News / Capacity shortage on intra-Asia pushing up rates and manufacturing costs

Reduced container shipping capacity on intra-Asia tradelanes has led to fewer sailings, higher rates and increased manufacturing costs.

As The Loadstar reported yesterday, shipping lines have deployed as much capacity as possible on the more-lucrative transpacific and Asia-Europe trades, leaving intra-Asia capacity down 11% and with 331,000 fewer slots than in 2020.

Naturally, this has had an impact on freight rates. According to Xeneta, in the first half of January, spot rates from the main Chinese ports to the main Japanese and South Korean hubs rose to an average of $1,800 per 40ft, compared with $1,400 in 2021 and $640 in 2020.

Considering the large amount of intermediate goods shipped on these trades, Xeneta said: “Doubling spot freight rates can often add considerable costs to manufacturing, forcing shippers to reconsider their manufacturing and supply chains across the region.”

DB Schenker said the space shortages and rate increases, had been compounded by “massive port congestion” in the region, particularly Bangkok. The forwarder said feeder services were “unstable, with frequent delays”, noting many blank sailings or port omissions being applied to connecting vessels for long-haul tradelanes.

“Due to prolonged waiting times at container depots and loading and unloading facilities, countries are also experiencing a lack of trucks and drivers, such as in Thailand,” DB Schenker added.

Peter Sundara, global head of ocean freight at a major Singapore-based cargo owner, agreed intra-Asia rates had gone up, although “not tremendously”, noting the Shanghai Container Freight Index (SCFI) had increased from an average of around $500 to $700 per teu.

He told The Loadstar: “Port congestion is also playing a role in tying up capacity and reducing sailing frequencies. The congestion in Singapore is much better than before, although there’s still one-or-two days delay, but Port Klang is still very severe, as is Shanghai, because of the high demand there and knock-on impact of Covid shutdowns in other Chinese ports, such as Ningbo.

“Container shortages remain a big issue. My concern for the rest of the year is, if the global port congestion continues and Omicron is still persistent, causing supply chain disruptions, then this will greatly impact space availability and on-time arrivals of vessels for intra-Asia trades.”

On the positive side, he said carriers had introduced some extra capacity to the Indian Subcontinent (ISC) and Middle East trades.

“We haven’t seen carriers introduce many new intra-Asia services, yet suddenly there is more capacity in ISC and Middle East. It’s an interesting phenomenon, and possibly indicates a shift in sourcing trends.”