While the SITL Maritime Day recently opened with a report on the container market, the return of lockdowns in China poses new threats to supply chains, not to mention the war in Ukraine. No drop in freight rates on East-West shipping routes is currently anticipated in terms of company offers.

On March 11, the American agency Bloomberg counted around 500 bulk carriers and more than 200 container ships waiting to load or unload off the ports of Shanghai and Ningbo. The Zero Covid policy introduced by the Chinese authorities to fight a new pandemic is the reason.

Without an isolated workforce, Shanghai is operating at a standstill and ship diversions are now congesting its neighbor Ningbo. The virus is also said to be resurfacing in Shenzhen, Suzhou and Guangzhou.

"According to the Caixin Manufacturing Purchasing Managers' Index, Chinese manufacturing activity has been falling in March since the start of the pandemic," Ovrsea also reports. Ports are therefore not the only links disrupted: the digital broker adds that in "Shanghai more than 90% of trucking capacity is out of service."

China in the eye of the storm

According to Upply consultant Jérôme de Ricqlès, "the snowball effect is increasing, the cancellation of stopovers (blank sailings) is slowing down, increasing their shortage... and maritime freight rates are resuming their upward trend after stabilizing at a high level."

Butterfly effect, "experts expect a repercussion in Europe within 5 to 6 weeks when stocks start to melt", predicts Arthur Barillas of Ovrsea. A few days apart, the fears expressed on April 7 during the SITL Maritime Day are confirmed.

Jérôme de Ricqlès states that "the war in Ukraine is attracting all the attention because of the human tragedies that are being played out there, but if we focus on the situation of containerized maritime transport, all eyes are on the large Chinese container terminals."

Freight forwarders, shippers and industry experts speaking at the Maritime Day debates agree that "the market driver has been the exit from China over the past two years." Nearly 800 ships were waiting to call off the coast of Shanghai (photo) and Ningbo on April 11.

Companies disciplined in their offers

The strategy of the forces in presence is confirmed on the China export routes to North America and Europe. The shipping companies, gathered around alliances, adopt a rigorous discipline on the control of capacities and available supply. Faced with increased demand and the disruptions observed on several links in the supply chains, this status quo does not allow us to foresee an improvement in terms of quality of service or transit time. No devaluation of freight rates is envisaged either.

At best, they stabilize at high levels excluding fuel surcharges (BAF: Bunker Adjustment Factor) and port congestion. On leaving China, Denis Choumert, president of the AUTF, and Jérôme de Ricqlès deplore the fact that "shippers can no longer find differentiated offers that can stand out."

The alternative of Logistics Schemes

This lack of competition in the maritime segment characterized by the two witnesses risks affecting other links in the logistics chain, according to Simon Roy. The vice-president Ocean Freight of DHL Global Forwarding mentions "the desire of shipping companies to extend their activities to freight forwarding, logistics, port terminals or air."

In his view, "recent acquisitions in these sectors by the latter could distort competition, particularly on the Asia-Europe and Asia-North America axes."

Joined by Anne-Sophie Fribourg, Director of Maritime Development at Bolloré Logistics, and Stéphane de Fives, Maritime Director at Kuehne-Nagel, Simon Roy points out that freight forwarders “work with all carriers”. To this end, they “can offer their shipper customers several solutions as well as alternative logistics schemes”.

Among them, Anne-Sophie Fribourg cites "the use of less congested secondary ports" while Stéphane de Fives mentions "the possibility of chartering transport capacities directly". To implement these solutions, the maritime director calls on shippers "to better anticipate their shipments".

Change of tack

The general consensus is that the container shipping market will remain tight over the next two years out of China, which will continue to have repercussions on other shipping routes to varying degrees.

This will encourage shippers to turn to urgent solutions, in particular by "reviewing their supply chains and accelerating their strategic thinking in terms of relocation and sourcing", according to Michel Garcia, AUTF's international transport delegate.

There are at least two reasons in favour of this approach. For Jérôme de Ricqlès, the threshold of acceptability of shippers and the capacity to pass on to their customers, including consumers, the increases in freight rates would have reached the ceiling by reaching its limits.

Finally, the hope of rapid action by the authorities responsible for regulating the container market seems increasingly unlikely, especially in Europe.