Market Update 12th Feb 2020

Factories in the Philippines are currently running at a higher capacity than in recent months and are beginning to catch up slightly on lost production.

There are still many orders to catch up on, and for VCO the backlogs are much more significant than for desiccated.

Demand from the UK and Europe during lockdown has increased way about norms, with some manufacturers’ requirements over 100% up year on year, meaning any increase in production is used almost immediately. With very little available on the spot market and warehouses virtually empty after 2020 delays.

Prices for desiccated are on the rise due to this demand, as are VCO prices.

Shipping continues to be the biggest challenge for most importers right now. Delays are ongoing with containership schedule reliability at the lowest level since records began.

Shipping companies are blaming market conditions, with the drop in traffic at the beginning of 2020 and the massive traffic surge towards the end, causing the prices to increase wildly.

Part of a Press release from Maersk this week said…

…in light of ongoing schedule reliability considerations, Maersk is implementing measures to improve schedule reliability in its Far East Asia to Europe network.

In combination with the Chinese New Year period, Maersk will cancel two (2) additional sailings with the aim to free up services for schedule recovery measures to respond to the recent, unprecedented market situation with severe port congestion and equipment limitations across global supply chains.

This situation has been driven by a combination of rapidly increased demand and measures to fight the pandemic that led to slower supply chain operations across ports, inland depots, warehouses and inland transport modes.

Soren Skou of Maersk said in an FT article “Ships don’t become larger because the demand increases. ”

We see sailing that used to take 40-45 days now at 74 for Felixstowe – but other sailings are improving.

Then we have container shipping costs that peeked at $16,500 at the beginning of January. Although the prices have dropped, they are still way above norm’s, to the extent that world governments, including China, are looking at the options and may well impose sanctions to ensure they come down.

However, shipping prices will probably not drop quickly, and costs will still be an issue into Q2 and Q3.

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