PPRCE 2017: Ups and downs

Ocean freight rates have sunk back down after a price surge in the first half of the year.


(Pictured: John Paul Mackens of Kuehne + Nagel.)

Presenters on a session focused on ocean freight at the 2017 Paper & Plastics Recycling Conference Europe event depicted a sector with ongoing consolidation and volatile rates. The conference was held in Warsaw in early November, at a time when rates from Europe to Asia were sitting in a trough.

China’s economic growth had spurred a massive increase in ocean shipping, according to figures presented by Dan Sandoval of the Recycling Today Media Group. China’s ports have seen a four-fold increase in container shipping traffic from 2000, when they handled 13 million twenty-foot equivalent units (TEUs), to the 52 million TEUs handled in 2015.

Shipping line consolidation has been the other major trend, said Sandoval. The five largest lines handled 27 percent of the container traffic in 1996, but in 2017 the five largest lines are expected to handle 64 percent of the total.

John Paul Mackens of Switzerland-based freight forwarding firm Kuehne + Nagel said the Chinese government’s increased scrutiny of imported scrap materials had been “a huge headache” for the freight industry, and that he had to reposition some 50 containers away from China because of the National Sword program there.

The changes in the plastic scrap sector have been sudden and dramatic, said Mackens. In 2016, Europe sent 89 percent of its outbound plastic scrap to Chinese ports. In September 2017, said Mackens, just 46 percent went to Chinese ports, with Malaysia receiving 12.6 percent, Hong Kong receiving 10.7 percent and Vietnam 9.5 percent.

By volume, Mackens said, July and August 2017 showed a huge drop in scrap shipments heading from Europe to China. Carriers, he said, are “now fighting for the shipments left” in that direction.

He predicted a 1 million TEU loss in secondary commodity shipments from Europe to China in 2018. That volume drop, combined with low rates, means “we will definitely lose another carrier” if those conditions continue, Mackens predicted.

Martino Tavolato of Switzerland-based paper recycling firm Vipa Lausanne S.A. portrayed the roller coaster-ride nature of shipping rates in the previous two years, with Northern Europe to China rates having soared from an average of $250 GIGO (gate in/gate out) in July 2016 to $1,200 GIGO in May 2017. “We couldn’t find any logic” in the massive increase, said Tavolato.

By June 2017, however, the effects of China’s National Sword initiative had become apparent as Europe-to-China traffic shriveled. By early November 2017, rates on those routes had dropped back to $500 GIGO. “It shows, in the end, the market is free,” said Tavolato, as supply and demand factors kicked in.

He said, based on China’s new restrictions, some 6 million tons of mixed paper and 7 million tons of plastic scrap that formerly headed to China will have to be processed differently to make it to Chinese ports. Otherwise, said Tavolato, there will be some 1 million TEUs “that need to be replaced,” which he says is equivalent to about “six average-sized container ships per month.” He concluded, “We’re going through some amazing changes.”

The 2017 Paper & Plastics Recycling Conference Europe, organized by the Recycling Today Media Group, was Nov. 7-8 at the Hilton Warsaw Hotel & Convention Centre.