Things don’t seem
to get better as the turmoil enters its third month.
The crisis, ignited
by attacks from Yemen’s Houthis since December 2023, has compelled most
carriers to divert from the customary Asia to Europe route through the Red Sea
and Suez Canal. This deviation has
thrown off vessel schedules, causing ships to arrive at ports on
unscheduled days, triggering berthing clashes and compounding the existing
congestion woes.
Diversions to
alternative routes, such as circumventing the Cape of Good Hope, have elongated
voyages between Asia and North Europe by 10 days to two weeks, presenting
logistical nightmares for supply chain managers. Key hub ports in Asia and the
Mediterranean, including Singapore, Dubai, and those around the Gibraltar
strait, bear the brunt of intensified pressure due to surging volumes seeking
alternative routes.
Despite the formidable challenges, Jeremy Nixon (CEO
of Ocean Network Express (ONE) in Japan) dismisses notions of industry
overcapacity, asserting that ONE, boasting the world’s sixth-largest container
ship fleet, grapples with a shortage of ships to uphold its regular weekly
services. This perspective stands in contrast to recent
concerns raised by Denmark’s AP Møller-Maersk, operator of the second-largest
container ship fleet globally, whose shares plummeted following warnings of
earnings pressure stemming from industry overcapacity.
The discrepancy
arises as world fleet capacity is poised to expand by approximately 8% in 2024,
outstripping the projected demand growth of around 3%. This surplus capacity
exerts downward pressure on shipping rates, constraining revenue streams for
carriers. Nixon attributes the shortage of vessels partly to investments in
cleaner fuel-powered ships, in anticipation of forthcoming emissions
regulations from 2027.
In the midst of the
Red Sea diversions, ONE faces a daunting shortage of vessels, necessitating
approximately 16 ships for a weekly service instead of the customary 12, owing
to extended transit times. Despite efforts to alleviate delays by ramping up
vessel speeds by 10 to 15%, the shortage persists due to inadequate global ship
availability to adequately cover the prolonged transit times.
The challenges
besieging container shipping lines underscore the intricate nature of maritime
logistics amid geopolitical crises and regulatory transitions, underscoring the
imperative for agile strategies to navigate disruptions effectively. As the industry grapples with port
congestion, ship shortages, and geopolitical uncertainties, the resilience and
adaptability of shipping lines will be put to the test in steering through
turbulent waters toward smoother sailing ahead.