30-06-2021 How long can bulk market benefit from containerization spillover? By Nidaa Bakhsh, Lloyd’s List
Record high freight rates for containerized cargoes and a severe lack of ship capacity are forcing some shippers to turn to the bulk or ro-ro trades. The phenomenon was reported to have started in February, and although the peak may have already been reached, volumes of goods including bagged rice, cement and fertilizers continue to flow into the dry bulk and break bulk sectors. An owner specializing in the smaller-sized bulkers which were being affected by this short-term trend said between 5% and 8% of all the cargoes it moves from the Far East to the west coast of South America, Europe, and the US were container cargoes spilling into the conventional bulker market, with China being the primary source. That equates to roughly 300,000 tonnes.
Cargoes included chemicals in bags, semi-finished steel parcels, and general cargo, predominantly lumbar, the owner said, adding that there were no signs of the new trend slowing down. Demand for bagged goods on bulkers were said to be a contributing factor in the rate rise for supramaxes, which is currently trading above $30,000 per day. However, a Europe-based analyst said that the effect of these trades was limited, given the volumes involved. Overall volumes for bagged rice were “microscopic”, he said, despite the 150% growth surge year-on-year from a very low base in 2020. Another analyst said that it was more likely that the supramax rate surge had been impacted by “extremely high trade volumes” of grains and other minor bulks, combined with inefficiencies and congestion tying up ships for longer.
Consultancy Dynamar noted that the trades were taking place on non-box-shaped vessels in the 45,000 dwt-65,000 dwt range carrying up to 100 teu on deck, with as much as 900 teu carried below deck as partial cargoes. Citing a trade journal, it said that logistical, technical, and contractual implications meant that the new business activity was not suitable for all bulk operators. Atlantic Container Line, which operates multipurpose ships able to carry containers, ro-ro freight, and vehicles, said it had received many requests to “de-containerize” cargo earlier in the year, but noted the peak in the North Atlantic occurred in the period from mid-February to the end of May. Transport involved all kinds of goods from cardboard boxes stacked/shrink-wrapped on euro pallets, to small crates and loose/unpacked items for the auto and agricultural equipment industries, as well as steel coils and bars, it said.
There was also an increase in shipper-owned containers, which were handled in the container cells or on trailers in the ro-ro decks. However, de-containerized volumes appeared to be slowing down, due to supply chains able to adjust to accommodate longer lead times, while ro-ro space availability was also becoming tighter. In addition, there was not the same degree of “space panic” with shippers able to pre-plan requirements weeks ahead, the company said.
As with the container market, overall ro-ro/breakbulk/project volume in the westbound direction is still quite strong, and the market stays active until the end of July, then slows a bit in August-September, before rebounding again in October. “The Covid effect has turned traditional seasonal patterns upside down this year, but it is fair to say that overall volumes will probably maintain their brisk pace for the rest of the year,” said Atlantic Container Line. For container lines already struggling to ship the volumes being booked, the loss of a handful of product categories will come as no great loss.
Hapag-Lloyd chief executive Rolf Habben Jansen recently said the movement of volumes to bulk trades was not something that the German carrier had noticed. The containerization of bulk goods is only viable when freight rates are low, and generally takes place on the lower demand backhaul leg of voyages. In normal circumstances, box lines are prepared to accept low-freight-rate cargoes rather than sail with just empties on board. In the current supply chain crisis, however, carriers have more incentive to return equipment that is in short supply to export destinations so that it can be used for the more lucrative head haul, particularly if it avoids having the container tied up in the hinterland while the box is loaded.
With additional reporting by Janet Porter and James Baker