Welcome to the Century Weekly Market Update! We’re excited to bring you the latest news and insights from the supply chain and logistics industry over the past week.
Our weekly market update features a dedicated section on emerging industry trends and a report specifically focused on the frequency and impact of port omissions during blank sailings. These updates provide valuable insights to help supply chain decision makers navigate potential disruptions, optimize their supply chains, and stay informed about the latest industry developments.
Last week, freight rates on most major trade lanes experienced growth. Shippers encountered difficulties in securing space and dealing with rising rates during early peak season, the Red Sea crisis caused a surge in minimum transit time from Asia to MED, and MSC resumed operations at the Port of Baltimore after the collapse of the Francis Scott Key Bridge. Additionally, the container shipping industry saw significant rebound in Q1 2024 driven by increasing freight rates.
At Century, we're committed to helping our customers stay a step ahead in these rapidly changing market conditions. Our team of experts are dedicated to providing comprehensive and timely insights to help you make informed decisions and stay competitive.
Emerging Industry Trends:
The Container Shipping Market Hangs on a Precarious Edge of Balance
Despite partial absorption through slow steaming in container shipping, the market experienced significant overcapacity, and this problem is expected to further intensity as an extra capacity of 1.5 million TEUs will be added in the remaining months of 2024.
Due to the Red Sea crisis, the extended sailing distance around Southern Africa has resulted in a substantial demand shift.
The unforeseen surge in demand has taken all stakeholders by surprise, which suggests an early commencement of the peak season driven by concerns over labor negotiations and service diversions around Africa.
The current market conditions mirror the initial phases of pandemic disruptions, characterized by inadequate capacity and unprecedented rate spikes.
The potential reopening of the Red Sea route poses the risk of a sharp decline in spot rates.
Journal of Commerce
Allocation Struggles for Shippers Amid Early Peak Season Demand and Surging Rates
Due to heightened demand during an early peak season, shippers especially on Asia-Europe trades face difficulties in preserving their weekly allocated space from carriers.
Unprecedented demand for the Asia to North Europe and MED routes has caused an earlier-than-expected peak season, which lead to increased rate levels and shortages of equipment.
Ocean carriers operating in the trans-Pacific region were confronted with a comparable scenario where they are reducing or eliminating allocations to NVOs for fixed-rate bookings.
Average spot rates for North Asia-UK increased M/M by 42% to US$4,950 per FEU, and average spot rate for Asia-MED increased M/M by 34% to US$5,500 per FEU, thus forcing shippers to choose between rolling over their cargo or incurring significantly higher rates.
Eastbound vessels encountered substantial delays of six days in Singapore ports and two days in Chinese ports, compounding the capacity challenges and contributing to equipment shortages.
Journal of Commerce
Canadian Rail Operators Rely on Government Intervention Amidst Pending Strike Threat and Unproductive Negotiations
Instead of engaging in negotiation, Canadian rail operators rely on government intervention as a means to prevent a nationwide rail strike.
Following the expiration of the collective agreement between Teamsters Canada Rail Conference (TCRC) union, Canadian National Railway (CN) and Canadian Pacific Kansas City (CPKC) on December 31st, 2023, the parties have recently initiated bargaining.
With a significant threat to North American supply chains, TCRC’s potential strike on May 22nd, 2024, was cancelled for the Canadian Industrial Relations Board (CIRB) to evaluate its potential impact on national health and safety.
While there has been no advancement in collective bargaining, TCRC explicitly expressed a preference for arbitration and implied a reliance on government intervention.
The CIRB is currently in the process of assessing shipments that must be preserved in the event of a strike or lockout, with submissions received by May 21th, 2024, and rebuttals due by May 31th, 2024.
Weekly Blank Sailings Report:
Century’s Blank Sailings Report for the week of May 20th – May 26h. Discover the latest insights on the current trend of blank sailings through the most up-to-date carrier data direct from Century.
Last week saw a total of 394 port omissions, a 3.66% decrease compared to the week prior.
Shanghai recorded the highest amount of port omissions last week with 36, followed by Singapore with 33 and Ningbo with 26.
Other ports with notably high omissions last week are Hong Kong and Kaohsiung with 20.
Hai Phong recorded the biggest W/W increase in port omissions, rising by 66.6%.
Looking towards the coming weeks, Century’s data shows a 0.76% increase in currently scheduled blank sailings for week 21.
Next week’s preliminary data shows notable increases in port omissions to be expected at ports in Ningbo and Busan.
Port omissions data for the most frequently omitted ports during week 21 can be found in the table below:
Internal
Our full Blank Sailings Report for the week of May 20th – May 26th below provides a full list of every current scheduled port omission from Week 21 to Week 31 as of May 26th, 2024. The second tab breaks down this data into an easy-to-read table which shows port omissions by each location per week so you can see which locations are being omitted the most and which locations are experiencing the sharpest increase in port omissions.
Majority of Trade Lanes Continue Seeing Increases in Freight Rates
Trans-Pacific and trans-Atlantic have all recorded W/W increases as the Global Container Freight Index rose by 10% W/W.
Trans-Pacific freight rates have now recorded five consecutive weeks of increases.
China/East Asia to West America East Coast rate surged by 13% W/W to US$ 4,915, and China/East Asia to North America East Coast rate surged by 18% W/W to US$ 6,297.
North Europe to China/East Asia rates significantly increased by 29% to US$ 918.
Rates from Europe to South America East Coast and South America West Coast were steady W/W at US$ 828 and US$ 1,736 respectively.
Freightos
Red Sea Crisis Leads to 39% Increase in Average Minimum Transit Time on Asia-MED
The Asia-MED trade has experienced extended transit times as shippers are forced to take longer routes, bypassing the Red Sea and navigating around the Cape of Good Hope.
Compared to the period from July 2023 to December 2023, the average minimum transit time between two sub-regions of Asia and three sub-regions of MED surged by 39%.
Connections to East MED have witnessed a notable rise by 61%-63% in the average minimum transit time.
The average minimum transit time for connections to the Baltics has observed a relatively smaller impact, with an increase ranging from 7% to 11%.
In contrast, the uptick in average minimum transit time on Asia-North Europe was lower at only 15%.
Surge in Intra-Asia Freight Rates is Driven by Port Congestion and Strong Cargo Demand
Freight rates on certain trades from China have reached their highest levels in 30 months as a result of redirection of shipments due to the Red Sea crisis, and expanding volume of exports originating from Southern Asia
Ocean carriers strategically redirect vessels and prioritize mainline east-west services by skipping regional trades, leading to a significant surge in volumes within intra-Asia route.
Carriers are discouraged from acquiring leased ships to address the capacity deficit because of the lack of available feeder vessels and excessive charter rates.
Spot rates from Shanghai to Bangkok and Vietnam have hit their highest points since December 2021, with prices of approximately at $1,200 per FEU and $1,000 per FEU respectively.
The congestion at Asian ports led to a 10-day delay in Japan-Straits Malaysia loop, and reduced supply of vessels increased dwell times for export containers in Shanghai up to 4.1 days in April 2024, intensifying inefficiencies in cargo movement and negatively affecting schedule reliability.
Journal of Commerce
China Faces Worsening Equipment Shortages Amid Surging Export Demand and Shipping Disruptions
The ongoing diversions of vessel around Southern Africa leads to significant increase in export demand, interruptions to long-haul and intra-Asia services, and equipment shortages in China.
The equipment difficulties are particularly severe for 40-foot and 40-foot high-cube containers.
Despite the prior observation of a tightening supply in the preceding months, the situation of equipment shortages has escalated into a serious concern since May 2024, as a combination of multiple factors creating an exceptionally challenging circumstance.
Extended durations to Europe and North America, as well as the omission of port calls in the Indian sub-continent and Middle East have caused delays in the return and pick up of empty containers.
The equipment shortage has been significantly worsened by the unforeseen surge in export demand since the start of 2024, as containerized exports from Asia experienced a 17% Y/Y increase in February 2024, and US imports from Asia saw a 24% Y/Y rise in Q1 of 2024.
Indian Shippers Adopt Cautious Approach Amid Contract Negotiations
Due to the escalating volatility of ocean rates on major trade routes to the US and Europe, Indian shippers and freight forwarders adopted a cautious approach to annual service contract negotiations.
Following the capacity expansion by Ocean Network Express through their newly launched independent routing connecting West India to North America, rates on the India-US trade routes, historically dependent on contractual agreements, experienced a significant drop in May 2024.
The decline in spot rates and a continued downturn in trade demand are attributed to shippers showing reluctance to finalize contracts.
Customers are actively urging their liner partners to modify certain finalized deals in terms of rates or volumes, particularly for Europe loading. This is primarily because of concerns about potential unforeseen events related to the Red Sea crisis.
Major liners are placing less emphasis on pursuing named account contract commitments and instead prioritizing volume acquisition from various sources due to the prevailing supply-demand imbalances.
Maersk has revealed a conservative peak season surcharge of $600 per FEU for India-US shipments, and has advised customers in South Asia to anticipate higher surcharges associated with the ongoing Red Sea crisis, which is projected to continue until Q3 2024.
Federal Funding Bolsters Upgrades and Maintenance at Ports of LA and LB to Enhance Global Supply Chains
Federal funding of US$ 112 million was distributed to the Ports of Los Angeles (LA) and Long Beach (LB) for construction upgrades and maintenance activities.
The federal government generates funds by collecting the Harbor Maintenance Tax, a 0.125% duty on the value of cargo at ports.
Given that the Ports of LA and LB handles 40% of container imports in the US, the investment will strengthen the global supply chain.
The enactment of the Water Resources Development Act in 2020 broadened the utilization of the Harbor Maintenance Trust Fund, leading to a fair allocation among ports of varying sizes.
The Port of LA plans to spend US$ 6.7 billion for upkeep and repairs, including sediment removal and pile replacements, while the Port of LB anticipates an expenditure of US$ 2.3 billion over the next ten years to enhance capacity and establish sustainable practices.
LA-LB Ports Reduces Dwell Times and Deploys additional Equipment to Prepare for Early Peak Season
Los Angeles and Long Beach (LA-LB) ports reached record-low dwell times in April 2024, indicating improved efficiency and readiness for the upcoming peak season.
Shorter dwell times for rail and truck transportation of import containers are attributed to the enhanced equipment support provided by BNSF and Union Pacific (UP) railroads.
Average rail container dwell times at LA-LB port declined to 4.55 days, and truck dwell times for cargos leaving the docks dropped to 2.5 days, both representing the lowest figure Y/Y.
Import volumes from Asia to LA-LB ports surged 17% M/M to 664,095 TEUs in April 2024, yet the declining dwell times resulted in the port complex of Southern California (SC) to handle 48.2% of total imports in April 2024.
An early peak season in 2024 is driven by factors such as increased demand for school supplies and autumn merchandise, sustained consumer spending, and improved inventory clearance.
Prince Rupert Port Authority Secures Loan from CIB for CANXPORT Development
The Canada Infrastructure Bank (CIB) will provide a loan of US$ 110 million to the Prince Rupert Port Authority for the development of CANXPORT, an upcoming export logistics hub.
CANXPORT aims to enhance the transloading services for various export products by rail to containers in the Prince Rupert region, as well as strengthen supply chain resilience.
The project is expected to be completed by Q3 2026 with an estimated cost of US$ 547 million.
Import containers constituted approximately 73% of Prince Rupert's overall laden container volume between January and April 2024, indicating an 11% Y/Y increase, while laden exports remained unchanged compared to the previous year.
CANXPORT’s 108-acre facility will be developed and operated by Ray-Mont Logistics, offering an initial transloading capacity of 400,000 TEUs annually.
MSC Restores Operations at Port of Baltimore
MSC returns services to the Port of Baltimore, which is in line with the decision made by Maersk and Hapag-Lloyd.
Following a two-month stoppage due to the temporary disruption caused by the collapse of the Francis Scott Key Bridge, MSC has resumed its operations at the Port of Baltimore.
MSC will restore its operations utilizing six vessels for the transportation of cargo, encompassing routes to northwestern Europe, South Africa, MED, and the Far East.
Most cargo originally designated for the Port of Baltimore was redirected to New York and Norfolk, with the Port of New York handling the largest portion of rerouted shipments, accounting for 55% as of May 17th, 2024.
The resumption of port operations brings relief to a significant number of longshoremen who experienced unemployment, as only 350 employees were engaged in maintenance and repairing tasks during the outage.
Container Shipping Witnesses Notable Turnaround in Q1 2024 due to Increasing Freight Rates
The container shipping industry experienced a remarkable financial transformation, shifting from a loss of US$ 700 million in 2023 to a net profit of US$ 5.4 billion in Q1 2024.
The industry's improved performance was primarily driven by a surge in freight rates, which can primarily be attributed to the Red Sea crisis.
Ocean carriers including MSC and Maersk were forced to alter the routes of their vessels, leading to a one-third rise in voyage distances and an 8% reduction in global container capacity.
Among the analyzed individual container lines, Cosco Shipping achieved the highest net income of US$ 785 million, while Maersk recorded a net loss of US$ 166 million.
The varying profitability among companies can be attributed to various factors, such as the composition of customers and trade lanes, the utilization of vessels, and improvements in pricing within trade lanes connecting Asia to Europe and North America.
