The container industry is currently in a paradoxical situation. Despite historically low export volumes of various commodities from Europe, shipping companies are increasingly facing space issues on multiple routes. This situation does not reflect the current economic reality, where low export volumes would normally lead to overcapacity and lower rates.

Space Issues in Various Regions

In recent weeks, we have already reported on the challenges regarding space towards the Middle East and Indo-Pakistan. We now see significant additional constraints on other routes such as North and South America. Even on traditionally problem-free routes such as Africa, we are suddenly experiencing capacity issues, resulting in orders being rolled over to later ships due to lack of space.

Causes and Consequences

The cause of these space issues is not far-fetched. There is an increase in 'blank sailings' on various routes, with the freed-up vessels then being deployed on Asian traffic. This shift in capacity to Asia is due to the booming exports there, in contrast to Europe. The usual peak period from Asia started much earlier and stronger this year, causing prices from Asia to almost quadruple compared to the beginning of the year. This early start is due to the impact of the Red Sea, which has increased transit times - leading American and European importers to take a head start on orders for the festive season.

Strategic Reallocation of Capacity

Shipping companies are massively opting to deploy their capacity on Asian exports due to the high freight rates they can 'catch' there. However, this strategic choice has a dual impact. On the one hand, shipping companies benefit from the high freight rates from Asia; on the other hand, they create artificial scarcity on other routes such as the Americas and Africa. Allowing them to drive up prices on these routes as well.

Additionally, a significant portion of the (over)capacity is still being consumed because all shipping companies continue to avoid the passage via Yemen and the Red Sea, opting instead to detour via the Cape of Good Hope. This longer route requires additional time and capacity, leaving fewer vessels available for other routes, further exacerbating capacity issues.

Impact on Global Rates

Over the past few days, we have received an increasing number of peak season surcharges on major routes. The shift in capacity and the resulting scarcity on various routes lead to higher freight rates worldwide, despite the low European export volumes. These developments show how dynamic and interconnected the global container industry is, where decisions and circumstances in one region can have significant repercussions for the entire market.

Below an overview of the communicated surcharges, for current announcements – peak season surcharges for dry and reefer containers are the same throughout their size.

*Destination range: To West Coast South America, West Coast Central America & Mexico West Coast, East Coast Central America & the Caribbean (except French West Indies, French Guiana, Gustavia & Philipsburg)

**Destination range: To North Brazil (Manaus, Vila do Conde, Fortaleza), Puerto Rico & US Virgin Islands

Should you have any questions or comments regarding this topic, do not hesitate to contact your Shipex representative.

The Shipex team