/ By tjchinafreight ivy / Shipping

Pakistan Customs Manifest Has New Regulations

Korea Shipping recently announced that, according to the latest notification from Pakistan Customs, from April 1, 2022, for goods exported to various ports in Pakistan, detailed information such as the consignee’s and the notifying party’s importer’s tax number must be added to the manifest. .

In order to avoid problems such as failure of customs clearance by the consignee at the destination port and delay in delivery due to the lack of manifest contents, please be sure to complete the confirmation information of the bill of lading in strict accordance with the following requirements, otherwise all responsibilities and expenses arising therefrom shall be borne by the customer.

The specific requirements are as follows, and the following contents need to be entered in the address column of the consignee and the notifying party of the bill of lading:

1. Real and valid detailed company address

2. NTN (CNIC) number:

- The consignee is a company: the Pakistan National Tax Number (NTN) of the importer company

- The consignee is an individual: Individual National Identification Number (CNIC)

3. Contact number

4. Mailbox

/ By tjchinafreight ivy / Shipping

Evergreen’s container ship ‘Ever Forward’ has declared general average

After the ship left Baltimore on March 13, the Ever Forward ran aground. For the common interests of cargo owners and the safety of all involved, Evergreen Shipping has been making every effort to refloat the stranded ship. Evergreen declared general average on April 17, given the increased cost of continued attempts to re-float the vessel. There have been no reports of injuries or contamination.

Ever Forward, a 12,000 TEU container ship owned by Evergreen Shipping (Hong Kong) Co., Ltd., a subsidiary of Evergreen Shipping Group, ran aground in Chesapeake Bay after leaving Baltimore on the evening of March 13. No casualties have been reported to the ship or its cargo. , and there are no signs of fuel leaks or contamination.

Dredgers have been digging around the stranded container ship, and groups of tugboats made two unsuccessful attempts to pull the 1,095-foot vessel out of the silt last week.

Under new plans announced by the Coast Guard, cranes will be used to remove some of the containers from the "long haul" to reduce their weight before the next rescue effort. The lifting operation will start as soon as a crane with the right lifting height is installed. Meanwhile, the dredger will continue to dig to a depth of 43 feet around the vessel. During these operations, the fairway will remain one-way traffic and a 500-yard safety zone will remain around the vessel.

Salvage experts determined that in their current state of loading, they would not be able to overcome the gravity of the "long-range wheel". The new program offers the best chance of successfully relaunching the long haul. ' said the Coast Guard.

Containers will be unloaded from the port and starboard sides of the 12,000TEU container ship and placed on a barge, which will transport the containers to the Seagrit Marine Terminal in the Port of Baltimore and unload them. The ship is currently carrying 4,964 general dry cargo containers, according to the Coast Guard. The Coast Guard said that for safety reasons, lifting operations can only be carried out during the day.

Once the required number of containers has been removed, another re-float attempt will be made using tugboats and pulling barges.

According to the Baltimore Sun, the plan calls for the removal of several hundred of the 4,964 containers on the long-haul ship, with most of the cargo remaining on board. Since the shipowner Evergreen Shipping has declared general average, the shipper needs to provide the necessary guarantees and documents to the general average adjustment company before the container cargo shipped to the Seagirt terminal can be recovered.

/ By tjchinafreight ivy / Shipping

Vietnam accelerates container production to compete with China

Chinese factories now account for more than 96% of the world's dry container and 100% of the reefer container market, and Vietnam is joining the fray and is providing the world with a new container export destination.

Vietnam's Hoa Phat Group, Southeast Asia's largest steelmaker, is making a foray into container manufacturing.
It sees potential synergies with its core steel production business.
Hoa Phat started construction of its plant Hoa Phat Container Manufacturing in Vung Tau province in December and is expected to be operational by the end of this year with an annual production capacity of 500,000 TEUs, all using steel produced in-house.
Two South Korean companies - Seojin Systems and Ace Engineering - have also built container factories in northern Vietnam, which are expected to be operational later this year.

Hefa Group: Plans to supply containers to the market in the fourth quarter

Nguyen Manh Tuan, vice chairman of Hoa Phat Group, said: "Shipping containers are part of the Hoa Phat company ecosystem, and Hoa Phat started building the container manufacturing plant amid a global shortage of shipping containers."

Hefa Group planned to start construction of the factory in June 2021, but due to the impact of the fourth wave of the new crown epidemic, the project was officially launched in November 2021, five months later than planned.

But after 3 months of construction, 5 workshops, with a total construction area of ​​nearly 7 hectares, began to erect columns. On February 22, 2022, the construction of the first truss of workshop 5 was completed.

Vu Duc Sinh, head of the container manufacturing division of Hoa Fatt Group, said the first machines and equipment at the plant are expected to arrive this month and construction will be fully completed by April. The construction of the factory is accelerating. There are 3-5 contractors on the construction site, who distribute the projects equally and strive to complete the capital construction within 6 months from the date of commencement of construction. We want to build factories as soon as possible to take advantage of the shortage.

In Vietnam, Hoa Phat was the first container manufacturer. Tuan explained that the high price of weathering hot rolled coil steel used to make containers would cost the company if imported, and we at Hoa Phat can produce this steel.

The Hefa Group's container factory will be commissioned in the third quarter of 2022, and products will be brought to market from the fourth quarter of this year. The plant is expected to have a capacity of 200,000 TEU per year by the end of 2023.

/ By tjchinafreight ivy / Cargo • International • Shipping

Maersk Bars on CMA CGM: We Oppose Stopping Plastic Waste

Not long ago, liner giant CMA CGM announced that it has banned all ships from transporting plastic waste, a move that has received support from NGOs.

But Maersk recently expressed a different view. The shipping company, also headquartered in Europe, warned that stopping the transportation of plastic waste will not only not improve the marine environment, but may also prevent the transportation of this waste to recyclable sites.

The NGO Plastic Change has urged Maersk to stop shipping plastic waste after rival CMA CGM announced it would no longer ship plastic waste for environmental reasons. Louise Lerche-Gredal, head of Plastic Change, wrote in an article, “It is time for Maersk to take a stance on whether they will continue to be part of the waste transport issue. Plastic waste not only contributes to pollution, it also contributes to the climate crisis. , and affect the most vulnerable societies in the world.”

Maersk said it would not do what CMA CGM did because banning the transport of plastic waste due to environmental concerns is not a good idea. "We do not think a blanket ban on the transport of plastic waste is feasible because such a ban would prevent us from helping responsible companies and organisations to transport plastic waste and other recycled materials to recycling sites in a responsible manner."

According to a Feb. 11 press release from CMA CGM, the decision to stop shipping plastic waste comes as the French carrier wants to work to prevent plastic waste from being "exported to destinations where sorting, recycling or recycling cannot be guaranteed." “About 10 million tons of plastic waste ends up in the ocean every year. If we don’t take action, this number will triple to 29 million tons per year in the next 20 years, which will cause irreversible damage to marine ecosystems, flora and fauna ."

CMA CGM said it transported around 500,000 tonnes of plastic waste in 2021. Maersk doesn't disclose the volume of veteran plastic waste shipped, but according to Plastic Change, Maersk ranks third.

Maersk emphasizes that it is "a responsible company and we of course take environmental protection seriously. Ensuring compliance with all legal and regulatory procedures regarding the import and export of plastic waste has always been embedded in our business and daily activities."

Maersk also works with an ocean cleanup organization. The organization recycles plastic waste in the Pacific, and stopping the shipment of plastic waste will prevent Maersk from assisting the organization in delivering the collected plastic to recycling sites.

/ By tjchinafreight ivy / Shipping

International air transport knowledge

Eight elements of air freight inquiry:

1. Product name (whether it is dangerous or not)
2. Weight (charges involved), volume (dimensions and whether it's in stock)
3. Packaging (Wooden box or not, with or without pallet)
4. Destination airport (whether it is a basic point or not)
5. Time required (direct flight or transfer flight)
6. Requested flight (different flight services and prices)
7. Types of bills of lading (main and separate orders)
8. Required transportation services (customs declaration method, agency documents, whether customs clearance and delivery, etc.)

Air freight is divided into heavy cargo and bubble cargo.

1CBM=167KG The volume weight is compared with the actual weight. Which one is larger is charged according to which one. Of course, there is a little secret in the air freight bubble, which all colleagues should know, and it is inconvenient to talk about it here. Manufacturers who do not understand can figure it out for themselves.

Air freight structure composition - did you know?

There are many people who do air freight. Do you know how the air freight rates of airlines are calculated? A brief introduction, I hope to help everyone.

Air freight composition:

1. Airfreight freight (charged by the airline)
2.Fuel sur charge fuel surcharge (depending on the airport, the price of the destination point is different, Hong Kong is generally about the first 4 yuan now, before 3.6, last year the highest 4.8, the price is adjusted by the airport, generally 2 yuan to Asia)
3. Security check fee (fixed fee of 1 yuan/kg in Hong Kong)
4. Airport operation fee (HKD283/ticket in Hong Kong, the airport is responsible for transporting goods on the plane, etc.)
5. Terminal fee: 1.72/kg When the goods are handed over to the dealer, the dealer is responsible for the board and other things, and finally handed over to the airport for collection)
6. Air main bill fee: HKD15/bl is the fee for issuing the bill of lading - document of title.

The above is the composition of accounting fees for most airlines, mainly Hong Kong Airport. Because Hong Kong is a super-large free trade port, and Hong Kong Airport is the largest airport in the world, it has fewer restrictions, a wide range, and a large number of cargo aircraft. There are currently 78 airlines. There are more than 100 flights every day, which can be the first choice when the space and service are guaranteed. However, the cost is generally about 2 yuan higher than that in China!

What are the types of air cargo?

When you decide to ship your goods by air, you should know that there are two main types of air freight:

  • Special shipment
  • General shipment

Special cargo allows heavy, hazardous material and temperature managed cargo. It also allows human tissue samples, organs, fragile, value items and animals.
General Crago allows digital machinery, hardware, consumer goods, retail goods, toys, clothing and textiles, and more.
Air cargo is transported using different types of aircraft including passenger, cargo, charter or helicopter.

What are the factors that affect the cost structure of air freight?

Many factors contribute to the cost of air freight, such as:

  • Special event or holiday
  • Traditional/New Regulations
  • Economic situation
  • Technology (robotics, augmented reality, drones, artificial intelligence and big data)
  • Other additional charges such as cargo insurance, airline terminal handling charges, customs clearance and security surcharges are also included in the fee.

Common air freight nouns:

ATA/ATD (Actual Time of Arrival / Actual Time of Departure)
Abbreviation for actual arrival/departure time.

Air Waybill (AWB)
A document issued by or on behalf of the shipper, which is proof of the carriage of goods between the shipper and the carrier.

Unaccompanied Baggage (Baggage, Unaccompanied)
Baggage that is not carry-on but checked in, and luggage that is checked in.

Bonded Warehouse
In this type of warehouse, goods can be stored indefinitely without paying import duties.

Bulk Cargo
Loose shipments that are not palletized and boxed.

CAO (Cargo for Freighter Only)
Abbreviation for "Cargo Aircraft Only", meaning that it can only be carried by cargo aircraft.

Charges Collect
List the charges to the consignee on the air waybill.

Charges Prepaid
List the charges paid by the shipper on the air waybill.

Chargeable Weight
The weight used to calculate air freight. The billable weight can be the volumetric weight, or when the cargo is loaded in the vehicle, the total weight of the load minus the weight of the vehicle.

CIF (Cost, Insurance and Freightage)
Refers to "Cost, Insurance and Freight", which is C&F plus Seller's insurance for loss and damage to the Goods. The seller must sign a contract with the insurer and pay the premium.

Consignee (Consignee)
The person whose name is listed on the air waybill and who receives the goods carried by the carrier.

Consignment
The carrier receives one or more pieces of goods from the shipper at a certain time and place, and carries it to a certain destination with a single air waybill.

Consignor
Equivalent to shipper.

Consolidated ConsignmentA consignment of goods consigned by two or more shippers, each of which has signed an air freight contract with a consolidation agent.

/ By tjchinafreight ivy / International

Different types of letters of credit

What is a letter of credit?

A letter of credit is a guarantee or assurance to the seller that they will get paid on a large transaction. They are especially common in international or foreign exchange transactions. Think of them as a form of payment insurance provided by financial institutions or other accredited parties to the transaction. The earliest letters of credit were common in the 18th century and were called travelers' letters of credit. The most common contemporary letters of credit are commercial letters of credit, standby letters of credit, revocable letters of credit, irrevocable letters of credit, revolving letters of credit, and red-term letters of credit, although there are several others.

Commercial letter of credit
This is a standard letter of credit commonly used in international trade. It can also be called a "Documentary Credit" or "Import and Export Credit". 1 The bank acts as a neutral third party to release funds when all the conditions of the agreement are met.

Standby Letter of Credit
This type of letter of credit is different: it offers payment if something doesn't happen. 2 Standby letters of credit do not facilitate a transaction, but provide compensation in the event of a problem. A standby letter of credit is usually similar to a commercial letter of credit, but only pays if the payee (or "beneficiary") can prove they didn't get what was promised in the agreement. Standby letters of credit are a form of insurance that ensures you get paid, and they also guarantee that services will be performed satisfactorily. They can be used with negotiable letters of credit.

Irrevocable letter of credit.
This Letter of Credit may not be cancelled or amended without the consent of the beneficiary (Seller). This Letter of Credit reflects the Bank's (Issuer's) absolute liability to the other party.

Revocable Letter of Credit.
The bank (issuing bank) can cancel or amend this type of letter of credit at the customer's instruction without the prior consent of the beneficiary (seller). After the L/C is revoked, the Bank shall not assume any responsibility to the beneficiary.

Red Clause LC.
The seller may require prepayment of a letter of credit for an agreed amount prior to shipment of the goods and presentation of the required documents. This red clause is so called because it is usually printed in red on the document to draw attention to the "advance payment" clause of the letter of credit.

Revolving letter of credit
A revolving letter of credit can be used for multiple payments.
If buyers and sellers want to repeat business, they may not want to obtain a new letter of credit for each transaction (or each step in a series of transactions). This type of letter of credit allows a business to conduct multiple transactions using a single letter of credit before the letter of credit expires, and the validity period of the letter of credit may be three years or less.

Negotiable letter of credit
A transferable letter of credit can be transferred from one "beneficiary" (payee) to another. They are usually used when an intermediary is involved in a transaction.

Back to back
Back-to-back letters of credit can be used when an intermediary is involved but a negotiable letter of credit is not suitable.

What are the benefits of using a letter of credit?

A letter of credit places the risk of the transaction on the bank rather than the buyer or seller. They provide a secure payment method that ensures funds get where they need to be. Letters of credit also provide parties with the opportunity to incorporate safeguards, regulations or other quality control measures.

How to get a letter of credit?

Many banks offer letters of credit, so you can get one by contacting your bank's representative. Banks with dedicated international trade or business departments are likely to offer letters of credit. If your bank doesn't offer a letter of credit, it may point you to an institution that does.

/ By tjchinafreight ivy / International

Foreign exchange risk

What is foreign exchange risk?

Foreign exchange risk refers to the possible loss of international financial transactions due to currency fluctuations. Also known as currency risk, foreign exchange risk and exchange rate risk, it describes the likelihood that the value of an investment may decline due to changes in the relative value of the currencies involved. Investors may be exposed to jurisdictional risk in the form of foreign exchange risk.

Where does foreign exchange risk come from?

Foreign exchange risk arises when a company receives payments in one currency but pays fees in another. From the importer's point of view, the risk is that the foreign currency will appreciate because it means they will have to pay more for the imported goods. Instead, for exporters, the risk is that the foreign currency will depreciate against the Canadian dollar. If the exporter's foreign currency depreciates after selling to an international customer, the exporter's Canadian dollar will end up being lower than expected.

Companies are also exposed to foreign exchange risk when they create price lists at the start of the season, long before they invoice foreign customers, or when infrastructure projects require payment after each step of the project is completed. Once a formal agreement is reached with a supplier or customer, the company is at risk.

There is no one-size-fits-all strategy for reducing foreign exchange risk. A company's exposure is affected by many factors, including the volume of imports and exports, whether payment is made at the time of sale or at a later date, the currencies involved, and the countries where customers and suppliers are located.

All currencies fluctuate in value, and the Canadian dollar is no exception. Decisions about major interest rates by Canadian banks, energy prices, geopolitical conflicts, foreign acquisitions of Canadian businesses and many other factors can affect the value of our currency. Predicting currency movements is very difficult, and analysts' forecasts are not always reliable. That's why it's so important for companies to have policies in place to minimize this risk and protect their profitability.

Characteristics of foreign currency export sales

Applicability
Recommended for (a) highly competitive markets and (b) when foreign buyers insist on buying in local currency

Risk
Exporters are at risk of exchange rate losses unless foreign exchange risk management techniques are used

Advantage
Enhanced export sales terms to help exporters remain competitive
Reduce the risk of non-payment due to local currency devaluation

Shortcoming
The cost of using certain foreign exchange risk management techniques Foreign Exchange Risk Management
burden

Foreign exchange risk is divided into three categories:

Transaction Risk: This is the risk a company faces when purchasing products from a company located in another country. Product prices will be in the selling company's currency. If the selling firm's currency appreciates relative to the buying firm's currency, the firm making the purchase will have to make a larger payment in its base currency to reach the contract price.

Conversion risk: A parent company with a subsidiary in another country may face losses when the subsidiary's financial statements (which will be denominated in that country's currency) must be converted back to the parent's currency.

Economic Risk: Also known as forecast risk, refers to the continued exposure of a company's market value to the risk of inevitable currency fluctuations.
Companies exposed to foreign exchange risk can implement hedging strategies to reduce this risk. This often involves forward contracts, options and other exotic financial products that, if done right, can protect companies from unwanted foreign exchange fluctuations.

Currency Exchange Tips

Please be aware of any issues with currency exchange. Not all currencies can be freely or quickly converted into dollars. Fortunately, the U.S. dollar is widely accepted as an international trade currency, and U.S. companies can often ensure payments are made in U.S. dollars.
If the buyer requires payment in a foreign currency, you should consult an international banker before negotiating a sales contract. Banks can advise on any foreign exchange risk associated with a particular currency. The most direct way to hedge foreign exchange risk is forward contracts, which enable exporters to sell a certain amount of foreign currency at a pre-agreed exchange rate, with a delivery date ranging from 3 days to 1 year in the future.
If you can do business entirely in U.S. dollars, you may be able to avoid many of the difficulties and problems associated with currency exchange.

/ By tjchinafreight ivy / Shipping

Export documentary collection

What is it?

The exporter (a client of UniCredit Bulbank) ships the goods to the buyer and presents the bank with documents related to the goods and their shipment, such as commercial invoices, bills of lading, cargo insurance, etc., with collection instructions. In the collection instruction, the exporter identifies the foreign buyer (payer), full details of the buyer's bank (collecting bank), a brief description and value of the exported goods, a full description and value of the type and number of documents submitted, and Conditions for handing over documents to the drawee.

UCB processes the documents and forwards them to the collecting bank, usually the buyer's bank, for processing and delivery to the buyer in accordance with the collection instructions. As instructed, the collecting or presenting bank releases the documents to the payer after paying the value of the documents, or according to a written commitment to accept/pay when due, or not to pay.

Under export documentary collection, the bank only receives and transmits documents according to the exporter's instructions on how to handle the documents, without any payment obligation to the exporter. Payment for documents sent on a collection basis depends solely on the goodwill and creditworthiness of the buyer.

A step-by-step guide to understanding export documentary collections

Broadly speaking, from your (as the exporter) perspective, the export documentary collection process can be broken down into five steps:

1. Terms and Conditions:

You and your importer agree to terms of transaction and payment, including the use of export documentary collections. At this point, you should also negotiate whether:

Acceptance Document (DA) – Once the importer agrees to pay later, a document related to the sale of the goods will be provided.
Payment Document (DP) – Once payment is made and finalized, the importer will get the document.

2. Shipment and receipt of documents:

You ship the goods and receive documentation from the carrier or freight forwarder that the shipment has occurred.

3. Submit documents to the bank:

First, fill out the export documentary collection application form and the draft. Next, submit these documents along with your shipping documents to OCBC, which is also known as the remittance bank during the process. Your remittance bank will then proceed to:

Forward these documents to your importer's bank, the collecting bank.
The collecting bank will then notify your importer that the documents have arrived and will release the documents when the payment terms are met (this depends on whether your payment term is DA or DP, as described in step 1 above).

4. Receive payment from importer and own the goods:

Importers will pay their bank and obtain documentation via DA or DP (as above).

5. Payment receipt from OCBC Bank to exporter:

OCBC Bank will deposit funds into your account immediately upon receipt of funds from the importer's bank (in the case of DP) or on the scheduled date when the draft has been accepted (in the case of DA).

Key point

D/C is less complex and less expensive than LC.
Under a D/C transaction, the importer is not obligated to pay for the goods before shipment.
If properly structured, the exporter will retain control of the goods until the importer pays the draft amount at sight or accepts the draft to meet the legal obligation to pay at a later date specified.
Although sea transportation can control the goods, it is more difficult to control air and land transportation. Foreign buyers can receive the goods with or without payment, unless the exporter hires an agent in the importing country to pick up the goods until the goods arrive for payment.
The exporter's bank (the remittance bank) and the importer's bank (the receiving bank) play a vital role in the letter of credit.
Although banks control the flow of documents, they neither verify documents nor take any risk. However, they can affect the mutually satisfactory settlement of D/C transactions.

/ By tjchinafreight ivy / Shipping

FOB Shipping Point vs. FOB Destination

Container ship in the harbor in Asia 

International business terms (incoterms) were designed by the International Chamber of Commerce (ICC) to simplify international trade by creating a common standard language, a globally recognized list of terms related to the international transport and transport of goods.
Importers and exporters need to be proficient and proficient in many terms. Some terms are more common than others, such as Free On Board (FOB), Free Carrier (FCA) and Ex Works (EXW). FOB, while common, is largely misunderstood.
Although their language is largely drafted in legal language, it is the responsibility of all parties involved in a shipment to ensure that they understand all Incoterms, otherwise a simple shipment can turn into a costly accident .

Incoterms are important for several reasons. If you find yourself wondering what FOB means in shipping, be sure to take the time to understand FOB shipping

Free shipping on board

The FOB point of dispatch, also known as the FOB origin, is when title and responsibility for the goods pass from the seller to the buyer when the goods are placed on the delivery vehicle.
Since the FOB shipping point transfers title to the shipment of the goods when they are placed at the shipping point, legal title to those goods passes to the buyer. Therefore, the seller is not responsible for the goods during delivery. FOB Shipping Point is a further limitation or condition of FOB as liability changes hands at the seller's shipping terminal.

For example, suppose that ABC Company in the United States purchases electronic equipment from its supplier in China, and the company has a FOB point-of-ship agreement. If the nominated carrier damages the package during delivery, ABC Company will be solely responsible and cannot claim compensation from the supplier for the loss or damage. Suppliers are solely responsible for bringing electronic equipment to the carrier.

Free destinations on board

Conversely, for FOB destinations, title transfers at the buyer's loading dock, PO box, or office building. Title to the goods passes from the seller to the buyer once the goods have been delivered to the place designated by the buyer. Therefore, the seller legally owns the goods and is responsible for the goods in transit.

Types of free destinations on board

  • FOB freight prepaid and allows the named seller to be obligated to pay the freight and have the goods in transit. The seller bears the risk of loss of or damage to the goods in transit. Title to the goods passes to the buyer at the buyer's place of business.
  • FOB shipping prepaid and adding the specified seller is obligated to pay shipping. However, the seller charges the buyer for shipping. The seller bears the risk of loss of or damage to the goods in transit because the seller owns the goods in transit. Title to the goods transfers to the buyer's place of business.
  • FOB freight collect specifies that the buyer must pay the freight upon receipt of the goods. However, the seller bears the risks associated with shipping the goods because the seller still owns the goods during the shipping process.
  • FOB freight collect specifies that the buyer must pay the freight. However, the buyer deducts the fee from the seller's invoice. The seller is responsible for the goods because the seller still owns the goods during shipping.

Main difference

Another key difference between the two terms is how they are calculated. Since the buyer is liable after the goods are shipped, the company can record an increase in its inventory at this time. Likewise, the seller records the sale at the same time. If the goods are damaged or lost in transit, the buyer can file a claim as the company holds title during delivery.

The accounting rules for FOB destinations have changed. In this case, the seller completes the sale on its records once the goods arrive at the receiving dock. That's when the buyer records the increase in their inventory.

There are also differences in the division of costs. For the FOB shipping point option, the seller bears the shipping costs and charges until the goods arrive at the port of origin.

Once the goods are loaded on the ship, the buyer is responsible for all costs associated with shipping, as well as customs, taxes and other charges. For FOB destinations, the seller bears all costs and expenses until the goods arrive at the destination. Once in port, all costs - including duties, taxes and other charges - are borne by the buyer.

/ By tjchinafreight ivy / Shipping

Shipping companies are buying container ships?

According to Alphaliner, some ocean carriers are turning to buying ships to increase capacity, rather than chartering them, reducing capacity in the containership leasing market by 1.6 million TEU.

In addition, there are concerns in shipbroker circles that this reduction in open capacity will weaken the industry's ability to cope with the normal seasonal peak and low seasons of liner trade.

According to shipbrokers, the loss of capacity controlled by NOOs (non-operating shipowners) began in August 2020, when shipping lines, flush with cash due to soaring freight rates, began to add capacity to their own fleets.

In just 18 months, more than 500 container ships have been sold to liner operators through the secondary market, a massive fleet exodus rooted in high demand for freight post-COVID-19, Alphaliner said.

"The huge demand for container ships has caused container ship rents to soar to levels never seen before in the history of container shipping, almost overnight."

"MSC has been the main buyer so far, buying 169 second-hand container ships with a total capacity of 636,900TEU," Alphaliner said.

CMA CGM was the second most active shipping company in the container ship market, purchasing 62 vessels with a total capacity of 207,000TEU; Maersk ranked third with 27 vessels purchased with a total capacity of 141,600TEU; followed by Wanhai with 23 vessels ship with a total capacity of 139,700TEU.

However, some shipping companies have decided to take advantage of the freight rate gained on newbuildings to increase dividends to shareholders, or to seize opportunities in the charter market for longer-term fixed charters.

According to Alphaliner data, in the past 20 months, non-operating shipowners have ordered 175 ships with a total capacity of 710,321TEU, more than half of which have signed long-term charter contracts with shipping companies.

“The low number of newbuildings relative to the loss of capacity suggests that non-operating owners’ fleets need to order more 1,000-9,000 TEU-sized container ships,” the shipbroker said.

But he added that several factors were preventing owners from ordering new ships, including soaring costs, longer lead times, and uncertainty over environmental regulations and fuel options.

Meanwhile, sources at shipbrokers said they were concerned about the current lack of open container ship capacity in the market, as well as the lack of spare container ships in the future.

"At the moment, the outlook is not very good," said one broker. "However, we think that when the situation returns to some form of normalcy, shipping companies may consider moving some of the excess smaller ships they have purchased. Rent out, that will give us something to sell," he said.