Ocean market update – Indian Subcontinent & Middle East

Overview

Rising Covid-19 cases in China, largescale fuel stockouts in Sri Lanka, and developments in Europe, amongst other global supply chain disruptions, have had an increasing impact on shipping volumes in Quarter 1 of 2022 and have exacerbated port congestion across the world. Demand remains incredibly strong, which continues to put increased pressure on the global supply chains as capacity is still tied up outside ports in the US, Europe and Asia.

Despite the disruptions witnessed across various regions, the overall global container trade market has been stable over the last two years.

Globally, the operational environment remains challenging, with the main bottlenecks in the US, Europe and Asia. The spread of Omicron has reduced the workforce by 10-15% in Northern Europe, and we can also see an impact due to the worsening weather conditions in the region and the ongoing situation in Eastern Europe.

The US witnessed a workforce reduction of up to 20-25% across functions in terminals, warehouses, trucking and others leading to continued high waiting times outside US ports with no improvement seen in Los Angeles nor Long Beach and the outlook worsening in Norfolk, Charleston and Houston.

As a result of the rise in Covid-19 cases in China, the country has enacted stricter border controls, extensive testing and lockdowns, which could lead to an increase in delays in the movement of freight through the region. Low truck driver capacity could impact both vessel and air freight, resulting in longer delivery time and a possible rise in transport prices.

The economic crisis in Sri Lanka also led to a buildup of containers in Colombo Port due to major truckload service disruptions. Furthermore, a sharp decline of the Sri Lankan rupee against the US dollar has contributed to the tightening of the foreign exchange market, further disrupting the movement of cargo between Indian ports and Sri Lankan terminals.

Port wait times

Equipment availability remains challenging in certain pockets, and the shortage is expected to continue for the foreseeable future across many locations throughout the region as the number of factors impacting our ability to reposition them continues.

What we’re doing

To increase predictability and reliability, we increased capacity for equipment and vessels, and significant effort is being made to prioritize contracted volumes - long-term contracts now representing 65% up from 50% a year ago.

Additional global capacity of 6.4% added in 2021 resulted in an increase in loaded volumes of 3.6% as compared to 2020. We’ve also been expanding our overall fleet and, as of Q1 2022, we have 13 vessels in the newbuilding programme.

In the Indian Subcontinent and the Middle East, we have been closely monitoring supply chain disruptions and taking steps to mitigate any impact on our customers. In December 2021, a new direct vessel service from Far East Asia into the Middle East was launched to insulate our customers in the region against capacity bottlenecks in Tanjung Pelepas, Asia.

Our overall utilisation in 2021 remained high at 94.5%, and despite port congestions and network disruptions, our schedule reliability is still above the industry average. According to the latest Sea-Intelligence Global Liner Performance Report in February 2022, Maersk delivered an on-time performance of 46.9% in January 2022 compared to an industry average of 30.9%.

The Indian Subcontinent and the Middle East region witnessed the impact of port congestions in Europe as schedule reliability on this route dipped in January 2022. The region also recorded an increase in schedule reliability for exports from the Middle East to Asia and imports from Asia to the Indian Subcontinent.

Schedule Reliability: Indian Subcontinent & Middle East