an almost linear way,” Tiedemann said. “It’s 1 million [TEUs] added year-in, year-out, and it’s almost stable.” Industry consolidation, with the top 10 carriers operating 85% of the total fleet compared with 65% a decade ago, and record profits during the pandemic give the major ocean carriers confidence in the long game, he said. “They understood that the ship is an asset which probably can break even for 10 years of its lifetime, probably can be slightly loss-making for another 10 years of its lifetime, but then makes all its money back in five years,” said Tiedemann. “So you have that asset, and especially in this time of constant disruption, where we’re going into a phase, that disruption is the new normal.” Not all container lines were able to capitalize on the disruption caused by diversions away from the Suez Canal starting in late 2023 because they failed to order enough tonnage, Tiedemann said. Carriers without enough tonnage for the longer sailings around the Cape of Good Hope had to turn to more expensive chartering and buying secondhand ships. Simon Heaney, senior manager of container research at Drewry, doesn’t see the massive order book as benign as others. Betting on a ‘black swan’ event to cause disruption and soak up functional capacity “doesn’t constitute as a plan,” he said. “Also, over-ordering means they are not fully capitalizing on the given situation,” Heaney said. “A smarter bet would have been to limit orders as they would win in any scenario without the expense.” Contact Mark Szakonyi at <a href="mailto:mark.szakonyi@spglobal.com">mark.szakonyi@spglobal.com</a>.</div>

This container shipping downcycle is shaping up to be “shallow,” and there’s an argument to be made that so-called ship overordering may be prudent in the long term despite overcapacity rising over the next few years. Most immediately, ocean carriers have a stronger financial backstop than past downcycles, having retired significant debt after reaping $600 billion in operating profits from 2021 to 2024, said Rahul Kapoor, S&P Global’s global head of shipping and analytics research. Average leverage for the industry, as measured by total debt to earnings before interest and taxes (EBIT), was a mere 1% to 2% between 2021 and 2025. Comparatively, the average leverage was in the range of 7% to 8% in 2012–20. “When we look at the industry and when we look at this downturn which we are talking about, I think the industry is very well-prepared, and we have to look at that when we’re talking about the container shipping downcycle which is going to come,” Kapoor said March 2 at the Journal of Commerce’s TPM26 conference in Long Beach. “So in our view, it’s a shallow cycle.” Beyond driving record profits for the industry, the disruption during the pandemic set carriers on a more profitable course, recording EBIT margins of 21% to 22% in 2021–25, compared with EBIT in the range of just 2% to 3% in the nine prior years, he said. The data is based only on carriers that report earnings, and thus excludes Mediterranean Shipping Co. Kapoor said he expected the container shipping industry to report losses over the next two or three years. Profitability is already falling. The average operating profit of major carriers fell to 5.3% for the fourth quarter of 2025 and was the first quarterly operating loss since the first quarter of 2024, according to analyst Alphaliner. But while overcapacity will pull balance sheets into the red in the coming years, container ship orders, representing more than one-third of the existing fleet, are a better bet than they appear, Kapoor said. In a capital-intensive industry, ordering more ships, partly to prepare for tighter decarbonization regulations, makes more sense than returning the profits to shareholders, he said. “Maybe [the industry] went a bit overboard. It always does. But the balance sheets are strong,” Kapoor said. “The cash buffers are extremely strong, and the windfall profits the industry saw were better utilized.” Why this order cycle is different Since 2020, there’s been two waves of ship orders, with the first between 2021 and 2024 being driven by record profits tied to pandemic-era disruption. “They were all building and forming a long conga line with a glass of champagne in their hand, and they ordered,” Jan Tiedemann, senior analyst at Alphaliner, said at TPM26. “But now there’s a second ordering wave going on. We have to think about why that is happening because this one is clearly deliberate, and it also focuses on more and smaller ships.” Whereas the first wave of orders centered on ships with capacities of up to 24,000 TEUs, the second wave is dominated by orders of small ships with capacities under 6,000 TEUs. Non-operating common carriers are also driving the ordering of small ships. “Since roughly 2005, if you look at the fleet and the fleet growth over these 20 years, it’s gone up in an almost linear way,” Tiedemann said. “It’s 1 million [TEUs] added year-in, year-out, and it’s almost stable.” Industry consolidation, with the top 10 carriers operating 85% of the total fleet compared with 65% a decade ago, and record profits during the pandemic give the major ocean carriers confidence in the long game, he said. “They understood that the ship is an asset which probably can break even for 10 years of its lifetime, probably can be slightly loss-making for another 10 years of its lifetime, but then makes all its money back in five years,” said Tiedemann. “So you have that asset, and especially in this time of constant disruption, where we’re going into a phase, that disruption is the new normal.” Not all container lines were able to capitalize on the disruption caused by diversions away from the Suez Canal starting in late 2023 because they failed to order enough tonnage, Tiedemann said. Carriers without enough tonnage for the longer sailings around the Cape of Good Hope had to turn to more expensive chartering and buying secondhand ships. Simon Heaney, senior manager of container research at Drewry, doesn’t see the massive order book as benign as others. Betting on a ‘black swan’ event to cause disruption and soak up functional capacity “doesn’t constitute as a plan,” he said. “Also, over-ordering means they are not fully capitalizing on the given situation,” Heaney said. “A smarter bet would have been to limit orders as they would win in any scenario without the expense.” Contact Mark Szakonyi at  mark.szakonyi@spglobal.com .

Container shipping faces ‘shallow’ downcycle amid strong carrier finances

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