African market experiences container shortages as carriers prioritize Asia-US routes

The African container market is currently experiencing box shortages, driven by carriers prioritizing the Asia-US trade lanes in anticipation of the impending end of the 90-day tariff reduction period for China on Aug. 12

Market sources mentioned cargo from Asia should be loaded by mid-July to reach ahead of the August US deadline.

Platts assessed PCR13 -- North Asia to the West Coast of North America -- at $5,700/FEU on June 10 and PCR 5 -- North Asia to the East Coast North America -- at $7,400/FEU, both unchanged from June 9.

This has caused carriers to redeploy capacity from other trade lanes, including the African trade lanes, in an attempt to earn profits.

A trader from Burkina Faso said that "freight costs are also on the rise." The surge in freight rates is largely due to container shortages, a situation worsened by recent trade agreements between the US and China.

Another exporter said that since demand in bulk is currently subdued and destination markets are overflooded, it is likely that container-based exporters would wait and watch and eventually trade would move to bulk shipments. A market participant mirrored the sentiment, stating that an increase in container freight is likely to push shippers to use dry bulk instead. Sources also added that although the rates have not seen a sharp increase India-West Africa yet, further increases are expected.

Indian rice suppliers have reported a shortage of containers and an increase in container freight costs. One exporter noted that if freight rates double, it will exert upward pressure on FOB prices, especially given the current subdued demand.

Platts assessed India Parboiled 5% at $379/mt FOB on June 11, up by $13/mt on the month. Platts assessed West African Parboiled 5% CFR Cotonou at $430/mt on June 11, up by $12/mt month over month.

Freight to East Africa has risen by 15-20%, with another trader citing that freight to Mombasa has risen by $100/mt on the month, at $750/TEU for June shipments.

"It is not just for West Africa, it is an equipment shortage throughout all trade lanes because more focus is now on exports out of China," a carrier said. "Additionally, it takes time for the imported boxes to get cleaned, painted and changed into food-grade boxes, so that also adds on to the unavailability."

Additionally, some carriers are also downsizing vessels operating on the Middle East-West Africa route and taking larger vessels towards transpacific.

"We are downsizing vessels, extracting 8,000 TEUs vessels with 6,000 TEU vessels, moving capacity towards China-US and also China-West Africa," another carrier said. "Volumes from the Middle East have also dropped and there are holidays in the Middle East. [Moreover], one of the main products moved to Africa is lubricants, and production right now is low."

In the East Coast Africa market, sources expect an increase in spot rates owing to capacity redeployment and blank sailings. However, low demand persists, especially for sugar.

"Cargo movement is a bit slow at the moment, especially sugar. MSC has had a blank sailing in the first week of June and Sea lead is sailing fortnightly," a carrier said.

Market sources mentioned capacity from India-East Africa being moved to China-US and also West Africa.