MSC's share of the global container shipping market has reached 20%. Since 2018, it is the first container line to capture a fifth of the market. Six years ago, this share belonged to Maersk, which was able to hold it for only a few months, Splash reports, citing Alphaliner data.

To reach the 6 million TEU mark, MSC lacks just one container ship of the Megamax series, that is, a 24,000-tonne vessel. According to analysts' forecasts, MSC's carrying capacity in 2025 will be equal in capacity to the fleet of the Gemini alliance created by Maersk and Hapag-Lloyd, which will officially start operating in February next year.

Since its founding in 1970, it has taken MSC 37 years to increase its fleet capacity to 1 million TEU. After another four years, MSC surpassed the 2 million TEU mark. By early 2022, the line had surpassed Maersk, thanks to record orders and the purchase of container ships on the secondary market.

Consulting firm Sea-Intelligence recently forecast what the top 10 lines would look like in 2026, taking into account a variety of aspects including order backlog and aftermarket vessel sales. According to this forecast, MSC will significantly increase its tonnage gap with the second largest carrier, CMA CGM. Maersk will be in third place.

A union proposal seeking to blunt China’s growing dominance in the maritime, logistics and shipbuilding sectors is finding bipartisan support among U.S. Congressional lawmakers, based on remarks made at a recent U.S. House of Representatives committee hearing.

The Congressional hearing, as well as the unions’ petition before the U.S. Trade Representative (USTR), reflect a growing concern among lawmakers and the private sector that China’s exponential growth in shipbuilding and in producing ship-to-shore cranes and shipping containers ultimately threatens U.S. national security.

Unions had petitioned USTR in March, arguing that the Chinese government “has funneled hundreds of billions of dollars” toward bolstering its shipbuilding industry so that now China dominates the world’s production of commercial vessels while the U.S.’s share is only 1%. The unions are pressing the USTR to take action against China’s practices under Section 301 of the U.S. Trade Act of 1974 by enforcing measures such as assessing a port fee on Chinese-built ships that dock at a U.S. port and creating a shipbuilding revitalization fund.

Congressional lawmakers affirmed the unions’ request at the June 26 hearing held by the House Select Committee on the Chinese Communist Party and entitled “From High Tech to Heavy Steel: Combatting the PRC’s Strategy to Dominate Semiconductors, Shipbuilding and Drones.”

“This committee should support unequivocally [the unions’] petition and demand that the USTR have remedies. I mean, it is unconscionable what we've allowed as a country,” said Rep. Ro Khanna, D-Calif. 

“China started with 5% of the global market in shipbuilding in 1999. They're up to 50%. They're producing 1,000 ships every year. The United States, which used to lead, is producing 10 ships every year. This committee is for American leadership. We should be for ensuring that we're not losing 100 to one on shipbuilding to China,” Khanna said. “The request for a docking fee of about US$1 million would translate into about less than US$50 per container.“

In response to Khanna’s statements, Rep. Andy Barr, R-Ky., said at the hearing, “I’m open to what [Khanna is] saying about a fee because I think China is an exception case… I do not think we should try to counter China by imitating Chinese industrial policy. … I think it would be a mistake to try to copy Chinese industrial policies because that’s actually the best way to misallocate resources. Free markets are the best answer in our competition with China, generally.”

Scott Paul, president of the Alliance for American Manufacturing, testified at the hearing that existing policy measures are not enough to address China’s “predatory market distortions,” adding that his trade association supports the counteracting measures that the unions proposed under Section 301 of the Trade Act. 

Paul said that China controls over half the world’s shipbuilding today, beginning construction on nearly 1,800 large ocean-going vessels in 2022. The United States, in contrast, was constructing five vessels that year, he said. The decline in U.S. shipbuilding since the 1970s and the rising dominance in China’s shipbuilding efforts have also led to a situation where the U.S. Navy relies on Chinese-made dry docks in certain circumstances.

“We currently have a tonnage advantage, but it’s not sustainable. We don’t have a surge capacity,” pointed out Paul.

As congressional leaders debated what actions Congress should take to bolster U.S. shipbuilding capacity, USTR has been undergoing its four-year review of Section 301 of the Trade Act.

In addition to receiving the March petition from the unions, USTR said in May that it plans to raise the tariff rate on ship-to-shore cranes from China from zero percent to 25% in 2024.

However, that plan is getting pushback from U.S. port interests, who argue that the tariff could cost at least US$131 million for seven U.S. ports that have preexisting orders with Chinese manufacturers for 35 ship-to-shore cranes.

President and CEO of the American Association of Port Authorities (AAPA) said the association “is confident that the tariff, if imposed, will not meet its stated objectives."

He emphasized that "it will only result in negative outcomes, including grave harm to port efficiency and capacity, strained supply chains, increased consumer prices, and a weaker U.S. economy.”

Halfway through 2024, and Statistics Netherlands (CBS) has announced that the preceding year had been less than exemplary for the country’s rail freight, recording a 12.5% year-on-year volume decline, with a little over 39.3m tonnes of goods moved in the 12-month period.

Containerised volumes dropped off 11.5% year on year, with a loss of more than 2m tonnes, from just shy of 20m tonnes in 2022 to 17.3m tonnes last year, with CBS noting that the country had particular struggles when it came to exports.

Sources within the sector said much of the decline could be attributed to the continuing post-Covid normalisation process, but the disappointing figures have coincided with a difficult period for European rail freight as it looks to sell itself as the green alternative to trucking.

Over the past year, sources have made clear that rail and barge offers one of the quickest and easiest routes to transitioning from carbon-fuelled road fleets – with others stressing that, amid the global truck driver shortage, it should be something of an easy win.

But there appear signs of government resistance to rail freight superseding road: Angela Merkel’s former party, the German Christian Democrats, having stated that road will remain the main freight mode in Germany.

One pro-rail and -barge source told The Loadstar governments needed to be moving more onto alternative modes, but stressed that the messaging needed to make clear there was not an agenda to remove road haulage – “road will be pivotal for final mile”.

The average container prices in China have reached their highest in two years, at US$3,600 this week for 40 ft high cube cargo-worthy containers in China.

These prices were somewhere around US$1,700 in March – April 2024. This is a 112% increase in a span of two months.

While the average container prices (for purchasing containers) are on a significantly upward trend, the average one-way pick-up charges (for leasing containers) continue to develop at a staggering rate so far in June.

“While prices and rates are significantly up, trading volumes have decreased as buyers

are becoming more cautious. This trend potentially indicates a potential reversal of

prices in the near future, as the market adjusts to the current disruptions and the high

levels of volatility.” shared Christian Roeloffs, cofounder and CEO of Container xChange.

Encouraging growth in China’s container throughput

China's ports recorded a 9% YoY increase in container throughput in the first four

months of 2024, handling 104.03 million TEUs. Foreign trade cargo throughput

increased by 9.1% YoY

Total cargo throughput reached 5.55 billion tonnes; a 5.2% rise compared to the same period last year.

Sanctions and Tariffs to Impact Euro-China Trade

The European Commission has proposed tariffs of up to 38% on Chinese electric vehicles, in addition to the existing 10% tariff, citing concerns over state subsidies. While the Container shipping sector is not directly impacted by these EV tariffs, we view this development as an early signal of potential broader trade tensions. If the proposed tariffs are implemented, the cost of exporting Chinese EVs to Europe will rise, possibly leading to a tariff war. This escalation could result in increased tariffs on a wider range of goods, impacting global supply chains. Higher tariffs and trade barriers could lead to delays and additional costs in the supply chain, causing inefficiencies in container utilization and higher operational costs for shipping companies.

Market Outlook

“Despite the current tariff dispute, the long-term outlook for China's container market remains cautiously optimistic. The positive trends in US retail demand and robust growth in China's port throughput suggest sustained demand for container shipping services. However, the resolution of the EU-China tariff dispute will be crucial in shaping the short-to-medium-term market dynamics,” commented Christian Roeloffs, cofounder and CEO of Container xChange.

"Container shipping companies should prepare for potential shifts in trade patterns by

diversifying their routes and enhancing logistics capabilities in other growing markets, such

as Southeast Asia and South America. Investing in technology and infrastructure to improve efficiency and reduce costs will be critical in navigating the potential market volatility and maintaining competitiveness," Roeloffs added.

Supply in container shipping has become “febrile and extreme”, according to analysts at Transport Intelligence (Ti), as the sector lurches between a surge in the requirement for capacity and a large increase in the supply of new vessels.

Stanley Smulders, director of marketing and commercial for ocean carrier ONE, told that the Red Sea crisis had upset the balance of supply and demand in ocean shipping.

“In our industry, the market prices are normally set by supply and demand. Demand is easy – either it is up, or it is down. But the supply side is different.

“Pre-Red Sea closure, you needed 12 ships to sail weekly from Asia to Europe, you now need 15 to provide customers with a weekly sailing. So, the tonnage capacity has been reduced as a consequence, and that has upset the balance between supply and demand in favour of the supply side,” he said.

He added that additional tonnage wouldn’t come cheap.

“What you also see is if the spot rates are going up because of the supply and demand situation, charter rates of vessels have gone up – this means that carriers face a significantly higher cost base. But shipping lines will pay these rates, because they know they can get a higher revenue. Otherwise, they wouldn’t charter them.

“We want every single ship to sail,” he concluded.

According to Alphaliner data, MSC charters 50.3% of its fleet, Maersk 41.1% and ONE 58.6%. Hapag-Lloyd charters the fewest of the ten major carriers, at 40% of its fleet, whereas Zim comes in at the other end of the spectrum, with 94.6% of its fleet chartered.

Indian importers and exporters are dealing with considerable cargo delays at Mundra Port, which leads the country’s containerised trade.

Local trade sources have raised serious concerns over the congestion plaguing Mundra’s container terminals over the past few weeks.

“The terminals at Mundra now seem to be hugely congested and the pendency (backlog) has increased to levels, which is affecting normal movement of boxes between CFSs [container freight stations] and terminals,” the Container Freight Station Association Mundra said in a complaint.

The association also noted: “All the efforts put in by CFSs are not witnessing any improvement, but are rather finding that the situation is deteriorating further.”

A change in the process of issuing port entry permits for freight vehicles by the port authority appears to be the major source of frustration for freight station owners.

According to them, truckers are facing longer waits to move in and out containers due to their inability to secure entry permits promptly.

The CFS association explained: “Vehicles are stranded on the road for hours together because of this. A corrective measure needs to be discussed with our members and worked out so as to ensure that movement continues without any hassles.”

The congestion has also left container rail operators piqued, as ICD (inland container depot) volumes represent a significant portion of Mundra’s box trade.

“There has been increased congestion at Mundra Port on account of delays at the port in terms of ability to effectively evacuate import containers in FIFO (first-in, first-out) sequence and on time, despite trains being provided for clearance by container train operators (CTOs),” Association of Container Train Operators (ACTO) said in a trade advisory.

According to ACTO: “This has led to restrictions being placed by Indian Railways on double-stack loading in order to speed up train evacuation from the port.”

The group added: “It is clearly informed to trade, port and shipping lines that the resultant levy of ground rent charges is not a result of any fault of the CTOs.”

As East Asia's container shipping industry sails into uncharted waters, it faces a shifting tide of customer demand reshaping the very foundations of maritime trade. Amidst emerging trends and evolving preferences, stakeholders must adapt, innovate, and collaborate to stay ahead in this dynamic and competitive arena.

In the dynamic landscape of global trade, East Asia stands as a pivotal hub for container shipping, facilitating the movement of goods across continents and powering the engines of commerce. With its strategic location, robust infrastructure, and rapidly expanding economies, the region's container shipping industry plays a crucial role in connecting markets, driving economic growth, and shaping the future of maritime trade.

East Asia's ports are witnessing a surge in vessel sizes and container throughput,

necessitating investments in infrastructure and efficiency enhancements to accommodate larger ships and handle growing cargo volumes.

Changing landscape of customer demand

The geopolitical landscape is undergoing profound changes, with geopolitical tensions, trade disputes, and economic uncertainties reshaping global trade patterns and supply chain dynamics. As a result, customer demand in the container shipping industry is influenced by shifting trade routes, emerging markets, and geopolitical developments.

Amidst emerging trends and evolving preferences, stakeholders must adapt, innovate, and collaborate to stay ahead in this dynamic and competitive arena.

Along with sustainable technologies, shippers are more attentive throughout the entire

process, unlike in the past, when receiving a consignment meant the end of their

involvement. Currently, shippers understand that competition is intensifying, and any issues during the voyage could affect their profitability. This shift in mindset emphasizes the need to re-evaluate the quality of service provided. Hence, it is key to ensure all customers are well-informed and regularly updated about their operations to enable a close working relationship to cater to meeting the dynamic demands required.

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The Global Port Tracker report, released jointly by the National Retail Federation (NRF) and Hackett Associates, forecasts that monthly inbound cargo volumes at U.S. major container ports will reach their highest levels in nearly two years this summer.

According to Ben Hackett, founder of Hackett Associates, this surge, expected to extend over seven months with import levels consistently exceeding two million TEUs, is partly attributed to shifts in the traditional peak shipping season.

In compliance with the Japan International Freight Forwarders Association (JIFFA), in April, the ports covered by Global Port Tracker handled 2.02 million TEUs, marking a 4.6% increase from March and a 13.2% rise year-over-year—the highest since October 2022's 2.06 million TEUs.

While May’s figures are yet to be reported, projections suggest volumes climbed to 2.09 million TEUs, an 8.3% increase, reaching the highest level since August 2022's 2.26 million TEUs.

June is anticipated to see further growth at 2.11 million TEUs, up 15.2%, followed by July at 2.1 million TEUs (+9.5%), August at 2.17 million TEUs (+10.6%), September at 2.06 million TEUs (+1.7%), and October at 2.01 million TEUs (-2.3%).

Overall, the first half of 2024 is projected to handle 12.1 million TEUs, reflecting a 15% increase from the corresponding period last year.

Nearly half of all Asia-Europe westbound sailings have failed to depart on time as congestion escalates in Asian ports.

Linerlytica’s latest report says last week only six out of 11 Asia-North Europe sailings departed on schedule, with congestion at Singapore and Tanjung Pelepas severely disrupting the market.

The consultancy said: “While bottlenecks in the second-busiest port, Singapore, have eased, the strain has shifted to Port Klang and Tanjung Pelepas in Malaysia. Waiting times have also risen across all main Chinese port regions, with Shanghai and Qingdao experiencing the longest delays.”

Ships have had to wait as long as five days to berth in the world’s busiest port of Shanghai, where logjams are at their highest since Covid.

S&P vessel-tracking data shows 50 containerships in Shanghai, including at anchorage. Some, like the Cosco Shipping Mexico and CMA CGM Big Sur, have been in the port since last week.

In Singapore, where authorities have temporarily reopened the shuttered Keppel Terminal to alleviate vessel queues, there are 56 boxships. The bottlenecks have caused some operators, including CMA CGM, to skip Singapore calls. That said, there is now about 380,000 teu of delayed vessels in Singapore, compared with 450,000 teu last week.

S&P also shows 51 containerships in Port Klang. Ports in south-east and north-east Asia are still the most congested, accounting for 29% and 23% of vessel queues worldwide.

The situation is such that management at Taiwanese liner operators Evergreen, Yang Ming and Wan Hai said last week they did not foresee any short-term let-up in the congestion, and that freight rates would remain high into Q3.

EMC GM Wu Kuang Hui pointed out that wage negotiations between port workers on the US east coast were due in September, which could cause shippers to rush out goods before that in a bid to avert any industrial action.

Linerlytica notes that, overall, liner capacity utilisation remains very high, while capacity forecasts for June, with continued delays from congestion, also see reduced capacity available due to forced blankings.