Following the outbreak of COVID-19 at Yantian International Container Terminals (YICT) in May, port congestion in South China is worsening.
In the two weeks that ended June 8th, Yantian has been unable to handle 375,000 TEU, and this figure does not take into consideration the impact of diversions on nearby ports. For comparison, the Suez Canal blockage affected approximately 330,000 TEU over six days.
With North American consumer demand expected to continue to outstrip supply on the eastbound trans-Pacific, the ongoing effects of Yantian and any further disruptions will have a greater impact than usual.
Limited trans-Pacific shipping capacity has led to shippers having to prioritise what needs to be imported into the US over what can be delayed, and any added capacity is immediately soaked up by demand and impacted by congestion at Asia origins and US destinations.
Shippers and forwarders have now voiced growing concerns over carriers’ inability to honour minimum quantity commitments (MQCs).
Amid so much disruption, it is currently difficult to determine the extent to which MCQs are not being honoured due to carriers’ inability to provide capacity and how much is due to carriers prioritising higher-paying cargo and overcommitting space.
Some are now likening container services to tramp services due to low schedule reliability. In April, schedule reliability was at 22.2% from Asia to the USWC.
A recent article by joc.com highlighted that one veteran maritime attorney, Carlos Rodriguez, has argued the alliances have “run rampant” over regulation while enjoying antitrust benefits; it is clear there is an appetite for the first rewrite of the Shipping Act since 1998.
The National Industrial Transportation League proposed updating the legislation last month. This has opened up a larger debate about whether the Federal Maritime Commission (FMC) has the required authority to effectively regulate the industry.
In the meantime, however, Yantian and other blows to capacity will continue to reduce functional capacity and likely lead to further failures in honouring MQCs.
We continue to monitor the situation and will keep you updated. Should you have any enquiries regarding specific bookings, please contact our Customer teams.