In the middle of 2021, we were stroke by a crucial issue related to the scarcity of containers due to the imbalance in the quality of international and domestic trade as well as port congestion (the impact of the decrease in the number of human resources & equipment) from the Covid-19 pandemic lockdown. The scarcity of containers has resulted in an increase in ocean freight rates in the world.
The lockdown regulation during the Covid-19 pandemic has hampered loading/unloading activities and disrupted logistics distribution (port congestion). Many ships are blank sailing, reducing their sailing schedule. As a result, the ship's loading capacity is reduced.
In the 4th Quarter of 2020, China began to increase export production to Europe and America again and this resulted in excess demand for containers for export packaging. China is doing a massive repositioning and is willing to pay a high price so that containers outside of China can be pulled back to China. MLO (Main Line Operator) chooses to place ships and reposition containers to several hub ports in China (Shanghai, Shenzen, Nongbo-Zhoushan, and Guangzhou) which causes container scarcity and high ocean freight.
International and domestic trade imbalances, especially the flow of containerized goods transported by sea for export and import orientation are trapped in the main ports of Europe and America. This has escalated with the poor economic relationship between the United States and China, which has resulted in operational disparities in the quality of long-haul shipping services, namely the Asia-USA and Asia-Europe routes. This problem then affects various short-haul routes, especially intra-Asia, including to and from various key locations in Indonesia.
Global shipping conditions Average world container throughput growth reached 3% with a throughput decline of -3% in 2020. With the World Container Index increasing 3.3% from $207 to $6,463.78 per 40ft container. The highest increase in the price of 380 HSFO type fuel was on May 20th 2020 with an increase of 4% and an average price increase of 2.1%, while the highest VLSFO type was on May 18th 2020 with an increase of 7% and an average price increase of 2, 4%, and the highest MGO LS type was on May 20th 2020 with a 6% increase and an average price increase of 2.1%.
Maersk Lines has the largest container service capacity with a total capacity of 4,157,653 TEUs. MSC has the highest capacity growth with additional capacity reaching 177,691 TEUs. PIL has the lowest decrease in capacity with a decrease in capacity of -39,039 TEUs. The decrease in the capacity of the world's container ships, has an impact on the presence of unserved ports and an increase in container Dwelling Time.
The decline in LSCI (Liner Shipping Connectivity Index) occurred in almost all ASEAN countries in the first Quarter of 2021. Indonesia's LSCI decreased by -2% during first quarter of 2019 to first quarter of 2021.
The scarcity indicator can be seen with the container availability index (CAI) which on average is below 0,5 and has even reached 0,15 at the ports of Tanjung Priok, Tanjung Perak, Tanjung Emas, Lampung, Belawan, and Makassar.
The increase in freight (both for sizes 20 Ft DC/Dry Container, 40 Ft DC/Dry Container, 40 Ft DV/Dry Van and 40 Ft HC/High Cube) from 100 - 1000% occurred for both long-haul and short routes, especially to China, USA and America, both for export purposes and for import orientation of Indonesia's main commodities.
This condition has become more sensitive due to the weak bargaining power of national container shipping companies and fleets on international container transportation (including the lack of coordination between the maritime logistics ecosystem, supervision and control over intervening MLO actors).
Macro disturbances occur to the cluster of entities that own cargo directly as well as to logistics operators (forwarders) for both long-term contracts and trade contracts and short-term sea transportation (spot) of small entrepreneurs.
The impact of the scarcity of containers and the high cost of ocean freight is undeniably affecting the small and medium-sized business industry in Indonesia. The scarcity of containers and the high cost of ocean freight also have an impact on the export of fishery products.
Many national companies are repositioning containers for Indonesian exports so that ocean freight costs have fallen, although not significantly. It could be because people's purchasing power is still low so they export more than import. The shipping company suffers a loss, if the return cargo is empty. 40 FEU ocean freight from Indonesia to Europe was $7.000 down to $6.500 (from before the pandemic $1.500), then ocean freight full container reached $13.000 for the East Cost of US, which was previously around $3,000.
Amidst the burning issue in freight, there are some of other countries' action regarding high freight prices at the beginning of the scarcity period, as such.
In United States of America, The US House of Transportation and Infrastructure Committee is drafting a bipartisan law that requires operators to accept all US export container orders. The US President ordered the Federal Maritime Commission to investigate the increase in container and freight costs, including other charges imposed (demurrage and detention) and related to anti-competition.
In South Korea, the government is instructing overseas shipping with South Korean flags to cooperate with MLO to rationalize freight prices and provide containers for national export purposes.
China imports empty containers at government expense. They encourage manufacturers to increase container production and tighten the supervision of shipping companies to prevent excessive price increases. They even also advancing the start of the Lunar New Year holiday to January 15, so that exporters are asked to adjust their forecasting of goods shipments.
Taiwan, to admonish domestic and international shipping operators not to take advantage of the container scarcity situation due to the Covid-19 Pandemic for corporate purposes in the form of increasing freight costs.
While India requires MLO operators to provide 1000,000 containers per week and draft Merchant Shippin Bill 2020 that all carriage must be stated openly in the Bill of Lading (B/L), and no fees other than those listed are allowed.
Vietnamese requests the shipping line in cooperation with the container depot operator to consolidate container needs throughout the country and ensure the fulfilment of empty containers originating from import activities.
And in Thailand, pushing ships with dimensions above 15,000 TEUs to Laem Chabang and exploring dry bulk potential.
A breakthrough is needed to be able to see the existing problems as a gap for the development of the national shipping fleet to be able to serve the international market share and take on more roles through the Indonesia Shipping Enterprise Alliance (I-SEA) as a long-term solution.
Source: Kemenhub 2021
