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Global shipping industry faces capacity challenges: Drewry

18 Jun '24
3 min read
Global shipping industry faces capacity challenges: Drewry
Pic: Adobe Stock


  • The shipping industry has faced capacity challenges, rising freight rates, port delays, and traffic surges since early May.
  • The Drewry World Container Index showed rates jumping 74 per cent from late April to early June.
  • Key factors include stagnant capacity, strong demand, early shipping, and operational disruptions, with relief expected by mid-2025.
Since early May, the shipping industry has been grappling with significant capacity challenges, rising spot freight rates, chronic port delays, and a surge in traffic volumes, according to independent maritime research consultancy Drewry. Shippers are struggling to secure capacity at agreed contract rates. The Drewry World Container Index, which tracks spot rates on eight East-West routes, had fallen from $3,964 per 40-foot container in January to $2,705 in late April, before surging by 74 per cent between late April and early June. Shippers are now often required to pay peak season surcharges.

Drewry has identified four key factors contributing to these issues: stagnant capacity, very strong demand growth, shipper behaviour, and operational disruption.

Carriers have added numerous ships to their East-West services to compensate for longer routes resulting from Red Sea attacks. On the Asia-North Europe route, carriers increased their ship numbers by 24 per cent and total capacity by 17 per cent. However, this resulted in only a 2 per cent increase in effective monthly capacity due to longer travel distances. The Asia-East Coast of North America route saw a 9 per cent increase in ship numbers, but no increase in effective capacity. Despite delivering one million TEU of ship capacity in the first four months of 2024, this had no impact on effective monthly capacity, as per Drewry.

The remaining capacity to be delivered in 2024 is projected to finally expand effective capacity, addressing the need for more ships following the Red Sea diversions.

Transpacific volumes and other routes have shown strong growth compared to the previous year. The National Retail Federation forecasts US containerised imports for May at 2.1 million TEU, up 8 per cent from May 2023. However, this is still 12 per cent lower than the pandemic peak of May 2022.

A survey of Drewry Benchmarking Club members revealed that some international shippers are shipping early to ensure timely arrivals, causing additional capacity issues and delays. Drewry suggests that this early peak season is a short-term market change and predicts a volume vacuum once peak volumes subside.

Port productivity has declined, with ships spending 43 per cent more time waiting to berth at high-volume ports compared to the third quarter (Q3) of 2023. A major Asian transhipment port is experiencing near-record container densities, and port strikes on the US East and Gulf coasts could exacerbate disruptions. The global container market's supply-demand balance has been further strained by these operational challenges.

Drewry's preliminary numbers indicate that operational disruptions and lower port productivity are severely constraining supply. The organisation is considering various scenarios for the duration of the Red Sea diversions and their impact on supply and demand. A survey of 90 respondents found that only 17 per cent expect an end to the diversions before the end of 2024. The majority (60 per cent) anticipate the situation will persist into the first half of 2025.

Most respondents believe it will take at least three months to normalise liner operations once the Red Sea diversions cease, with 43 per cent predicting a three-month period and 27 per cent expecting longer.

Fibre2Fashion News Desk (DP)

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