Despite ocean freight rates reaching record highs, “global container shipping demand was up only 2.7% in the second quarter versus the same period two years ago,” according to Maersk’s Q2 2021 report. With factors like the demand boom in the U.S. and the string of supply chain setbacks the industry’s been experiencing lately, many are chalking up these huge spikes in shipping rates to severe equipment imbalances.
And major ocean carriers like Maersk, Matson, Hapag-Lloyd, and ONE just keep on raking in the profits. According to Supply Chain Dive, “Hapag-Lloyd increased its earnings outlook for the year and now expects EBITDA to be in the range of $9.2 billion to $11.2 billion.” Meanwhile, “ONE’s revenue more than doubled in its most recent quarter to reach nearly $5.8 billion.”
Organizations such as the National Retail Federation are also warning trans-Pacific U.S. shippers in particular of the potential this month’s holiday shipping demand has to further intensify market conditions. On top of this, the new COVID-19 restrictions in South Vietnam have reportedly “caused a 100,000 TEU pile-up at Ho Chi Minh City’s Cat Lai port,” based on an article published by The Loadstar.
Shippers are mostly to blame for slowing cargo flow during the surge in imports from Asia, Class I railroads told US rail regulators in defending their storage fee practices that have come under greater scrutiny of late. The charge from the railroads comes as their rail ramps in Chicago are storing roughly three times the amount of ocean containers than this time a year ago. “It is important to note that while freight congestion caused by container dwell and longer-than-normal street turn times are ‘back end’ challenges that may be difficult for a shipper/receiver to manage, these are driven by ‘front end’ decisions including continued ordering of freight shipments without the resources to move the container beyond the rail terminal,” BNSF said in its response.
As a similar situation begins to develop in China, legislators over in the U.S. working on updating the Shipping Act of 1984 have ultimately decided to place maritime regulators like the FMC in charge of identifying whether or not carriers are behaving unreasonably.
To understand how this bill could impact container shipping, or to follow up with any of this week’s other top news, check out the following article highlights:
