Carriers deploy new weapon but will it work?

Figure of the week

91,200 TEUs

Excess container ship capacity has not stopped liners from placing a spate of newbuild orders this week. TMS Group made the largest order, for eight 11,400-TEU vessels, representing a combined 91,200 TEUs. A series of other new orders were also placed, with deliveries scheduled for 2028.

Quote of the week

“If a vessel is heading south through Suez, it has already passed Israel, so it is not heading towards one of the Houthis intended targets. And if it did stop in Israel, the Houthis would already know.” Director of the Global shippers forum, James Hookham, speculates on carriers’ rationale for resuming backhaul routes through the Suez Canal. A backhaul transit will also place less cargo at risk, he said.

Carriers deploy new weapon but will it work?

Ocean carriers are unveiling a new weapon in their bid to keep Trans-Pacific spot rates from crashing: rapid-fire GRIs . So far, carriers have largely avoided the temptation to engage in a price war in the face of fast-falling spot rates. Instead, their strategy has been to apply frequent GRIs. While these have generally failed to stick, they have had just enough impact on spot rates to stop an outright collapse. As a result, carriers have taken this strategy to even greater extremes. For some carriers, this has taken the shape of rapid-fire GRIs announced almost weekly, i nstead of the more traditional approach of announcing larger GRIs on the first and 15th day of each month. In doing so they have been aided by an FMC loophole, which enables them to sidestep the regulatory requirement to provide a 30-day advance notice of any GRI. The loophole effectively applies when carriers lower an intended GRI below the filed rate. Some carriers have found that by filing a high GRI with 30 days’ advance notice, they can then issue a series of staggered smaller increases by dropping these below the previously filed figure. For shippers, this potentially means more market uncertainty, as it becomes harder to predict when genuine GRIs will be implemented. That said, just like the less frequent GRIs, even the smaller ones may only have a moderate effect on pricing. Either way, shippers can expect these tactics to intensify as Trans-Pacific service contract negotiations draw nearer. Nevertheless, capacity will continue to increase and is set to reach a 37-month high in January from Asia to the West Coast, according to Xeneta. Import volumes, meanwhile, are set to decline even further over the next two months. Carriers may be scrambling for new ammunition, but shippers will not be too worried about getting caught in the crossfire for now.

SE Asia air cargo surge as supply chains remap

Rapid gains from Southeast Asia to the US fueled a sudden burst of growth in the global air cargo market in November . A surge in volumes of 42% from Southeast Asia to the US was the most eye-catching figure, from WorldACD’s global update. Overall global air cargo tonnages rose by 5% year on year in November. A breakdown of WorldACD figures reveals a mixed picture across Asia to the US, with volumes characterized by shifting supply chains. Overall tonnages from Asia-Pacific to the US were up by around 6%, but while Southeast Asia to the US saw the afore-mentioned substantial growth, there were decreases from China and Hong Kong, Japan and South Korea. For example, China to the US volumes were down by 5%, while Hong Kong to the US chargeable weight fell by 14%. It appears that US importers are increasingly sourcing products from Southeast Asian manufacturers as a result of increased US tariffs on exports from China. The scrapping of the de minimis exemption has likely also had a major influence on the figures. For shippers, the result is rising rates and a general lack of capacity amid increasing demand. Shipments have also faced slower transit times. Shippers will then face another week of tight capacity and rising rates as they finalize air cargo orders for the Christmas period. After that, demand is likely to drop off and rates will stabilize .

What does alliance’s Suez return mean for shippers?

The prospect of a return to Red Sea routings by container vessels appears to have drawn closer with the news that a second Ocean Alliance service is to resume Suez Canal transits. Many shippers will be asking to what extent the development really represents a likely return to the Red Sea for container vessels. It is significant that the Ocean Alliance’s services via the Suez Canal will be limited to backhaul leg transits to Asia. Not only does this place far less cargo at risk, as many vessels are almost empty on the backhaul, it also reduces the risk of being potentially targeted by the Houthis should the group’s ceasefire suddenly break down. Southbound vessels will have already passed Israel when approaching Houthi-controlled waters. This means that there will be no ambiguity over whether they are planning to call at Israeli ports, reducing the risk of an attack. The Houthis announced that they would cease Red Sea attacks in response to the recent Gaza ceasefire. However, carriers have understandably been reluctant to beat a hasty return to the region. On the one hand, the ceasefire gives every impression of being fragile. On the other, while a full Red Sea return could represent a boon for shippers in the form of faster services and lower rates, for carriers it represents a potential nightmare. Trans-Pacific spot rates are already collapsing due to muted demand and excess capacity, and more capacity that routing would free up would be likely to accelerate the process. Above all, it appears that insurers are still reluctant to give full cover to vessels or cargo owners transiting the Suez Canal. Some industry insiders believe this means the canal is unlikely to be fully open for westbound trade at least until Q4 2026. Shippers, then, should not count on rates bottoming out even further due to a return to Red Sea routings .

🤔 Did you know ?

Once very much a backroom function, supply chain management has grown hugely in profile since Covid. Now the US government has ordered the CIA to get involved. The US government’s recent National Security Strategy has called on the US intelligence community to intensively monitor global supply chain risk. The initiative comes as part of a broad strategy to reshore as many supply chains as possible.

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