Covid-19: Cargo Movement Update – 16 September 2022

PUBLISHER: BUSA

This update – the 105^th of its kind – contains a consolidated overview of the South African supply chain and the current state of international trade. Port operations this past week were characterised by strong winds, fog, equipment breakdowns and shortages, and congestion. For example, the Eastern Cape terminals were windbound at times this week, while Durban also experienced adverse weather conditions. In addition, Durban experienced a crisis week as two more tugs went out of commission, leaving the port with only two operational tugs. In addition, port engineers advised that the second set of shore tensioners at the Cape Town port are expected to arrive around 23 September 2022. Furthermore, regarding the Moormaster system at Ngqura, port engineers anticipate refurbishing the hydraulic cylinders by the end of September and hope to test the system in October 2022.

Key Notes:

An average of ~7 380 containers was handled per day, with ~8 583 containers projected for next week.
TNPA port statistics for August: containers are ↑8% (m/m), and ↑21% (y/y), but still down YTD (↓1,3%). Total cargo handled is ↓33% (m/m) and ↓26% (y/y), mainly due to reductions in dry bulk.
Rail cargo handled out of Durban amounted to 1 703 containers, ↓0,4% compared to last week.
Cross-border queue times were ~↑1 hour, with transit times ~↑1,8 hours, SA borders ~7 hours (↓57%).
Global container demand/supply gap closing (~2%) as equipment utilisation rallies despite struggles.
The “WCI” dropped for the 29th week in a row, with spot rates down by ↓8% ($387) to $4 492 per 40ft.
Air cargo rates were stable for August (↑0,5%, m/m), but cargo-revenue targets are unlikely to materialise.

Port operations – General:

Port operations this past week were characterised by strong winds, fog, equipment breakdowns and shortages, and congestion.
For example, the Eastern Cape terminals were windbound at times this week, while Durban also experienced adverse weather conditions.
In addition, Durban experienced a crisis week as two more tugs went out of commission, leaving the port with only two operational tugs.
In addition, port engineers advised that the second set of shore tensioners at the Cape Town port are expected to arrive around 23 September 2022.
Furthermore, regarding the Moormaster system at Ngqura, port engineers anticipate refurbishing the hydraulic cylinders by the end of September and hope to test the system in October 2022.

Port operations – Performance metrics:

CTCT stack occupancy for GP containers was 31%, reefers 39%, and empties 35%.
CTCT handled ~1 807 containers per day, with an increased average of ~1 882 projected this week.
DCT Pier 1: Stack occupancy was 58% for GP containers and 39% for reefers with 2 126 imports on hand, 404 reefers and 143 unassigned units.
DCT Pier 2: Stack occupancy was 53% for GP containers and 88% for reefers, highlighting an improvement at the terminal after the backlogs experienced last week.
The terminal had between 79 and 86 straddles in operation throughout the week, operated by eleven gangs.
DCT Pier 1 handled ~1 538 containers per day, with an increased average of ~1 735 this week.
DCT Pier 2 handled ~3 274 containers per day, with a decreased average of ~3 657 this week.
Average TTT for DCT this week: 61 minutes (↓40%), with a staging time of 57 minutes (↓201%).
In the last week (3 to 9 September), rail cargo handled out of Durban was reported at 1 702 containers, down by ↓0,4% from the previous week’s 1 708 containers.

Local and cross-border road:

Last week, clearing times at South African borders averaged ~7 hours (↓57% w/w).
In the local road freight sector, the industry was badly affected by the cumbersome bureaucratic requirements for applying for abnormal load exemption permits for loads leaving the port Point precinct.
Since there is only one weighbridge in the harbour area servicing many trucks, transporters are consequently experiencing extended delays.
Furthermore, the Department of Transport is insisting that the actual weight be declared on the permits. This totally unnecessary requirement has added a further three days to the process.
The collective industry is desperately pleading with the DOT to rectify this situation. Our supply chains need to move without hindrance, and cumbersome, unnecessary administrative challenges such as these are detrimental to our drive to facilitate trade and accelerate economic growth and development.
Reports were received of authorities at Kazungula weighbridge refusing to print out weighbridge slips – telling drivers they had to pay P3 500 for each vehicle. Under no circumstances should drivers pay anything until a slip has been printed.
Reports were received from the DRC with officials telling drivers that trucks could not operate in DRC without a carrier’s license, which is untrue but is nonetheless being enforced. Fesarta is currently in talks with Ministers in DRC to rectify the subject.
Last week, Namra issued a statement warning of infrastructure downtime over the weekend (Saturday, 10 September from 09:00 to 18:00). It was therefore recommended that all 24-hour borders resort to manual processing until the updating process was completed.
Oil spillage on Van Reenen’s Pass on Sunday, 11 September, affected both North and Southbound lanes. This delayed traffic for approximately three hours.

Global shipping industry:

According to CTS’s latest container throughput volumes , container throughput volumes (import and export) have increased annually by ↑0,6% (y/y) and would have probably been higher if the demand could have been better satisfied.
As a result, global container demand was consistently ↑10% higher than capacity from November 2020 to January 2022. However, the gap between demand and supply has subsided to below 2% compared to pre-pandemic levels .
It becomes evident that the extreme strength in favour of the carriers in 2021 is driven by a consistently higher cumulative demand growth than the available fleet. However, the outlook is shaping for a continuation of weaker demand, as economic growth forecasts for Q3 are likely to recede even further.
This week, Sea Intelligence provided an update on the carrier earnings before interest and tax (EBIT) and their relationship with container volumes for the second quarter. In summary, the second quarter is likely to become the most profitable quarter in the last decade.
However, this profitability level might not continue into Q3 due to the fast-falling freight rates and the slowdown in global demand. Indeed, after the peaks of September last year ($10 377), container spot rates have been slashed in half, with Drewry referring to the trends as “returning to sanity”.
The downward trajectory continues now for the 29th week in a row, as Drewry’s “World Container Index” decreased by a substantial ↓8% (or $387) – to $4 492 per 40-ft container this week.
Six major lanes decreased this week, with the other two unchanged. Compared to last year, only two lanes remain more expensive on the spot market.
The composite index is ↓52% below the levels experienced last year but remains ↑34% higher than the five-year average of $3 692. Indeed, the spot market rates are still 3,5 to 4 times higher than pre-pandemic levels, and the long-term contracted rates are much higher than the levels of the previous years.
Further developments of note included (1) typhoon “Muifa” shutting China ports for the second time in 10 days, (2) port congestion remaining despite an improved medium-term outlook, and (3) further labour issues disrupting supply chains on the other side of the Atlantic.

Local air industry:

South Africa’s international air cargo volume increased this week (↑6%), as the domestic volumes increased by the same amount (↑6%).
Operationally, several training sessions were held between the IVS team and SAAFF, SAEPA, and the ACOC.
The daily average volume of air cargo handled at ORTIA the previous week amounted to 516 562 kg inbound and 260 412 kg outbound, resulting in an average of 776 974 kg per day or ~103% compared with September 2021. Also, the level is currently at ~109% compared with the same period in 2020.
The average domestic air cargo moved last week was ~62 450 kg per day, which is ↑6% compared with the previous week and ~92% compared to August 2021.

International air industry:

Internationally, air cargo rates are stable, with the expected demand and accompanying revenues not quite materialising for airlines.
On the major routes, the prevailing rates are currently:
Frankfurt – North America is currently trending at $3,95 per kg – ↑3,4% (m/m), and ↑0,3% (y/y).
Hong Kong – Europe is currently trending at $6,34 per kg – unchanged versus July and still way up on last year at ↑36,9% (y/y).
Hong Kong – North America is currently trending at $8,33 per kg – ↓1,9% (m/m) and ↓3,6% (y/y).
In other cargo news, Maersk is expanding its logistics offerings by venturing into air cargo. The shipping giant has applied to the US Department of Transportation to have the foreign air carrier permit of subsidiary Star Air transferred to its new Maersk Air Cargo business.