About: Macnels Macnels

Criticism is mounting over a lack of information following the disruption to Belgium’s rail network by the severe flash floods that hit Northern Europe a fortnight ago.

One source told The Loadstar that, as calls for an official investigation into the disaster appear to have succeeded, disruption to inland navigation and rail transport has been compounded by “zero communication” from suppliers and ports.

“The whole disaster and its impact on multimodal operations between the port of Antwerp and the hinterland is nowhere to be found,” said the source.

“There is nothing on the websites of the port of Liege, Flemish and Walloon inland navigation waterway authorities, Belgian Railways, Athus Container Terminal, or the port of Antwerp – it is as if the disaster never happened.”

However, an alert on the National Railway Company of Belgium’s website warns “extreme weather” conditions in the Walloon region, which includes Liege, has left rail traffic “very disrupted”.

Noting that some lines remain closed, the site fails to explain how long the disruption is expected to last, although several reports have suggested that full services may not be resumed before the end of August, with tracks damaged or “completely washed away”.

A spokesperson for the port of Liege said: “Services into the Liege Container Terminals are functioning normally, with a train arriving on Monday.

“Rail is impacted between Liege and Verviers and does not function, but this is so far away from the port authority, and we have been using other rail tracks, so there has been no impact on our port activities.”

Sources, however, questioned this depiction of the situation, citing “outrageous” disruption to intermodal services right across northern Europe, with Liege alone handling some 116,000 teu annually, disruption for up to 10,000 containers is possible.

A spokesperson for Infrabel, the state-owned company charged with track maintenance, said international freight traffic remained “very disturbed” between the Belgian ports and southern Europe, adding: “Two portions of our network – the North Sea-Mediterranean corridor through Belgium and the Athus-Meuse back-up line – have been heavily damaged.”

But the spokesperson rebutted suggestions of a lack of communications, noting that information had been forthcoming with the accounts manager and “sometimes even” the CEO supplying clients with twice-weekly developments.

“This morning, we informed our clients about the re-establishment of our Namur-Arlon-Luxembourg line, which we hope will provide some partial relief.”

But the company has yet to provide a list of the clients named or confirm whether cargo owners had been brought up to speed on the work to get goods flowing again, and Infrabel’s website last provided an update on 15 July.

The spokesperson did note services on the Athus-Meuse axis, which services Liege, was expected to see a “full return” by 16 August.

Source: The Loadstar

With the exception of a few containership owners that are enjoying eye-watering short-term charters, most non-operating owners have chosen to fix their ships on lengthy periods with ocean carriers at highly elevated daily hire rates.

Indeed, with only a few ships now becoming open, brokers are receiving massive monetary offers from charterers for any tonnage that appears on their radar.

“Basically, our container desk has nothing to offer charterers,” a broker contact told The Loadstar this week.

“Owners are going for as long as possible so that they can pay off their mortgages and retire to their dachas,” he said.

Alphaliner reports that the 2021-built 5,295 post-panamax Orca 1 has achieved a staggering $300,000 a day from a Chinese forwarder for just 2-3 months. This could net the owners $27m, over half the $48m build cost of the ship – a colossal return.

The consultant noted that container vessel charters had now developed into a two-tier market.

On the one hand, there are NOOs that have some ships unencumbered by charters, where there is a short-term market that apparently does not have a ceiling and are therefore free to secure contracted revenue in excess of the value of their vessels.

But the vast majority of owners have been content to let their brokers seek out the most lucrative long-term deals for their ships over the past few months.

And the market has been buzzing this week with reports of a four-year extended charter fixed by Maersk and a five-year extension negotiated by CMA CGM.

Maersk will pay $38,000 a day for the 2013-built 3,421 teu Bomar Beijing for 48 months and has committed $55m of revenue by charter party to owner Global Ship Lease, which purchased the vessel for just $25m in June.

CMA CGM has agreed a 60-month extension to its charter of the 2009-built 4,275 teu ALS Flora at $39,000 a day for a contracted revenue of $70m. To put this into context, four years ago the same panamax ship achieved a six-month charter with Zim at just $4,300 a day.

Given the long-term charter rate liability carriers are taking on for any new fixtures, it is little wonder that MSC and CMA CGM have been extremely aggressive in the S&P market, snapping up any tonnage on offer in an endeavour to insulate themselves from the monumental charter hire inflation.

Maersk, however, has generally shied away from S&P, exposing itself to the charter market hikes, although the carrier has a higher owned tonnage-to-charter ratio than its two main rivals.

Meanwhile, Alphaliner’s latest inactive fleet report lists 156 containerships as idle, however more than 70% of these are in shipyards undergoing routine maintenance, retrofit or repair. The rest are either between charters, arrested, detained or unable to enter service for other reasons.

Source: The Loadstar

Unfortunately for beleaguered cargo shippers, these bellwethers now imply the opposite: that the scramble for container capacity is growing even more intense.

New container prices still rising

On Tuesday, the world’s largest container-equipment leasing company, Triton International (NYSE: TRTN), announced record results and provided the latest intel on box production.

The price of a new container, which had stabilized at around $3,500 per twenty-foot equivalent unit (TEU) earlier this year, has risen again and is now at $3,800 per TEU. Prices are “at unprecedented levels,” said John O’Callaghan, Triton’s global head of marketing and operations, during the call with analysts.

The price of a new container at this time two years ago, pre-COVID, was around $1,600 per TEU, less than half the current level.

What’s particularly telling is that the price is rising at the very time Chinese factories are churning out more new boxes than they ever have before.

Record production in China

According to Triton’s estimate, which excludes sales to nonleasing and nonshipping buyers, factories built around 2.6 million TEUs of dry (nonrefrigerated/nontank) containers in H1 2021 — more than the 12-month totals in most years.

It estimated that 2021 production could reach just over 4.5 million TEUs, more than double the annual totals in the prior two years and almost 30% above the record set in 2018. The global container equipment fleet could increase 8% year on year.

Numbers from Drewry on global production of all container types show the same trend. As of May, Drewry reported that 2.66 million TEUs overall had been produced year to date, with factories on track to build at least 5 million TEUs this year. That would bring this year’s tally at least 18% higher than the all-time high in 2018.

As previously reported by American Shipper, virtually all containers are built in China, where construction is dominated by three Chinese entities: CIMC Group, CXIC and Dong Fang. These three builders accounted for eight of out 10 containers built between January and May, according to Drewry.

During a quarterly call in February, Tim Page, interim president and CEO of container-lessor CAI International (NYSE: CAI), asserted, “The factories are behaving differently than they have in the past. They don’t have any interest in increasing production at the expense of price. I think it’s a new dynamic in our industry. And I think it’s going to stick. They’re more focused on maintaining high container prices.”

Five months after that comment, the data confirms that Chinese factories have indeed increased production sharply, yet demand has been so strong that they haven’t had to sacrifice anything on price.

Inventories still very low

Continued low levels of new container inventory confirm the strength of demand.

“What’s being built is being absorbed,” said O’Callaghan. “What’s sitting on the ground is already booked and at most represents two to three weeks of supply. Despite production being at record levels, there is no spike in inventory.”

Yet another sign of the shipping demand strength is the price of older containers sold for nonshipping uses.

Just as virtually all older container ships that can still float are being employed, not scrapped, older containers are being kept in service longer. That leaves fewer to be sold in the secondhand market, which has pushed up disposal (resale) prices for aging 40-foot high-cube containers to 2.5 times levels seen a year ago.

For container-shipping market participants such as investors and cargo shippers, disposal prices are another bellwether to watch. When the global capacity crunch finally eases, many more older boxes will become available for resale and these prices will fall back.

Congestion to persist into 2022?

Strong consumer demand is only one driver of the container shortfall. Port congestion also plays a pivotal role, by tying up equipment.

Triton CEO Brian Sondey said during the call, “If you look at the number of vessels anchored outside of major ports like Los Angeles, it briefly got better during the second quarter but now it has gotten a little bit worse again.

“When speaking with our shipping line customers, I think the general feeling is that these various operational disruptions are not likely to clear soon.

“I’m not sure anyone has a perfect estimate for when we’ll see container flows get back to normal levels of velocity,” Sondey continued. “But what I hear is that it’s not likely this year — that a lot of these disruptions will carry forward into 2022. It’s the high continuing volumes that make it difficult to get the debottlenecking done.”

Container leasing profits soar

Congested supply chains are highly painful to cargo shippers but extremely advantageous to equipment lessors like Triton.

Triton reported adjusted net income of $144.2 million for the second quarter of 2021 compared to $60.1 million in the second quarter of 2020. Adjusted earnings per share of $2.14 topped the consensus estimate for $1.96.

Triton is using the current demand boom to lock in revenues via “very long-duration, high-return leases,” said Sondey. The average lease duration for containers ordered in 2021 is 13 years, far above the historical norm of five to seven years.

“Container leases are so long for two reasons,” he explained. “One is the strength of the market and that we like long-duration leases. It helps us lock in high returns. It’s also driven by the fact that container prices are extraordinarily high. Agreeing to very long-duration leases is a way for the shipping lines to mitigate even higher lease rates [for shorter durations] that we would need to charge right now, given how high container prices are.”

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Port Houston halted operations Tuesday at its two main public container terminals due to a major hardware failure, officials said.

The issues at the Bayport and Barbours Cut terminals were first reported Tuesday, just before the gates were set to open at about 7 a.m.

In a letter posted on the port’s website on Wednesday, Port of Houston Executive Director Roger Guenther said the port experienced a “major failure of the storage devices that support all applications used to operate both Barbours Cut and Bayport container terminals” prior to the opening.

“Our staff responded immediately and moved the applications and associated data to a redundant set of storage devices and the terminals were again operational by 10 a.m.,” the letter stated. “Unfortunately, the redundant storage devices failed at noon and the terminals have been unable to process any transactions since then. I want to be clear that this is not a cyber-attack on the Port Houston operating system.

“The ships that were already in progress have been able to continue working, but new vessel starts have not been possible,” Guenther added. The truck gates at both container facilities also continue to be idle.

Both the Bayport and Barbours Cut terminals will remain closed at 7 a.m. Thursday, port officials tweeted Wednesday.

Once both terminals resume operations, Guenther said they plan to have daily extended gate hours, including weekends.

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