HMM cautious in short term despite Q2 profit long jump

South Korean ocean carrier HMM expects “downward pressure” on demand growth in the second half of 2022.

HMM reported Wednesday its operating profit shot up by 153% year over year, but the South Korean ocean carrier isn’t counting on revenue figures to be quite as impressive in the second half of 2022.

Seoul-headquartered HMM said the operating profit for the first half of 2022 was KRW 6.08 trillion ($4.68 billion), up from KRW 2.4 trillion ($1.8 billion) in the first six months of 2021. 

First-half revenue leapt by 87% year over year from KRW 5.33 trillion ($4.1 billion) to KRW 9.95 trillion ($7.66 billion). 

HMM provided year-over-year comparisons between the first six months of 2022 and 2021.

Net profit was the most impressive figure of all — up 1,560% from KRW 365 billion ($281 million) in 2021 to KRW 6.06 trillion ($4.65 billion) this year.

HMM significantly improved earnings in H1 2022, mainly led by high freight rates and efficient fleet operations,” the company said in an earnings statement. “The Shanghai Containerized Freight Index (SCFI) in H1 2022 was 4,504 points, up 49% from 3,029 points in H1 2021.” 

Second-quarter earnings also significantly improved year over year. Revenue was up 73% from KRW 2.9 trillion ($2.23 billion) to KRW 5.03 trillion ($3.85 billion). Operating profit increased 111% from KRW 1.38 trillion ($1.06 billion) in Q2 2021 to KRW 2.937 trillion ($2.264 billion) this year. Net profit leapt 1,290% from KRW 211 billion ($162 million) to KRW 2.933 trillion ($2.261 billion).

HMM said it was able to attain record results despite fuel costs rising 35% from the first to the second quarter of this year. 

HMM said its second-quarter net profit skyrocketed by 1,290% year over year. (Chart: HMM)

“The financial structure has remained strong,” it added. “HMM’s debt-to-equity ratio has improved to 46% in June 2022 from 73% in December 2021.” 

HMM provided only three points in the “outlook and plans” section of its earnings release, which hint that results for the second half of 2022 might not be as astounding as those for the first six months of the year.

“Demand growth is expected to be under downward pressure due to considerable uncertainties mainly related to widespread inflation, rising oil prices and [a] recurrent coronavirus situation, in addition to geopolitical tensions,” HMM said. 

It added that the “global supply chain is forecast to remain strained in the coming months” and port congestion at locations around the world is “still pervasive.”

HMM said it unveiled a mid- to long-term strategy in July and “will spearhead an effort to address the full range of future challenges and lay a solid foundation for sustainable growth.” 

HMM will spend more than $11.3 billion as part of the growth strategy that includes expanding its container ship fleet from 820,000 twenty-foot equivalent units to 1.2 million TEUs by 2026. 

HMM growing container ship fleet as part of $11B investment

HMM making change at helm

12 HMM container ships’ sticker price $1.57 billion

Click here for more American Shipper/FreightWaves stories by Senior Editor Kim Link-Wills.

Freight companies begin sharing capacity data with feds

DOT officials are calling the start of data sharing among supply chain companies a ‘milestone’ event.

Containers stacked at marine terminal.

Carriers, shippers and logistics companies have started sharing critical freight capacity information with the federal government in the first data exchange aimed at untangling congested supply chains.

The U.S. Department of Transportation announced the development Wednesday before hosting a meeting of participants in its Freight Logistics Optimization Works (FLOW) program.

If successful, DOT’s initiative would be seen as a significant step toward overcoming long-standing concerns associated with sharing proprietary information among competitors across the freight supply chain.

“The start of data sharing between industry and USDOT is an important milestone for FLOW,” said Stephen Lyons, the supply chain envoy to the White House. “We look forward to continuing to collaborate with industry to develop this tool to enable industry to make more informed decisions that will improve the movement of goods along our supply chain.”

FLOW, which was launched in March, is considered a first-of-its-kind effort to develop a digital freight exchange with the goal of giving companies information on the condition of a node or region in the supply chain to speed freight flow.

Data submitted by participants — including purchase order forecasts, cargo bookings, vessels in-transit, marine terminal space availability, drayage truck dispatch capacity, over-the-road truck dispatch capacity, chassis availability and warehouse capacity — will be used to create an index of demand over capacity, according to DOT. The index is expected to act as a leading indicator of freight congestion and supply chain performance.

“It has been great to collaborate with the FLOW team since the very beginning and see the progress already being made toward achieving true end-to-end visibility that includes every link in the supply chain,” said Ed Aldridge, president of CMA CGM America and APL North America, before the meeting. “This is essential for increasing fluidity of operations in the U.S. and will enable all parties in the supply chain to more accurately forecast and address potential issues.”

Andy Damkroger, vice president of logistics for Werner Enterprises, called FLOW a “well-organized, thoughtful approach” to aligning supply chain goals among transportation modes.

“Collaboration is vital across industries to streamline the intricate exchange of information,” Damkroger said.

Last month DOT sought an emergency order from the Office of Management and Budget to help expedite the initiative, which is starting out as a pilot to test proof of concept.

DOT also announced Wednesday it had doubled the number of voluntary participants in the program to 36 from the initial 18. Participants that have joined the program since March include:

  • Ocean carriers: Hapag-Lloyd, Maersk.
  • Marine terminal operators: APM Terminals, TraPac, West Basin Container Terminal, Yusen Terminals.
  • Importers/exporters: Procter & Gamble, Samsung.
  • Trucking: J.B. Hunt, Werner Enterprises, C&K Trucking, RoadOne.
  • Intermodal chassis: Consolidated Chassis Management, TRAC Intermodal.
  • Logistics and warehousing: Flexport, DHL; Becton, Dickinson and Co.
  • Railroads: BNSF. 

Click for more FreightWaves articles by John Gallagher.

Tanker shipping stocks pull away from the pack, hitting fresh highs

Tankers stocks are doing great. Dry bulk and container stocks temporarily stopped the bleeding. “Maxim stocks” still underperform.

a photo of Wall Street; shipping stocks are seeing mixed fortunes

Shipping stocks are not considered “buy and hold” investments these days — for good reason. It’s all about timing. Case in point: Tanker stocks are now soaring after years mired in negative territory.

Fresh 52-week highs were hit Tuesday by Scorpio Tankers (NYSE: STNG), Ardmore Shipping (NYSE: ASC), Euronav (NYSE: EURN), DHT (NYSE: DHT), International Seaways (NYSE: INSW) and Teekay Tankers (NYSE: TNK).

Tankers stocks are up double digits year to date (YTD), in some cases triple digits. However, the rebirth of tanker stocks comes after two painful “bagholder” years. Anyone who bought and held a basket of tanker stocks since January 2020, pre-COVID, would have only recently broken even.

To gauge how shipping stocks have fared, American Shipper crunched the numbers by segment — tankers, dry bulk and containers — both YTD and across the COVID era.

The analysis also examined Greek-sponsored micro-cap shipping stocks in various segments involved in fully disclosed, dilutive sales of common equity and warrants facilitated by New York investment bank Maxim Group. “Maxim stocks” appear to attract retail investors looking to gamble on short-term price swings even though data confirms that these shipping stocks fare much worse than others over time.

Winners and losers YTD

The pattern of winners and losers YTD is very different from the medium-term pattern over the course of the pandemic. From Jan. 1 to Monday’s close, tanker stocks were up 88%. Dry bulk stocks were up 21% and container shipping stocks just 1% (for methodology, see below).

In contrast, shares of shipping companies that have sold equity via Maxim-related deals were down 42% YTD.

(All charts by American Shipper based on adjusted closing price data from Yahoo Finance)

This year has been a continual upward climb punctuated by a few brief pullbacks for tanker stocks. Dry bulk shares kept pace with tanker shares until June, after which lower spot rates and economic headwinds took their toll. Dry bulk shares have seen a small recovery since mid-July.

Container shipping shares maintained their winning streak until the end of March. Then they fell back, although, like dry bulk shares, they’ve regained some ground since mid-July.

The Maxim-linked shipping share average jumped briefly in March due to a fleeting spike in one equity, Imperial Petroleum (NASDAQ: IMPP), after which that stock and the overall average slid lower.

Product tankers trump crude tankers in 2022

Tanker stock performance has diverged based on tanker type this year. Shares of pure product-tanker owners are far outperforming the rest, up by an average of 173% year to date. Mixed fleet owners — with both crude and product tankers — are up 73%. Pure crude-tanker owners are up 47% (an impressive gain considering that crude tanker owners are still reporting losses).

chart of shipping stock prices

COVID-era shipping stock performance

Over the course of the pandemic, container shipping stocks have been by far the biggest winner. As a group, they’re still up 409% on average since Jan. 1, 2020, despite flat performance in 2022 YTD.

Dry bulk shares have been the second-biggest winner. Even with this year’s retrenchment, they’re up 129% since January 2020. In contrast, tanker stocks — which are more in the spotlight this year — are essentially flat versus January 2020 (up 3% as of Monday’s close).

chart of shipping stock prices

Highlighting the importance of stock-trade timing, the performance of different tanker segments over the medium term was the reverse of 2022 YTD performance. Since Jan. 1, 2020, product tanker stocks fared the worst, mixed-fleet stocks were in the middle, and crude tankers fared best.

‘Maxim stocks’ down over 90% vs. pre-pandemic

The performance of the Maxim-linked shipping equities over the medium term highlights just how important it is to get in and out of such equity bets very quickly.

Keeping in mind that the maximum loss is 100%, the share values of Top Ships (NASDAQ: TOPS) and Globus Maritime (NASDAQ: GLBS) were both down 98% at Monday’s close versus Jan. 1, 2020. Over the same time frame, shares of Seanergy (NASDAQ: SHIP) and Castor Maritime (NASDAQ: CTRM) were both down 91%.

Shares of Imperial Petroleum — a spinoff of StealthGas (NASDAQ: GASS) that Maxim has supported — have lost 95% of their value since the stock began trading in early December. Shares of OceanPal (NASDAQ: OP) — a spinoff of Diana Shipping (NYSE: DSX) that conducted an offering with Maxim as sole bookrunner — have lost 91% of their value since they began trading in late November.

A new shipping equity doing Maxim-placed offerings emerged last month. Seanergy spun off United Maritime Corp. (NASDAQ: USEA) into a separate listing that began trading on July 7. 

In just one month, United Maritime’s shares shed 71% of their value.

Methodology for shipping stock averages:

Averages use adjusted closing price data of U.S.-listed shipping stocks from Yahoo Finance. Segment averages were not weighted by market cap.

Only large “pure” owners in each segment were included in averages. For the pure product-tanker average: Scorpio Tankers and Ardmore Shipping. Crude tankers: Euronav, DHT and Nordic American Tankers (NYSE: NAT). Mixed-fleet operators: Teekay Tankers, Frontline (NYSE: FRO) and International Seaways. Tanker owners with significant holdings in non-crude/product segments, such as Navios Partners (NYSE: NMM) and Tsakos Energy Navigation (NYSE: TNP), were excluded.

The dry bulk average was made up of the four largest U.S.-listed pure bulker owners by market cap: Star Bulk (NASDAQ: SBLK), Golden Ocean (NASDAQ: GOGL), Genco Shipping & Trading (NYSE: GNK) and Eagle Bulk (NASDAQ: EGLE).

The container shipping average comprises liner operators Zim (NYSE: ZIM) and Matson (NYSE: MATX), as well as pure container-ship lessors Danaos (NYSE: DAC), Global Ship Lease (NYSE: GSL) and Euroseas (NASDAQ: ESEA). Costamare (NYSE: CMRE), Atlas (NYSE: ATCO) and Navios Partners were excluded due to significant noncontainer holdings.

The Maxim stocks average comprises Top Ships, Seanergy, Castor Maritime, Globus Maritime, Imperial Petroleum and OceanPal. Due to the recency of its listing, share pricing of United Maritime was excluded.

Click for more articles by Greg Miller 

No precipitous plunge in container shipping rates, just ‘orderly’ decline

Port congestion and voyage cancellations by shipping lines are preventing a steeper slide in spot container freight rates.

A photo of a container ship; rates remain high

There’s an old Greek shipping saying that goes: “Ninety-eight tankers and 101 cargoes, boom. Ninety-eight cargoes and 101 tankers, bust.” This doesn’t translate so well into modern-day container shipping because the consolidated liner sector manages the number of ships in service a lot better than the fragmented tanker business.

Tanker spot rates can plunge violently lower when supply exceeds demand. One of the big questions for container shipping has been: Will spot rates plunge precipitously after demand pulls back, as it has in the past in bulk commodity shipping? Or will there be a gradual decline toward a soft landing?

So far, it looks gradual. Trans-Pacific rates have steadied in July and early August. In fact, some indexes show spot rates ticking higher again.

Spot rates are at least temporarily plateauing because U.S. import demand remains above pre-COVID levels, some U.S. ports remain extremely congested, and ocean carriers are “blanking” or “voiding” (i.e., canceling) sailings, both because their ships are stuck in port queues and because they’re matching vessel supply with cargo demand to avert the fate of Greek tanker owners.

“Void sailings are still the go-to options for carriers at this point to try and stymie the fall in rates,” said George Griffiths, managing editor of global container freight at S&P Global Commodities.

“Congestion is still the buzzword for East Coast ports, with Savannah currently feeling the full force of loaded imports and associated delays,” he told American Shipper.

FBX trans-Pac rates up 3% from recent lows

Different spot indexes give different rate assessments but generally show the same trends.  The Freightos Baltic Daily Index (FBX) Asia-West Coast assessment was at $6,692 per forty-foot equivalent unit on Friday.

The good news for shippers booking spot cargo: That’s just one-third of the all-time peak this index reached in September. The bad news: Friday’s assessment is up 2.7% from the low of $6,519 per FEU hit on Aug. 2, and it’s still 4.5 times higher than the rate at this time of year in 2019, pre-COVID.

chart showing container shipping rates
Rate assessment in $ per FEU. Blue line: 2021, orange line: 2019, pre-COVID. (Chart: FreightWaves SONAR)

The FBX Asia-East Coast spot rate assessment was at $9,978 per FEU on Friday, less than half the record high in September. However, it was up 3.5% from the recent low of $9,640 on Aug. 2 and still 3.6 times higher than 2019 levels.

chart showing container shipping rates
(Chart: FreightWaves SONAR)

Drewry indexes show gradual slide

The weekly index from Drewry portrays a gentler descent than the FBX, because Drewry did not include premium charges in its spot assessments at the peak.

Unlike the FBX, Drewry’s Shanghai-Los Angeles assessment does not show a recent uptick. It was at $6,985 per FEU for the week announced last Thursday, its lowest point since June 2021. It was down 44% from its all-time high in late November 2021, albeit still 4.2 times higher than rates at this time of year in 2019.

(Chart: FreightWaves SONAR)

Drewry’s weekly Shanghai-New York assessment was at $9,774 per FEU on Friday. Rates were relatively stable over the past two week, yet the latest reading is the lowest since June 2021 and down 40% from the peak in mid-September.

Drewry’s Shanghai-New York assessment on this route is still 3.5 times pre-COVID levels.

(Chart: FreightWaves SONAR)

S&P Global: East Coast rates 50% higher than West Coast

Daily assessments from S&P Global Commodities (formerly Platts) show a widening divergence between North Asia-West Coast and North Asia-East Coast Freight All Kinds (FAK) rates.

S&P Global assessed Friday’s North Asia-East Coast FAK rate at $9,750 per FEU, up 2.6% from the recent low hit on July 29. Spot rates on this route have roughly plateaued since late April, according to this index.

S&P Global put Friday’s North Asia-West Coast rate at $6,500 per FEU, still gradually falling and at the lowest point since late June 2021. The gap with East Coast assessments has been widening since May, with the East Coast rates now 50% higher than West Coast rates.

(Chart: American Shipper based on data from S&P Global Commodities)

“East Coast rates are significantly higher than West Coast rates due to the congestion we are seeing,” said Griffiths.

Port congestion still very high

Matthew Cox, CEO of ocean carrier Matson (NYSE: MATX) explained on his company’s quarterly call earlier this month: “In fall of last year, we saw over 100 vessels waiting at anchor or offshore waiting to get into the ports of Los Angeles and Long Beach. We still have 100 ships waiting. But a lot of that congestion has moved into different ports. We [have] the same number of ships but just more distributed to different places.”

The number of ships waiting off all North American ports topped 150 in late July, according to an American Shipper survey of ship-position data from MarineTraffic and queue lists for Los Angeles/Long Beach and Oakland, California.

The count fluctuates by the day (and by the hour as ships enter and leave queues) and is now down 15% from its peak — but still historically high. As of Monday morning, there were 130 ships waiting offshore. East and Gulf Coast ports accounted for 71% of the total, with the West Coast share falling to just 29%.

The queue off Savannah, Georgia, was the largest at 39 ships on Monday morning. It was considerably higher just a few days earlier. According to Hapag-Lloyd, there were 48 container vessels off Savannah on Friday, with wait times of 14-18 days.

The queue off Los Angeles/Long Beach has now virtually vanished. On Monday morning, it was down to just 11 container vessels, according to the queue list from the Marine Exchange of Southern California. It hasn’t been that low since November 2020. It hit a high of 109 ships on Jan. 9.

Spot rate easing expected to continue

On last Wednesday’s quarterly call by ocean carrier Maersk, CFO Patrick Jany said port congestion preempted a steeper drop in spot rates. Even with support from congestion, he predicted short-term rates will decline further in the months ahead.

“We have seen an erosion of short-term rates in the past few months that has been stopped here and there by renewed or new disruptions,” Jany said. “The erosion of the short-term rates will continue. It won’t be a one-day drop but a progressive erosion toward a lower level of short-term rates in the fourth quarter.”

Jany predicted that when rates stop falling, they “will stabilize at a higher level than they were in the past [pre-COVID] and higher than our cost level.”

During the latest quarterly call by logistics provider Kuehne + Nagel, CEO Detlef Trefzger predicted rates would ultimately settle at levels two to three times pre-COVID rates. A Seko Logistics executive made the same prediction during a recent briefing.

According to Cox at Matson, spot rates “are adjusting slowly. There’s no falling off a cliff. The word we use is ‘orderly.’ We’re seeing rates decline from their peak, but … we expect an orderly marketplace for the remainder of the year, with our vessels continuing to operate at or near capacity.” 

Click for more articles by Greg Miller 

Performance Team breaks ground on South Carolina cold chain facility

The South Carolina cold chain facility opening next year will handle Port of Charleston imports and exports of proteins, fruits and vegetables.

Performance Team – A Maersk Company will open a cold storage facility in Charleston, South Carolina, early next year designed to get imports of proteins, fruits and vegetables to 80 million U.S. consumers within one day and 225 million consumers within two days. 

“We have been evaluating South Atlantic cold chain market opportunities for the past three years, and this opportunity stood out in a strong way for a number of good reasons. The South Atlantic is one of the fastest-growing areas in the nation, and we see lots of business opportunities thanks to a competitive port that we can connect our logistics and services to with all our brands here — Maersk, Hamburg Süd and Sealand,” said Mike Meierkort, head of logistics and services for Maersk North America, during a groundbreaking ceremony in Charleston last week. 

The ceremonial first dig is recorded on land along Interstate 26 in Charleston, South Carolina. (Photo: Maersk North America)

A Maersk spokesman told FreightWaves the facility would be in “a very strategic location” along Interstate 26 less than 30 miles from the Port of Charleston. He declined to share the size of the cold storage building or the cost of construction. 

A.P. Moller – Maersk (OCTUS: AMKBY) acquired Performance Team in April 2020 in a $545 million deal.  

Proteins and frozen fruits and vegetables reportedly accounted for 77% of all 2021 reefer food volume at the Port of Charleston. 

“South Carolina Ports has the capacity to support more refrigerated and frozen goods and we look forward to growing the cold chain business segment together,” South Carolina Ports Authority CEO Barbara Melvin said in a news release Monday. 

According to the release, the facility, which will be developed by RL Cold and constructed by Charleston-based Primus and will open in the first quarter of 2023, “will offer a truly unique value proposition to customers through supply chain simplification benefits by integrating cold storage solutions with ocean transit and drayage, refrigerated inland trucking, blast/quick freezing, USDA meat inspections, boxing/repacking and other value-added services based on customer needs.” 

Diogo Lobo, head of cold chain logistics for Maersk North America, said: “Customers are looking for more cold storage space in Charleston to grow their exports to the destinations the Port of Charleston serves. There’s a strong refrigerated market in poultry, pork, beef, seafood and potential for fruits and vegetables too. 

“We are creating the capacity needed in the market to handle fresh produce, with multiple chambers designated for the different seasons and commodities. We will have a 20,000-square-foot repack room designated for value-added service to the retail sector. We will be a one-stop shop for the temperature-controlled products going to the grocery sector.”

South Carolina Ports announced last month that it had a record 2022 fiscal year, handling 2.85 million twenty-foot equivalent units, a 12% increase year over year, at the Port of Charleston’s terminals.

Performance Team operates more than 150 distribution and fulfillment facilities in North America. Maersk announced in June that Performance Team will open a nearly 168,000-square-foot cold storage facility in Dayton, New Jersey, in October. 

In March, Maersk announced Performance Team would build a 283,000-square-foot cold storage facility in Baytown, Texas, about 15 minutes from Port Houston. The facility, which will have access to both BNSF and Union Pacific rail lines, is expected to open this month. 

Maersk added to its North American first-, middle- and last-mile capabilities with its February acquisition of Pilot Freight Services for $1.8 billion. 

Performance Team opening cold storage facility in New Jersey

1st woman tapped to lead South Carolina Ports

Walmart picks site near Port of Charleston for distribution center

Click here for more American Shipper/FreightWaves stories by Senior Editor Kim Link-Wills.

War effect on crude trade: Long-lasting and just beginning

It appears increasingly likely that war-driven changes to global crude flows will persist — and grow — through 2023.

photo of a crude oil tanker

Is the shift in global crude flows due to the Ukraine-Russia war a fleeting event or a more lasting, structural change?

At first, many market watchers and investors viewed it as short-lived. It now seems like something to count on for at least the medium term. More Russian crude will likely head to India and China for a longer period of time, and more Atlantic Basin and Middle East crude will head to Europe to replace Russian barrels.

“Oil supply chain disruptions related to Russia’s invasion of Ukraine are proving to be durable and marked by significantly longer average voyages,” said Steward Andrade, CFO of Teekay Tankers (NYSE: TNK), during Thursday’s quarterly conference call. “These trade pattern changes are likely to be long-lasting.”

Executives of Euronav (NYSE: EURN) highlighted the same point on their quarterly call on Thursday. According to Brian Gallagher, Euronav’s head of investor relations, “This isn’t some event that happens over a few weeks. There’s a longevity to the structural change.”

Only the beginning

The EU ban on crude oil and petroleum product imports doesn’t take effect until Dec. 5 for seaborne shipments and Feb. 5, 2023, for pipeline imports.

As of now, Europe is still importing large quantities of Russian crude. Pre-invasion, volumes were around 4 million barrels per day (b/d). Various estimates put the reduction to date at around 700,000 to 1 million b/d. Tanker effects are already significant despite the transition being just one-quarter complete.

“We are only seeing the beginning of a story that will have a long tail,” said Euronav CEO Hugo De Stoop.

Upside for smaller and midsize tankers

War-driven trade changes have mainly impacted smaller tankers known as Aframaxes (with capacity of 750,000 barrels) and midsize Suezmaxes (1 million barrels). Larger tankers known as very large crude carriers (VLCCs, with capacity of 2 million barrels) are too big to call at Russian terminals.

Andrade explained, “Short-haul exports of Russian crude oil to Europe have fallen by around 700,000 b/d compared to pre-invasion levels, with Russian crude oil increasingly being diverted to destinations east of Suez, particularly to India and China.

“Europe is having to replace short-haul Russian barrels with imports from other regions, most notably from the U.S. Gulf, Latin America, West Africa and the Middle East. These changes are primarily benefiting Aframax and Suezmax tankers due to the load and discharge regions involved.”

Compares average seaborne crude oil flows in three months prior to invasion versus three months after (Chart: Teekay Tankers earnings presentation based on data from Kpler)

“When oil imported into Europe previously came five days from the Baltic and now comes approximately 20 days from the Middle East on a Suezmax or approximately 20 days from the U.S. Gulf on an Aframax, that is obviously helpful for ton-mile demand.”

Tanker demand is measured in ton-miles: volume multiplied by distance. The longer the average distance, the more tankers you need to carry the same volume.

“When China imports oil from the Baltic on Aframaxes — which we’ve seen recently — it’s another example of increased ton-mile demand due to changing trade patterns,” added Andrade.

More ship-to-ship transfers to VLCCs?

Euronav expects the war effect to benefit VLCCs as well, for two reasons: because of ship-to-ship transfers in the Russia-to-Asia trade and because of the strong interconnection between Suezmax and VLCC markets.

“The most efficient way to transport crude oil over long distances is obviously on a VLCC. So ideally, they would do transshipment,” said De Stoop, referring to Aframaxes or Suezmaxes loading in Russia and transferring cargo to VLCCs. 

“We’ve already seen a few of those, largely off Africa. We’ve also seen cargo being discharged in Libya and Egypt for relatively short periods then lifted again on bigger ships. The part of the industry that can do that [carry Russian oil] is trying to find the most efficient way to carry that oil to the Far East.”

Suezmax-VLCC connection

Meanwhile, if Suezmax rates rise too high versus VLCC rates, oil shippers traditionally combine two Suezmax cargoes into one lot and use a VLCC instead.

“There are a lot of markets where two Suezmax cargoes can go into one VLCC, so you have this push-pull effect,” said De Stoop. “When the Suezmax market is doing very well, and is seeing many more cargoes, that would naturally have a knock-on effect on the VLCC market. Those two markets are really, really interconnected.

“When we speak to the chartering desks of our clients, it’s usually the same people [booking Suezmaxes and VLCCs] and they monitor the price of one versus the other. In the last two or three weeks, we have seen a lot of cargoes that were shown to our Suezmax desk and then they disappeared and popped up in the [VLCC] pool. Two cargoes were being combined in order to be carried by a VLCC.

“Normally, it’s the VLCC segment that is doing the heavy lifting for all the other segments. This time around — because the disruption is coming from Russia and Russia is not a VLCC market — the pushing is coming from the smaller sizes.

“The Aframaxes are pushing the Suezmaxes and the Suezmaxes are now pushing the VLCCs. Simply because when you compare rates of Suezmaxes to VLCCs, it’s a lot cheaper to use VLCCs. [According to Clarksons, Suezmax rates are currently 30% higher.] 

“And that’s what we have seen in recent weeks. That’s the main reason why we believe the VLCC market improved after the Suezmax had already improved.”

Tanker earnings roundup

The VLCC market may be improving, but it was extremely weak in the second quarter and the early part of the third quarter.

Euronav, which owns VLCCs and Suezmaxes, reported a net loss of $4.9 million for Q2 2022 compared to a net loss of $89.7 million in Q2 2021. Its adjusted loss of 12 cents per share was just shy of the consensus outlook for a loss of 11 cents.

Euronav’s VLCCs earned an average of $17,000 per day in Q2 2022. So far in the third quarter, the company has 47% of available VLCC days booked at a significantly lower rate: only $12,700 per day. De Stoop attributed this to longer-haul voyages booked during a period of weak rates and VLCCs employed on lower-earning repositioning voyages.

Teekay Tankers — which owns a fleet of Suezmaxes, Aframaxes and product tankers — reported net income of $28.5 million for Q2 2022 versus a net loss of $129.1 million in Q2 2021. Adjusted earnings per share of 76 cents topped the consensus forecast for 61 cents.

Teekay’s spot-trading Suezmaxes earned $25,310 per day in Q2 2022. So far in the third quarter, the company has 43% of its available Suezmax days booked at an even higher average rate: $29,600 per day.

Click for more articles by Greg Miller 

FMC wants ocean carriers to pay for container storage

Federal regulators are pressuring carriers at the Port of New York and New Jersey to compensate shippers and carriers for container storage.

Port Newark Container Terminal

The head of the Federal Maritime Commission is warning ocean carriers serving the Port of New York and New Jersey to stop forcing shippers and drayage truckers to store their containers — and pay them for it when they do.

FMC Chairman Dan Maffei is ratcheting pressure on carriers following a meeting with truckers and marine terminal operators at the port on Wednesday.

“The [FMC] has already been investigating reports of carriers charging per diem container charges even when the shipper or trucker cannot possibly return the container due to terminal congestion,” Maffei said in a statement released Thursday. “I will ask that this investigation be broadened and intensified to cover instances where shippers and truckers are being forced to store containers or move them without proper compensation.”

The National Industrial Transportation League and Bi-State Motor Carriers Association last week urged the FMC to suspend demurrage and detention at the port as congestion worsens amid spiking import volume. Maffei and the agency’s acting director of the bureau of enforcement, investigations and compliance, Lucille Marvin, followed up with a visit to the port to see conditions firsthand.

“When ocean carriers continue to bring thousands of containers per month to a port and only pick up a fraction of that number, it creates an untenable situation for terminals, importers and exporters, trucking companies and the port itself,” Maffei said.

Carriers most behind in picking up their empty containers will be asked for a plan to get caught up.

“Whatever their answers may be, I will do everything in my power to ensure that carriers do not receive involuntarily subsidized storage for empty containers that belong to them,” Maffei asserted. “If it can be shown that a shipper or a trucker is not allowed to return a container then, not only should they not be charged per diem, but the carrier should compensate that trucker for the space it takes up.”

Maffei defended the stricter stance against ocean carriers as being in line with its demurrage and detention rules because it promotes the movement of cargo “since chassis and space would be freed up by carriers taking full responsibility for the empty containers resulting from the increased volumes of import cargo they bring in.”

As record-breaking container ship queues threaten to tie up ports around the country ahead the of the fall peak shipping season, the Port of New and New Jersey announced Tuesday it will be charging ocean carriers a $100 per-container fee on long-dwelling import or export containers, with the goal of freeing up space and improving the balance between imports and exports. The new tariff is effective as of September pending a mandatory 30-day federal notice.

Click for more FreightWaves articles by John Gallagher.

Saber-rattling in Taiwan Strait stokes new supply chain threat

Chinese military exercises in the Taiwan Strait will delay shipments. Further escalation could have dramatic supply chain effects.

a map of ships near Taiwan

China will conduct live-fire military exercises in the Taiwan Strait and around Taiwan from Thursday to Sunday in retaliation for House Speaker Nancy Pelosi’s visit — exercises that are expected to breach Taiwan’s territorial waters and block some busy international shipping lanes.

Any escalation of tensions would create yet another major threat to global supply chains.

If the strait were ever closed to commercial traffic, it would be a negative for cargo shippers and a positive for ship owners and operators. Delays would push up transit time and reduce effective vessel capacity, boosting freight rates.

House Speaker Nancy Pelosi and Taiwan President Tsai Ing-wen (Photo: AP Photo/Taiwan Presidential Office)

“The Taiwan Strait is one of the busiest straits in the world,” said Maersk CEO Soren Skou during his company’s quarterly conference call on Wednesday.

“Obviously, if it were to close, it would have a dramatic impact on shipping capacity, in the sense that everybody would have to divert around Taiwan and add to the length of the voyages,” Skou said. “That would absorb significant capacity. But I have to say that there seems to be no suggestion that this is where we’re going.”

Bloomberg calculated that almost half of the world’s container ships and 88% of larger container ships transited the Taiwan Strait this year. It also reported that some liquefied natural gas (LNG) carriers have already rerouted or slowed speed in response to the coming military exercises.

Brief ‘partial blockade’ or something bigger?

According to Peter Williams, trade flow analyst at VesselsValue, “With China conducting significant military drills and military tests around Taiwan … there is potential for substantial disruption to trade in the region.”

VesselsValue analyzed location data on commercial ships currently in Taiwanese waters, as well as those en route to Taiwan. As of Wednesday, it found 256 container ships, tankers and bulkers in Taiwanese waters, with another 308 destined to arrive. Of inbound container ships, tankers and bulkers, 60 are scheduled to arrive before the Chinese military drills conclude on Sunday.

Shipping agency GAC warned in customer notice that “some of the exercise areas are within the VTS [Vessel Traffic Service] range of various ports of Taiwan. The port control bureau has set up a warning range. If a vessel enters the area, it will prompt a warning by the port VTS and be requested to leave as soon as possible to avoid any accidents.”

According to Evercore ISI analyst Krishan Guha, “With China warning foreign planes and ships to stay away while its military exercises proceed, the result is what Taiwan’s ministry of foreign affairs terms a blockade, though possibly only a partial one, with some air and sea lanes still potentially open.”

Guha continued: “The current exercises and effective partial blockade are scheduled to last only a few days but could be extended or restarted, leading to a more prolonged crisis, as well as more serious disruptions to global chip and other tech-component supply chains.”

Click for more articles by Greg Miller 

FreightWaves Classics/ Infrastructure: Ballard Locks turn 106 today!

FreightWaves Classics profiles the Ballard Locks, located in Seattle, Washington.

An aerial view of the Ballard Docks and surrounding areas. (Photo: U.S. Army Corps of Engineers)

FreightWaves Classics is sponsored by Sutton Transport, an LTL leader in the Midwest for more than 40 years. Sutton Transport proudly services Illinois, Minnesota, Missouri and Wisconsin. Request a quote here.

On August 3, 1916, the steamer Swinomish became the first ship to pass through a complex of locks on the Lake Washington Ship Canal in Washington state. The locks are located at the west end of Salmon Bay and between the Seattle neighborhoods of Ballard and Magnolia. 

The Swinomish on August 3, 1916. (Photo: blog.friendsoftheballardlocks.org)
The Swinomish on August 3, 1916. (Photo: blog.friendsoftheballardlocks.org)

Around 100 government officials were on the Swinomish for the inaugural trip through the Hiram M. Chittenden Locks, which were named for U.S. Army Major Hiram M. Chittenden, the Seattle District Engineer for the Corps of Engineers from April 1906 to September 1908. Although the locks were named for Chittenden, they are now widely known as the Ballard Locks. The Oregon-based Daily Capital Journal reported in its next-day edition that “thousands of cheering spectators” had also lined up on the banks of the canal to cheer the progress on the project. 

The complex of locks were built by the U.S. Army Corps of Engineers, which still operates them. The short voyage by the Swinomish occurred a little more than nine months before other ships began routinely using the locks and 11 months prior to their official dedication and opening on July 4, 1917.

Construction of the locks in 1913. (Photo: livabl.com)
Construction of the locks in 1913. (Photo: livabl.com)

Since then, the Ballard Locks have been a critical component of the Lake Washington Ship Canal, which connects the waters of Salmon Bay, Lake Washington, and Lake Union to the tidal waters of Puget Sound. The Lake Washington Ship Canal and the Ballard Locks allow recreational and commercial vessels to travel to the docks and warehouses of Seattle’s fresh water harbor. In fact, the locks carry more maritime traffic than any other lock system in the United States. 

A large boat passes through the locks. (Photo: sealifer3.org)
A large boat passes through the locks. (Photo: sealifer3.org)

Overview

There are two locks, one small (30 x 150 feet) and one large (80 x 825 feet). The complex also includes a 235-foot spillway with six 32 x 12-foot gates to assist in water-level control. In addition, a fish ladder is integrated into the locks for migratory fish, notably salmon.

The locks and associated facilities serve three purposes:

  • To maintain the water level of Lake Washington and Lake Union at 20 to 22 feet above sea level, or more specifically, 20.6 feet above Puget Sound’s mean low tide.
  • To prevent the mixing of sea water from Puget Sound with the freshwater of the lakes (saltwater intrusion).
  • To move boats from the water level of the lakes to the water level of Puget Sound, and vice versa.
An unidentified schooner outbound in 1916. (Photo: blog.friendsoftheballardlocks.org)
An unidentified schooner outbound in 1916. (Photo: blog.friendsoftheballardlocks.org)

History

Beginning in the 1850s, discussions regarding the construction of a navigable connection between Lake Washington and Puget Sound took place. At that time, the connection was needed to transport logs, milled lumber and fishing vessels. In 1867, the U.S. Navy endorsed a canal project that also included a plan to build a naval shipyard on Lake Washington. However, it wasn’t until 1891 that the Corps of Engineers began planning the project. Modest preliminary work began in 1906, but it wasn’t until 1911, under the command of Hiram M. Chittenden, that construction began in earnest. However, the years of delays in the canal’s planning and construction led the U.S. Navy to build the Puget Sound Naval Shipyard in Bremerton, Washington. It is located across Puget Sound from Seattle.

The Lake Washington Ship Canal in 1914. (Photo: blog.friendsoftheballardlocks.org)
The Lake Washington Ship Canal in 1914. (Photo: blog.friendsoftheballardlocks.org)

The Washington State Legislature appropriated $250,000 in early 1909 for excavation of the canal between Lake Union and Lake Washington. The funds were placed under the control of the Corps of Engineers. Then Congress gave its approval for the lock in June 1910. However, Congress stipulated that the rest of the canals along the route be paid for locally. Legal challenges by mill owners in Ballard who feared property damage and loss of waterfront in Salmon Bay, and by Lake Washington property owners, then further delayed construction.

Construction of the locks connecting Salmon Bay to Shilshole Bay began in 1911, and it proceeded without further controversy or legal entanglements. The locks’ gates were closed for the first time in July 1912. Over time, this action turned Salmon Bay from saltwater to freshwater. 

After the Swinomish ceremoniously passed through the locks on August 3, 1916, the temporary dam at Montlake was breached on August 25. Over the next three months, this caused Lake Washington to drain, lowered the water level by 8.8 feet and dried up more than 1,000 acres of wetlands, as well as drying up the Black River and cutting off the Cedar River salmon run.

This was followed by the rerouting of the Cedar River into Lake Washington to provide sufficient water flow to operate the Ballard Locks. In addition, the White River was rerouted into the Puyallup River. Previously the Cedar and White rivers flowed into the Duwamish River, which caused frequent flooding. By rerouting the rivers, large areas of lowlands were available for development; however, the actions disrupted the Duwamish salmon runs. 

The locks officially opened to boat traffic on May 8, 1917. The project’s cost up until then was $3.5 million. Of that total, $2.5 million had been federal funding; the remainder came from the state and local governments.

The Ballard Locks in 1917. (Photo: Frank Nowell/Seattle Municipal Archives)
The Ballard Locks in 1917. (Photo: Frank Nowell/Seattle Municipal Archives)

The Lake Washington Ship Canal project was declared complete in 1934. While generally a success, the project did create problems. Salt water intrusion began upstream toward Lake Union, which required a system that included siphons and flushing mechanisms. In addition, the Cedar River was the primary water source for the lakes, the locks and Seattle’s potable water. After the construction, there were problems at times with an adequate water supply to maintain lake levels and operate the locks. Also, redirecting the rivers caused greater flooding throughout the watershed. That was made worse by logging; at times during storms the locks were opened just to allow water to flow out.

Salmon Bay Terminal in 1936. (Photo: Seattle Municipal Archives/livabl.com)
Salmon Bay Terminal in 1936. (Photo: Seattle Municipal Archives/livabl.com)

As a result of the locks’ construction, the topography of Seattle and the surrounding area was reshaped profoundly. In addition to lowering the water level of Lake Washington and Lake Union, miles of new waterfront land were added, the flow of several rivers were redirected, and the eastern half of Salmon Bay was drained. 

As noted above, the Ballard Locks carry more boat traffic than any other lock in the U.S. They were designed and built for the nation’s commerce. Logs and coal traversed the locks for years. Now, over one million tons of cargo, fuel, building materials, and seafood products pass through the locks each year. In addition, a significant portion of the Alaskan fishing fleet moors in Seattle’s fresh waters and use the locks. However, it is smaller recreational boats that make up the majority of the vessel traffic through the locks, with nearly 50,000 boats moving through the locks annually. 

The Ballard Locks. (Photo: myballard.com)
The Ballard Locks. (Photo: myballard.com)

Operation of the locks

The locks are capable of elevating a 760-by-80-foot vessel 26 feet – from the level of Puget Sound at a very low tide to the level of freshwater Salmon Bay, in only 10 to 15 minutes. The locks handle pleasure boats and commercial vessels, ranging from kayaks to fishing boats returning from the Bering Sea to cargo ships. 

Vessels that want to pass from the freshwater Lake Washington or Lake Union to Puget Sound enter the lock chamber through the open upper gates. The lower gates and the draining valve are then closed. Lockwall attendants make sure the vessel is tied down and ready for the chamber to be drained.

Next, the upper gates and the filling valve are closed. The draining valve is opened, which allows water to drain via gravity out to Puget Sound.  When the water pressure is equal on both sides of the gate, the lower gates are opened, allowing the vessels to leave the lock chamber.

The process is reversed for upstream locking. 

Boats traverse the locks. (Photo: myballard.com)
Boats traverse the locks. (Photo: myballard.com)

The complex includes two locks so that the small lock can be used when boat traffic is low. This conserves fresh water during summer, when the lakes receive less inflow. With two locks one can be drained for maintenance without blocking all boat traffic. For the last several years the large lock is drained for approximately two weeks (usually in November); the small lock is drained for about the same period (usually in March).

An aerial view of the Ballard Locks complex. (Photo: ballardlocks.org)
An aerial view of the Ballard Locks complex. (Photo: ballardlocks.org)

The locks complex

In addition to the locks, the Ballard Locks complex also has a visitors center, a spillway, a fish ladder and the Carl S. English Jr. Botanical Garden.

South of the small lock is the spillway dam. It has tainter gates that are used to regulate the freshwater levels of the ship canal and lakes. The gates on the dam release or store water to maintain the lake within a two-foot range of 20 to 22 feet above sea level. Maintaining this lake level is very important – there are floating bridges and mooring facilities on the lakes, and if the lakes were too high it would impact vessel clearances under various bridges. 

In addition, smolt flumes in the spillway help young salmon to pass safely downstream.  Higher water levels are maintained in the summer to accommodate recreation and so that the lakes can act as a water storage basin in case of drought conditions. 

The salt water barrier is very important as well. If excessive salt water were allowed into Salmon Bay, the salt could eventually damage the freshwater ecosystem. To help prevent this, a basin was dredged just above the large lock. Salt water is heavier than freshwater; it settles into the basin and drains through a pipe discharging downstream of the locks area. The saltwater drain was modified in 1975 in order to divert some salt water from the basin to the fish ladder. There it is added via a diffuser to the fish ladder attraction water. 

Visitors in the viewing gallery watch salmon return to spawn. 
(Photo: myballard.com)
Visitors in the viewing gallery watch salmon return to spawn.
(Photo: myballard.com)

To further restrict the intrusion of saltwater, a hinged barrier was installed just upstream of the large lock in 1966. A hollow metal barrier, it is filled with air to remain in the upright position, which blocks the heavier salt water. The barrier is capable of being flooded; it then sinks to the bottom of the chamber when necessary to accommodate deep-draft vessels. 

According to the federal government, the fish ladder at the Ballard Locks is “unique,” because it is located where salt and freshwater meet. Normally, fish ladders are located entirely within freshwater. 

Pacific salmon hatch in lakes, rivers and streams (and now in fish hatcheries). They then migrate to the sea, and only at the end of their life return to freshwater to spawn. Prior to the construction of the locks, no significant salmon runs existed in the nearby area. 

As noted earlier in this article White River was rerouted into the Puyallup River. Cedar and White rivers did support significant salmon runs but also created severe flooding conditions for the area’s early settlers. Rerouting these two rivers was a mixed blessing; while flooding was reduced, the Duwamish River salmon runs were decimated. To help the situation, salmon runs were rerouted through the Locks, which included introducing a major run of sockeye salmon using stock from Baker River, Washington.

Looking down into the viewing gallery. (Photo: myballard.com)
Looking down into the viewing gallery. (Photo: myballard.com)

The ladder was designed to use “attraction water” – fresh water flowing swiftly out the bottom of the fish ladder, in the direction opposite which the salmon migrate at the end of their lives. However, the attraction water from this first ladder was not effective. The Corps rebuilt the fish ladder in 1976 by increasing the flow of attraction water. In addition, the old fish ladder had only 10 “steps”; the new one has 21. A diffuser well mixes salt water gradually into the last 10 steps. When the fish ladder was rebuilt, the Corps added an underground chamber with a viewing gallery.

Part of the Carl S. English, Jr. Botanical Gardens. (Photo: myballard.com)
Part of the Carl S. English, Jr. Botanical Gardens. (Photo: myballard.com)

Legacy

Today, the locks are a leading tourist attraction in the Seattle metro area, with more than one million visitors annually. In addition to the attractions noted above, there are the Carl S. English, Jr. Botanical Gardens. The gardens contain seven acres of exotic trees and plants.

Carl S. English, Jr. was a horticulturist and botanist hired by the Army Corps in 1931. For over 40 years his vision and expertise transformed the area surrounding the locks into an English estate-style garden. English also helped to develop the waterside plantings along the Fremont and Montlake Cuts that are part of the Lake Washington Ship Canal.

Seattle residents or visitors can relax in the gardens, enjoy a picnic or a free summer concert. The gardens have also become a favorite outdoor wedding venue.

The Ballard Locks were added to the National Register of Historic Places in 1978 and the American Society of Civil Engineers’ list of Historic Civil Engineering Landmarks in 1997.

FreightWaves Classics thanks the following organizations for information and photos used in this article: the U.S. Army Corps of Engineers, myballard.com, transportationhistory.org, ballardlocks.org, blog.friendsoftheballardlocks.org and the Seattle Municipal Archives.

Maersk: Shipping profits stay ‘super strong’ as supply chain pain persists

Container shipping giant Maersk sees continued strength in U.S. imports and ongoing supply chain disruptions globally.

photo of a Maersk container ship

The container shipping boom refuses to end on its predicted schedule. Maersk previously guided for a sharp slowdown starting in July. That didn’t happen. Now it sees a gradual pullback toward the end of the year.

On Tuesday, the world’s second-largest container liner operator pre-reported an all-time high $10.3 billion in earnings before interest, taxes, depreciation and amortization for Q2 2022. During a conference call on Wednesday, Maersk CEO Soren Skou said that Q3 2022 will be “equally good,” i.e., around $10 billion.

Maersk has pushed back expectations for a “normalization” of its ocean business until Q4 2022. Even then, it doesn’t see a collapse. Its new guidance calls for full-year EBITDA of $37 billion, implying Q4 2022 EBITDA of around $7 billion. If so, Q4 2022 would be the fourth- or fifth-best quarter in the company’s history.

What has kept the container boom going longer than expected? Maersk executives cited three causes: ongoing supply chain congestion, continued U.S. import demand strength and higher long-term contract pricing.

‘No quick resolution’ to congestion

According to Maersk CFO Patrick Jany, “Q2 saw a continuation of global congestion, with several disruptions offsetting the weakening demand and lower economic outlook and [supporting a] still very high level of freight rates. Although spot rates softened, they remain high in absolute terms.

“While the demand outlook is certainly down, various disruptions preempted a wider erosion of freight rates, which led to an overall market development that was very similar to that of the first quarter, with both higher rates and lower [year-on-year] volumes.”

Skou said he has been frequently confronted with questions from investors on the development of global congestion. He explained, “Congestion really ramped up last year on the U.S. West Coast as import volumes jumped at the same time labor supply dropped due to COVID. We had expected congestion to ease by the middle of this year.

“The situation on the ground is that while congestion has eased a bit on the West Coast, congestion has spread to the East Coast and to Europe.

“Containers are just not moving off the terminals fast enough. On the West Coast, we have a massive problem getting rail cars. Yesterday, we had 8,500 containers in our L.A. terminal waiting for rail cars. That is three or four times the average from a few years ago.

“Across the West Coast, East Coast and Europe, we see issues with customers not picking up containers because of full inventories. This picture means that a quick resolution of the global supply chain issue is increasingly unlikely.”

US imports remain at ‘very high levels’

“Import volumes into the U.S. remain at very high levels,” said Skou. In contrast, he noted, imports to Europe are back to pre-pandemic levels.

Imports in millions of forty-foot equivalent units. Charts: Maersk. Data source: Maersk estimates including CTS data

An analyst asked Skou why U.S. imports have remained strong despite U.S. retailers reporting excess inventories and slowing demand for some products.

He responded: “Some of the [excess] inventory, particularly in the U.S., is the ‘wrong’ inventory. So, our customers are complaining that they have the wrong inventory and they still have to import the ‘right’ inventory.

“There are certain product categories, especially in durable goods, where pretty much everybody has bought [what they needed]. Everybody has bought a new couch, a new set of lounge furniture, a new TV screen — all the things we spent our money on during the pandemic.

“You cannot go on buying things like another TV screen. But there is still actually very strong demand for faster-moving stuff, especially in lifestyle and retail goods.

“With inflation being rampant in the U.S., people are able to afford less than they were a few months ago. At some point, that should have an effect on U.S. imports. The only caveat there is that savings are also very, very high. Many wise people have said that we should always be careful not to count out the U.S. consumer.”

Blue line: 2022 TEU import volumes. Green line: 2021. Chart: FreightWaves SONAR

Maersk contract rates exceed expectations

Yet another reason why the container shipping boom is lasting longer than some expected: long-term freight contract coverage. Spot rates get more attention and spot rates are falling. But contract rates are up sharply year on year.

Contract rates have been even higher than Maersk previously thought, one of the key reasons why it just hiked full-year guidance.

“The conclusion of our 2022 contracting season was very strong,” said Skou. Maersk now expects 2022 contract rates to be $1,900 per forty-foot equivalent unit higher than 2021 contract rates. That’s $500 more per FEU than it predicted just three months ago. “That reflects much better performance, compared to our expectations, in the latter part of Q2 and over the summer,” said Skou.

Maersk now has 71% of its long-haul business on contracts, mostly with beneficial cargo owners as opposed to freight forwarders.

The company’s average freight rate, including both contract and spot, came in at $4,983 per FEU in Q2 2022, up 64% year on year and up 9% from the first quarter. It was the highest quarterly average rate ever reported by Maersk — and the current quarter looks like more of the same.

Click for more articles by Greg Miller