Market Update – August 2021
Dire shortage of carrier space, unreliable vessel schedules, and skyrocketed freight rates – what many thought were temporary aberrations due to COVID-19, became prolonged challenges that shippers have had to endure for over a year. In times of highlighted volatility, responding to disruptions in your supply chain based on genuine and real-time information is especially critical to keeping your goods moving across the globe. In the fast-moving world of international shipping, Century stays committed to helping you stay tightly engaged with industry events that may impact your supply chain operations. Our updates are always published with the objective of helping you navigate the ongoing industry challenges and move freight at the right time and cost. Apart from our real-time Century News Updates, we are giving a facelift to our Market Updates and are glad to introduce this new publication that will be sent to you monthly.
In our rebranded monthly newsletters, we will gather market intelligence from our global offices and provide you with a selection of the most relevant news revolving around world trade, ocean freight , ports, and other information that may impact your supply chain operations. We will start every month with a Century Spotlight highlighting what we see as keys to synchronized supply chain management amidst current industry circumstances.
Under these unique shipping circumstances, phrases like “tight carrier capacity” are starting to lose real meaning as many shippers have grudgingly gotten accustomed to inflated ocean freight rates to secure space on vessels. As your trusted supply chain partner, we remain committed to delivering operational excellence and would also like to share our take on this prominent issue and what our customers have been doing to circumvent this ongoing industry-wide challenge.
Given the upcoming festive seasons and the long golden week holiday in China, we recommend better prioritization of your hot merchandise so that not only can your suppliers ensure production timelines are met based on your demand forecasts, but so that our teams can book with carriers in advance to secure space for your hottest cargo. Following historical shipping trends, we anticipate carriers may start blank sailing around the golden week holiday in early October as most Chinese manufacturers, carrier offices, terminals, and customs will halt operations during that period. To better anticipate the typical rush in September, we strongly recommend ensuring that your vendors place booking as soon as possible so that we can help with carrier bookings and securing equipment as soon as possible. There may be a need to consider using premium or express services if you need to ship your goods out of China promptly before the long national holidays. We would be happy to work with you to establish a prioritization process for your cargo, and can also connect with your vendors to check on cargo readiness accordingly.
As carrier capacity remains limited in various origin ports, we are seeing more customers leveraging diversified resources to move their time-sensitive goods. For example, due to the recent restrictions implemented at Vietnam’s Ho Chi Minh Port, one of our customers successfully acquired additional carrier space through our NVO division and a local co-loader. At the destination side, our customers are also remaining flexible and rerouting their cargo to alternative ports where they then leverage transload operations to truck their goods to the right final destination.
According to industry data, the latest transpacific container rates for exports from China to North America West Coast, excluding premiums, reached $15,809 as of August 13th, representing at least a 274% increase from $4,222 earlier this year.
- Due to the continuously extraordinary import demand from China and the operational challenges in ports worldwide, some carriers previously announced aggressive surcharges. Effective August 15th, German vessel operator Hapag-Lloyd began levying USD $4,000 and $5,000 for all types of 20’ and 40’ containers, respectively. The surcharge will be applicable for containers originating from China destined to the United States and Canada. Likewise, effective August 6th, Israeli liner ZIM also started implementing a US congestion surcharge of $5,000 for all types of containers from the Far East to US West Coast.
- Two members of the U.S. Congress introduced a bipartisan bill with the aim of modernizing federal regulations on the shipping industry. The Ocean Shipping Reform Act, if enacted, would promote the competitiveness of US exporters and require ocean carriers and port operators to formally adhere to federal guidelines on detention and demurrage charges, etc. Earlier on July 20th, the U.S. Federal Maritime Commission (FMC) announced that it has established a new audit program to assess the rationale and compliance of the late fees charged by carriers and ports. While marketers believe this is unwanted attention for carriers, some are concerned that the reform may weaken the fluidity of containers. Currently, shippers are incentivized by the demurrage and detention rates to pick up and return shipping boxes more promptly to avoid additional costs.
- Following a report of a confirmed COVID-19 case, Meishan Container Terminal in Ningbo, China, and its nearby Bonded Logistics Park have suspended operations since August 11th until further notice. To minimize schedule disruptions, some carriers such as CMA CGM, COSCO Shipping, and OOCL have announced port omissions at Ningbo and/or diversion to other local terminals. While many fear that the closure of Meishan Container Terminal could turn into another crisis similar to what we witnessed at Yantian Port in May, there are several other terminals at Ningbo Port that are currently maintaining normal operations. While there are speculations that Meishan Terminal may fully re-open on September 1st , we anticipate there could be longer wait times that may affect vessel schedules until the container backlog is cleared.
- The yard density in Busan Port remains tight as the port is handling the return of empty containers at a much lower pace due to constraints in carrier space and vessel delays. From July 30, Pusan Newport International Terminal, one of the largest terminals in South Korea, started tightening CY gate-in to 3 days before ETB (Estimated Time of Berthing) from the previous ETB -5. We are seeing continued delays in vessels to the U.S. and Europe up to 20 days as well as an overflowing volume of cargo at yards and CFS.
- According to a recent press release from the Port of Los Angeles, 890,800 TEUs of goods were processed in July, which is a 4% growth as compared to the same timeframe last year. The port also reported a total loaded imports of 469,361 TEUs in July as well as a 329,999 TEUs of empty containers due to strong demands in Asia, reflecting a 20.4% jump compared to last year.
- The port of Oakland in California recently announced that in the first half of 2021, the port recorded a total throughput of 1.3 million TEUs, representing an 11.4% increase as compared with the same timeframe last year. Given the current outlook and the anticipated strong holiday volume, the port of Oakland will likely handle over a record volume of over 2.6 million by the end of this year.
Please refer to the below visualization of Century’s assessment of the operating status at the major origin ports throughout Asia.
- Equipment shortage remains an industry-wide challenge throughout Asia. The imbalance in export/import is believed to be aggravating the shortage of containers as export demand far outweighs import supply, significantly affecting the availability of empty containers that are used to carry export goods departing Asia.
- In the first half of 2021, around 2.6 million TEUs of dry containers, excluding sales to private buyers, were built. This number has surpassed what container manufacturers would normally build in a year and according to industry forecasts, the annual production of shipping boxes is set to exceed 4.5 million TEUs, outstripping 2018’s record high by 30%. While manufacturers are producing more containers to fulfill overwhelming demand, shippers are absorbing the new equipment so quickly that the industry has not seen a spike in container inventory.
- The domestic eastbound trucking rates have soared after Union Pacific Railroad temporarily suspended all of its international intermodal services from the West Coast to one of its Midwest hubs in Illinois for seven days in July. While Union Pacific is maintaining normal services, its operational fluidity could be compromised if the congestion at USWC ports worsens.
ASIA PACIFIC LOCAL UPDATE
- Due to the resurgence of COVID-19 and the highly infectious Delta variant in multiple Asian countries, local governments have been extending and/or re-imposing restrictions to contain the further spread of the coronavirus. While authorities are issuing stay-at-home orders to control the public’s movements, those employed in essential sectors, including logistics and export-oriented businesses, are oftentimes exempt from the restrictions. Century has been publishing a global COVID-19 update on a bi-weekly basis and sending out separate advisories in between our fortnightly publications if there are significant impacts that could affect your supply chains. If you are not receiving these as expected, please reach out to your Account Manager who will be happy to help resolve the issue.
- The period from July to September is when the risk of tropical cyclones and monsoons traditionally peaks. In July, our teams have not received reports of severe impacts brought by tropical storms besides the typhoon In-fa that shuttered Shanghai Port and Ningbo Port for two days in July. Although weather is an uncontrollable factor, our teams are closely following weather forecast locally and ensure all precautionary measures are taken as needed.
TRADE & ECONOMIC HIGHLIGHTS
- Vietnam recently claimed the title as the world’s second latest apparel exporter with a global share of 6.4% , racing past Bangladesh and remaining under China’s dominance in the garment industry. Vietnam’s garment exports accounted for $29 billion in 2020, while Bangladesh’s textile shipments declined by 18% YoY to $28 billion in 2020 due to COVID-related factory closures.
- Manufacturing activities in China shows growths at the slowest pace since the pandemic first began in February 2020. According to the official Purchasing Managers’ Index (PMI) released by China’s National Bureau of Statistics, the PMI stood at 50.4 in July 2021, slightly above the half mark that separates expansion from contraction in activities. Statisticians believe the manufacturing industry has weaken due a range of factors, including extreme weather in some areas, equipment maintenance, increased costs in sourcing raw materials, etc.
- In the second quarter of 2021, the U.S. real Gross Domestic Product (GDP), rose 6.5% on an annualized basis and marginally surpassed the first quarter by 0.2%. While the real GDP has reached the pre-pandemic level, the Q2 number is still below its trend. This GDP gain is considerably lower than the 8.4% growth Dow Jones had anticipated.
Besides our suite of tools on VMS® that power your supply chains every day, customers are also leveraging the following solutions to maximize the efficiency in their supply chain operations and mitigate the ongoing industry challenges.
- Century Express – Century Express holds contracts with multiple ocean carriers and helps you realize schedule flexibility for your shipments. With Century Express as your NVO partner, you will have complete visibility to your shipments within VMS® as our NVO division leverages VMS® as the operating platform. We also consolidate the NVO invoicing into your existing invoicing and keep the numbers of documents issued for multiples services transparent and minimal.
- Warehouse Storage – Besides the usual CFS cargo flow through our facilities, we can also work with you to take on dedicated storage space to accept vendor deliveries based on their production schedule. This way, we can help alleviate pressure at vendor facilities while also ensuring that your cargo can be dispatched as soon as carrier space becomes available.
- Value-added Services – The wide range of value-added services we provide at origin CFS, such as pick and pack, consolidation, and palletization, gives you a space-efficient solution for greater transport equipment efficiency. Century can build direct store loads from our Asia CFS facilities to bypass transloads/DCs and streamline inbound delivery.
- Origin Trucking Solution – With the support from your carriers, we may be able to divert your space allocations and truck your cargo to alternate ports for loading and sailing, giving you greater efficiency in space planning.
- Destination Services – Our physical network in North America extends beyond the predominant shipping hubs in California. Our coverage in the Pacific Northwest gives you alternative storage and transload options in Seattle and Tacoma, as well as Vancouver, Canada. Spanning along the Atlantic coast from the Florida Peninsula to the Northeast, we also offer a range of destination services such as pick and pack and cross-docking on the east coast.
Talk to your Century Account Manager or contact a sales representative today to understand how we can develop a customized solution to meet your supply chain needs! We will continue to work together with your logistics teams to navigate these unique shipping times every step of the way.
Disclaimer: The information contained in this newsletter was provided by our partners across Asia and referenced from online sources that were not specifically authorized for third-party usage. The aim of this publication is for informational purposes only. While Century endeavors to validate the authenticity of the stipulated information, Century is not responsible for its accuracy and completeness and does not accept liability or responsibility for any actions taken upon reliance.
- Freightos Baltic Index
- Port of Oakland volume spiked 11.4 percent in first half ‘21
- Containers are being built at a record pace. It’s still not enough
- Vietnam leapfrogs Bangladesh as world second-largest clothing exporter
- China’s factory activity in July grows at slowest pace since Feb 2020
- U.S. GDP rose 6.5% last quarter, well below expectations
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