South Korea’s biggest port Busan is faced with more containers than it can send out to sea as carriers have trimmed capacity but demand for cargo space has increased.
The situation signals the potential for shipping lines to bump up freight rates.
A news report by Bloomberg says surging shipments of furniture, electronics and clothes to the US and Europe, coupled with capacity cuts by shipping lines, has caused as much as 15% of containers to be delayed, sometimes by about a week, in Busan this year. The report quotes Park Jong Ho, assistant general manager at Busan International Container Terminal Co.
“With the economy recovering, we have been seeing a lot of containers that didn’t make it out on time because there wasn’t enough space on ships,” he said.
A capacity crunch on transpacific routes has disrupted deliveries of Asian and US exports, prompting a probe by U.S. regulators. Container lines have cut trips and imposed higher rates on customers, or shippers, after slumping trade and an excess supply of vessels caused industry-wide losses of about USD$20 billion last year, the report says, quoting Drewry Shipping Consultants Ltd.
Amid last year’s slump, lines mothballed more than 500 ships worldwide to pare capacity. They also began operating vessels at slower speeds, which cuts fuel usage and reduces the total amount of cargo each ship can haul per month.
Shipping companies, including, Maersk and Mediterranean Shipping Co., the world’s two largest container lines (and 13 others) are seeking an extra $800 per cargo box on the Asia-US west coast routes. That’s about a 50% increase.