Connector Series - Q3 2021

In general, the main underlying factor still dramatically disrupting the global supply chains are the effects of the Covid-19 pandemic. The substantial shift from consumer spending on goods instead of services as a consequence of worldwide lockdowns and hence very limited travel and other service spending, has led to a surge in demand for goods. This demand surge has continued through the normal patterns of the seasons, especially for exports from major goods manufacturing countries like China.

Port productivity and congestion

Throughput in the world’s ports continues to be severely impacted, with many ports worldwide working at or beyond 100% of their yard capacity. Port productivity is reduced by Covid-19 effects, being a shortage of labour as a result of sick-leave, operating procedures with social distancing measures in place and misalignment of labour schedules due to highly unreliable vessel schedules. The latest extremely affected area is China’s Pearl River Delta where the port closure of Yantian, a single port with an annual throughput of more than 13 Million TEU (which is four times as much as all ports in New Zealand together), after a Covid-19 outbreak affected more than 500,000TEU. While the port has reopened, it will take an estimated three months to work through the backlog. Meanwhile, Hong Kong (annual throughput approximately 18 Million TEU) as an alternate port very close to Yantian and a major transhipment hub, is also experiencing substantial disruptions due to congestion. Other ports in the world, e.g. India’s ports around Calcutta, European base ports like Rotterdam and Hamburg or ports in the Middle East like Karachi, experience a similar operational environment while also the biggest port in the world, Shanghai (approximately 44 Million TEU throughput p.a.), experiences heavy disruptions e.g. in connecting transhipment cargo to the relevant feeder vessels to the final ports of destination.

Shipping schedule delay impacting shipping capacity

Despite shipping lines deploying all available vessels, and orders for new container ships now reaching the highest level in 20 years we are seeing a significant reduction in shipping capacity.  The primary reason is vessel delays vs their planned schedule. In most cases, shipping services to and from New Zealand are weekly; this is achieved by placing sufficient vessels into a service to achieve a weekly cycle through each port e.g. if a service is expected to take 21 days through the full circuit of ports it will have three vessels operating to achieve a weekly frequency. If a weekly service experiences three to five days of delay on its circuit it is no longer able to achieve a weekly frequency and so, over the course of a year we do not see the expected 52 vessels, but rather 30% - 42% less.

Freight rates and surcharges

The shipping demand surge and effectively reduced capacity continue have drastic effects on freight rates and we expect to see further substantial upward movement in pricing. Globally, the ocean freight rate indices (which look at a basket of trade lanes), reflect increases approaching +300% compared to one year ago, and on specific trade lanes rates are 5-10 times higher year over year. While these indices typically follow Asia to Europe and Asia to USA, the strong returns the carriers are enjoying on these lanes put pressure on the NZ – Asia / USA / Europe / Middle East and Australia rates as the carriers look to get a return on the vessels and container equipment used.

In the current environment of a severely broken global shipping network resulting in a massive imbalance of demand over capacity, carriers have pushed through various surcharges even on long-term contracted shippers, who are forced to entertain rate increases or congestion surcharges to ensure cargo movement.

In addition to the above, the application of extremely strict detention terms has dramatically increased, due to carriers striving to re-use equipment as efficiently as possible in the current freight rate environment.

It is notable that these freight rate increases and the introduction of various surcharges are combined with service levels from shipping lines that are being described by customers around the world as “the lowest ever experienced”. While this is naturally a partly subjective perception, hard facts such as an extremely low schedule reliability, remarkably high roll-over rates and obvious deselection of contracted lower paying cargo in favour of higher contribution levels speak for themselves.

Effects on ship operations in New Zealand

The extremely challenging operational environment for New Zealand in particular has been ongoing since we updated you last. Shortage of vessel capacity and container equipment, the long ongoing operational disrupted situation at the Ports of Auckland with a further delay in the automation project announced only recently, a flow-on effect on other New Zealand ports, inland hubs and depots result in an extraordinary pressure on the services calling Aotearoa. The detrimental effects of winter weather on port and vessel operations add another layer of complexity. Furthermore, the technically reduced capacity calling New Zealand as described above and in our last update, results in a produce peak season lasting longer than usual, with prioritized reefer cargo keeping pressure on space for dry cargo on an extraordinarily high level. Big fruit size, e.g. for Kiwi fruit, in addition result in less fruit count per container and hence higher reefer volumes and longer time to ship the crop.    


The numerous operational constraints worldwide continue to be extremely challenging for container liner shipping and we expect this situation to prevail into 2022. The third quarter pre-Christmas peak season for the world’s main trade-lanes from Asia to Europe and the US will further aggravate an already difficult situation with an accordingly even higher pressure on the supply and demand balance and rate levels.

To avoid operational disruptions to your supply chains as much as possible, we would like to again ask you to place bookings as early and far in advance as possible in order to mitigate operational risks and build resilient inventory levels. Thank you for your co-operation and support.
We would like to re-assure you that our teams and our service providers are working tirelessly on solutions to provide you the best possible customer service in order to keep the impact on your operations, and those of your customers as limited as possible.

Stay Safe, and Stay Connected

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