Post-Suez box port crunch in Europe less severe than feared

Freight forwarders say the knock-on effects of last month’s Suez Canal blockage have worsened and prolonged problems of equipment availability, tight capacity, and schedule reliability ‘in an already very constrained market’, but have not led to a catastrophic congestion crisis.

While the Suez Canal blockage at the end of last month is set to prolong the current operational capacity issues in ocean freight, it has not led to the catastrophic congestion crisis some had feared, major forwarders have told Lloyd’s Loading List.

Commenting on the knock-on effects currently of the Ever Given container ship blocking the channel at the end of last month, Geodis’ senior vice president for global ocean freight Matthias Hansen said equipment availability, tight capacity, and schedule reliability have taken a further turn for the worse “in an already very constrained market where less than 35% of ships arrive on time”.

However, he played down reports that ocean carriers are discharging container imports delayed by the Suez incident wherever they can in North Europe as they scramble to return vessels to Asia as soon as possible with empty boxes.

“The majority of the carriers have unloaded the containers in accordance with the booking,” Hansen said, with only “a very few isolated cases” where the boxes of Geodis’ customers had been discharged in the ‘wrong’ port.”

Empties given priority

He accepted that in some cases empties were being given priority by lines over European export freight, noting: “The repositioning of empty boxes to Asia has the highest priority, as East-West freight rates bring in the highest income for the carriers. This leads to the fact that certain urgent (export) cargo flows are interrupted or will not be accepted by carriers, leading to equipment shortages becoming an issue in Europe.”

Bolloré Logistics’ director of strategic accounts and ocean freight development, Anne-Sophie Fribourg, said imports have suffered because of the Suez Canal blockage “with the late arrival of the blocked ships and the (ensuing) congestion at ports” while on the export side, “the main difficulties are to find empties for export cargo and find space aboard ships on the majority of trades”.

But like Geodis, Bolloré has not seen carriers curtailing schedules on a widespread basis in order to offload imports and precipitate the return of vessels to Asia, at least not “on a global scale,” she explained.

Some alternative ports used

“We have seen some cargo being discharged in Antwerp instead of Le Havre, but carriers have offered a solution to bring the containers to Le Havre,” she noted. “The prioritisation of empties has become a feature due to the shortage of containers in China for many weeks now.”

Fribourg added that carriers are seeking to limit the impact on exports by restricting the number of ‘empties’ in circulation – through limiting the number of days empties can be picked up prior to ETD.

“It is more the ‘Schedule Recovery Programmes’ of the carriers, with blank sailings, which have led to call skips and therefore a backlog in export cargo,” Fribourg added.

Hellmann Worldwide Logistics’ global head of sea freight FCL, Michael Amri, said that the blockage of the Suez Canal will have “a lasting effect and will tend to worsen the situation with regards to import and export business in the coming weeks. This is particularly true for the equipment situation in Asia and Europe, which was already very tense before the Suez crisis.”

He continued: “Carriers have omitted ports in order to bring their services back on schedule. This leads to further delays on many routes. The entire industry is affected to some extent. Thanks to our tracking tools, we can trace shipments globally across all modes of transport and are hence in a position to buffer the negative effects in the best possible way.

“As a multi modal service provider, we can shift shipments from one transport mode to the other. This has helped us to offer agile solutions and keep supply chains running.

On those contingency plans for the boxes affected by the Suez incident, Amri said Hellmann was “in close contact with affected clients and our carrier partners to bring the containers to the final destination as soon as possible by sea or any other possible mode of transport”, stressing that “communication with clients is key to manage the situation”.

Hellmann’s Amri concluded: “The Suez Canal blockage will definitely hamper the Asia-North Europe trade for several more months. Whilst the overall demand still remains high, the disrupted supply chains cause an immense shortage of equipment (boxes) and available capacity on cargo vessels, particularly in Asia and Europe, maintaining spot rates at a very high level.”

“Generally, the (ocean freight) market is growing, despite all the challenges.”

Contingency plans

As for contingency plans for cargo affected by the Suez Canal blockage, Geodis’ Hansen said: “Generally, we offer a variety of alternatives – sea-rail and rail options, as well as ‘priority products’ or air freight, depending on the customers’ requirements. We are regularly reviewing the market to decide whether our own charters would provide extra value for our customers. All solutions are customised and need to be seen in correlation with each customer’s key requirements. As we have only very few cases where containers are off-loaded at the wrong ports, we deal with them on a case-to-case basis.”

Bolloré too is focused on multi-modal contingency solutions which include ship charters, full block trains and a combination ocean and air freight, Fribourg noted.

As to when the ripples of the Ever Given incident are likely to disappear, Fribourg said: “Not before eight weeks”, while Geodis’ Hansen points to a similar timeframe.

“With regard to Europe to Asia services, we expect that the situation and schedule disruptions will improve as of end of June,” he noted. “That said, some disruption will certainly impact Q3. The fact that some carriers announced the supply of ‘new build’ empty equipment becoming available will relax the market on certain trade lanes.”

US impact

Meanwhile, another major forwarder, DHL Global Forwarding, said that the congestion caused by the Suez Canal blockage has impacted ports in the US more than those in Europe, while backlogs are building up in Asia due to delayed sailings and equipment scarcity.

“However, we see the ports working hard on getting the increased volumes managed,” DGF’s EVP and global head of ocean freight, Dominique von Orelli, told Lloyd’s Loading List. “In addition, some carriers are rerouting vessels and skipping certain port of call in an effort to stabilise schedules, which has naturally resulted in a reduction in capacity and allocations. Exacerbated by the empty container situation, the impact of this marine traffic jam will continue to be felt in the coming two months.”

Outlook for the market

Turning to the outlook for the market, Geodis’ Hansen predicted that global demand for containerised goods “will remain robust until the end of the year and the elevated container price index is not likely to be lowered any time soon”.

He continued: “Available capacity and vessel utilisation are close to being maxed out as idle fleet is at record levels, below 3%. Operational challenges are here to stay through the second quarter and ahead of summer peak season.”

Source: Lloyd´s