Having learnt lessons from the closure of Yantian Port earlier in the summer, a number of carriers are not hanging around waiting for Ningbo Meishan Island Container Terminal to open anytime soon, with several ships opting to skip Ningbo this week.

One port worker at the terminal was found to have contracted Covid-19 yesterday, resulting in the terminal being closed. Tests on the port’s workforce are underway, and the terminal is being decontaminated. For all other Ningbo terminals, the gate-in of export containers is now limited to two days of a vessel’s expected time of arrival.

The sheer enormity of Ningbo-Zhoushan port, the world’s largest port in tonnage terms, appears to have helped prevent a wider total port lockdown.

Meishan Island is approximately 30 km away from Ningbo’s major container terminal at Beilun, and 60 km away from Ningbo downtown.

Meishan accounts for approximately 20% of the near 30m teu that pass through the port each year. There are currently a total of 41 container services calling Meishan, eight into North America, six for Europe, and two for the Red Sea. The Meishan closure mainly impacts the Ocean Alliance, a grouping made up of Cosco, OOCL, CMA CGM and Evergreen.

Cosco and CMA CGM have already indicated that a number of ships will skip Ningbo this week.

“With this sudden suspension, we expect a delay in planned sailings,” Hapag-Lloyd stated in a note to clients yesterday.

“The liner companies organised in the Ocean Alliance are the main users of the Meishan terminal and will be directly affected, but all others will face indirect ripples from this. Important lessons were learned from Yantian, and to some extent the Suez Canal blockage, and they will all be put to work now,” commented Peter Sand, chief shipping analyst at BIMCO.

Sand went on to warn that further Covid-19-related port disruptions in China ought to be expected in the coming month, further sending skyrocketing container freight rates higher.

The World Container Index, published today by Drewry, climbed another $50 higher into record territory. The composite global index shows it now costs $9,421 to move an feu, more than four times the price tracked by Drewry a year ago.

Ningbo is also a large port for oil tankers and dry bulkers discharging in China.

“They could see support to freight rates from increased congestion,” Sand suggested.

Nasdaq-listed Greek boxship owner Euroseas has sealed a new charter for 1998-built 2,008 teu boxship Diamantis P.

The charter, with an unnamed client, is for a period of 36 to 40 months at a daily rate of $27,000 which represents a 315% increase on the current charter at $6,500 per day. Commencement of the new charter is scheduled for between October 5 and October 15, after the vessel completes a drydocking.

Euroseas announced the deal while releasing its latest set of results, where it posted a quarterly adjusted EBITDA of $10.3m.

Aristides Pittas, chairman and CEO of Euroseas, commented: “Containership markets, both charter rates and secondhand prices, have continued unabated their upward path that started in the fall of last year reaching all time highs in all size segments. Selected short term fill-the-gap charters have been reported in extremely high levels while long term charters of two to five years are widely offered by charterers for the various types and ages of vessels. There is no doubt that part of the near term increase in demand for vessels is fueled by the inefficiencies brought about by the effects of the Covid pandemic in the transportation system, in addition to rebounding trade growth. However, the strong demand for securing capacity for the medium and longer term can only come from expectations that vessel capacity will be in short supply in view of the expected demand. We believe that the favorable market fundamentals will continue as incremental regulatory requirements coming in 2023 will further restrict the effective supply of vessels and assist in absorbing increased new deliveries starting from the latter part of 2023 onwards as a result of recently placed newbuilding orders.

“Chartering-wise, we have pursued to-date a staggered expiration strategy which has allowed us to follow the upward path of the market having charters coming due for renewal on a rolling basis. Today, we announced the three-year long charter of our vessel, Diamantis P, at a rate of $27,000 per day which will provide us with more than $28.5 million of contracted revenues and $21 million EBITDA during the term of the charter. As the containership markets keep their present levels or continue to rise, we expect our profitability to rise as well, in addition to providing increased visibility of our earnings which now extends into next year and in 2023.”

Shippers frantically trying to book container shipments are faced with yet another hurdle in this most tricky of years for those involved in sea logistics, namely arriving at a correct price for a spot shipment.

Container shipping is hampered by having five providers of spot box information, and as the sector has soared to ever higher record territory the disparity in prices from the index providers has widened, adding to the confusion in the supply chain sector.

Analysis carried below by Vespucci Maritime shows the variance between the five indices, the Shanghai Containerized Freight Index (SCFI), Drewry’s World Container Index (WCI), the Freightos Baltic Index (FBX) and the Xeneta Shipping Index (XSI) and Platts.

Assessments from August 6 in USD/FFE:

Asia-N.Europe:
SCFI: 14,836
WCI: 13,653
FBX: 13,819
XSI: 13,663
Platts: 17,000

Additionally it appears that individual shipments have seen as much as 28,000 USD/FFE

Asia-USWC:
SCFI: 5,555
WCI: 10,322
FBX: 18,555
XSI: 6,758
Platts: 7,900

Additionally it appears that individual shipments have exceeded 20,000 USD/FFE

Discussing this increasing gap, Lars Jensen, CEO of Vespucci Maritime, a Danish liner consultancy, explained via LinkedIn that the different index providers measure different things.

“They do not include the same customer mix, they do not include the same mix of surcharges, they do not include the same definition or inclusions of spot versus short-term contract. This is also to say that just because the indices diverge, it does not mean that one is ‘correct’ and the others are ‘wrong’,” Jensen explained.

The onus is on the shipper to understand which index most closely resembles their own business mix, Jensen advised.

As data providers have had to grapple with the skyrocketing rates, some indices have been found to be less than perfect. For instance, on July 28, Freightos and the Baltic Exchange, who administer the FBX, admitted that some outlier data is now being excluded in order to more accurately reflect market conditions. This resulted in a significant one-time adjustment that removed outliers and substantially increased rates on China/ East Asia-US FBX lanes, which now account for the premium surcharges required for bookings.

The stage is set in Washington DC for a bitter fight between global carriers and politicians.

A bipartisan pair of lawmakers, pressed by agricultural exporters, yesterday introduced the Ocean Shipping Reform Act into Congress, a bill which would put in place new minimum requirements for service contracts and give the Federal Maritime Commission (FMC) greater powers.

Representative Dusty Johnson, a co-author of the bill, commented: “It makes it clear that there can be no unreasonable refusal to carry freight. Number two, it improves the enforcement, it does things like, allowing the FMC to self initiate investigations. It allows registration and shipping exchanges, it puts into place anti-retaliation safeguards and, critically important, shifts the burden of proof to the carriers. Then finally, this legislation does a lot to increase transparency with quarterly reports and annual reports to Congress.”

California Democrat John Gerimundi, the other co-author, hit out at what he sees as an oligopoly in container shipping.

“The problem was severe, the control of the shipping by a handful or two handfuls of ocean carriers, really eliminated the competition that had been in place for many, many years prior to the increased consolidation,” Gerimundi said.

The Washington DC-based World Shipping Council (WSC), container shipping’s lobby group, said the proposed act was flawed. The WSC said in statement that liners were not solely responsible for the current supply chain congestion, while the legislation was “infused with fundamental unfairness”.

“The supply chain congestion is widespread. Every link in the supply chain—from marine terminals, to truckers, to rail cars and warehouses—is under tremendous strain. It is unrealistic, inequitable, and unproductive to try to address these supply chain-wide challenges by regulating only one class of supply chain participants—ocean carriers,” the WSC argued, suggesting the legislation was designed to tilt the market in favour of shippers in commercial disputes.

The bill is due for further discussion this month, while other parts of Washington DC are also trying to iron out today’s severe supply chain constraints.

Last month president Joe Biden issued an executive order to address competition in shipping, tapping the FMC to take all possible steps to protect American exporters from the high costs imposed by the ocean carriers and to crack down on unjust and unreasonable fees, including detention and demurrage charges.

In June the White House also announced the creation of a Supply Chain Disruptions Task Force. Led by the secretaries of commerce, transportation and agriculture, the task force aims to bring together stakeholders “to diagnose problems and surface solutions – large and small, public or private – that could help alleviate bottlenecks and supply constraints”.

Other nations, including China, Vietnam and South Korea, have also looked into tackling high shipping costs over the past year.

There is still no indication when operations at a container terminal in the world’s largest port will resume following a single Covid outbreak earlier this week.

Since Wednesday, the authorities have identified more than 4,000 port staff to go through further Covid tests. There has been no official announcement of any further positive cases being detected.

“This closure has continued … and has the possibility of being closed for up to 14 days,” UK-headquartered logistics outfit World Transport Agency (WTA) warned in an update on the ramifications for global supply chains in the wake of the terminal closure.

There is now more than 200,000 teu worth of boxships anchored off Ningbo, according to Splash estimates. The giant port was already experiencing some of the worst congestion in the world before the Covid case struck thanks to new Covid operating procedures and a recent typhoon.

“While other terminals remain open, they are facing heavy congestion. With a current waiting time of 2-3 days, this time is likely to increase further as carriers change route away from Ningbo Port,” WTA predicted.

Nerijus Poskus, vice president of global ocean at logistics platform Flexport, commented: “We don’t know how long this closure will last, but with average wait times currently at two to four days, expect to add another day onto your dwell time for every day Ningbo Meishan terminal is closed. For any cargo already going through that terminal, it’s not a question of if it will be impacted but for how long.”

Poskus’s advice for urgent cargo that isn’t already at Ningbo is for shippers to arrange trucking as long as a special RNA test is not required for drivers to Shanghai and then pay for premium ocean services from there.

Lars Jensen, CEO of Danish liner consultancy Vespucci Maritime, told Splash the Ningbo outage could cause operational disruptions larger than those already experienced in 2021.

“It will not only impact export cargo from the specific terminal but will add pressure on both Ningbo and Shanghai ports, worsen equipment shortages in East China and cause added ripples for reefer slot shortage at terminals in the region and when re-opened it could cause another wave of cargo surge at destinations in North America and Europe,” Jensen warned.