MARKET UPDATE – February 2022
Strong market sentiments continue to present a series of supply chain challenges. Global port inefficiencies and the associated labor shortage have brought vessel schedule reliability to a historic low. While these disruptions seem to have become the norms, Century remains committed to navigating market volatility together with our customers to minimize cargo delays. In our February Market Update, we discuss the escalating capacity crunches and provide an overview of the freight market condition across the globe.
While global port congestion has been getting plenty of unexpected attention from those outside of the logistics space, for many supply chain professionals, it translates into a nightmare as we brace for further uncertainty in international shipping. As destination ports continue to deal with equipment and labor shortages, the inefficiencies are causing upstream impacts and leading to a continuing ocean capacity crunch.
In the coming month, ocean carrier space is projected to remain tights as carriers adjust their deployed capacity. According to the latest shipping data, across the major Asia foreign trades, including transpacific eastbound and Asia to Europe and Mediterranean, 110 out of 836 scheduled sailings between weeks 9 and 13 have been cancelled, representing a 13.1% cancellation rate. The withdrawals of ships will be primarily affecting scheduled port calls in China, with Shanghai, Ningbo, and Yantian seeing the most void sailings. Further, 75% of the blank sailings are forecast to be occurring in transpacific eastbound trade and mostly destined for Los Angeles/Long Beach, Oakland, New York, Savannah, and Vancouver. As more shippers reassess their replenishment strategy and book much earlier in advance than the traditional summer peak, the ocean capacity outlook will likely remain constrained until ports worldwide regain pre-pandemic efficiencies.
Century endeavors to provide our customers with optimal supply chain visibility and we have been working with an extensive range of data providers, including carriers and ports to obtain trusted shipping data. To help you better anticipate effective carrier capacity, click here to download a report of blank sailing forecast from March to June 2022!
As always, your supply chain wellbeing remains the utmost priority of Century. Until the current volatile market conditions moderate, advance cargo planning, timely vendor bookings, and flexibility in the choice of discharge ports will be key for hitting target ETD. Your Century Account Managers or Sales representatives will be glad to work with you to identity mitigating solutions to circumvent challenges around vessel schedule unreliability!
- Eastbound transpacific container freight rates were largely stable, with prices remaining at an elevated level. On the spot market, ex-China rates are at $13,492 to USWC and $15,428 to USEC, while ex-East Asia rates are at $18,517 and $23,100 to USWC and USEC respectively. The backlog created during the Lunar New Year when China’s workforce ceased operations is the most recent major cause that is keeping prices up. According to industry index which excludes premiums and surcharges, as of week 9, the transpacific container rates for exports from East Asia/China to USWC remained at $15,511 or 179% higher as compared to the same period last year. As for the China/Asia-USEC freight rate, prices are at $17,866 per FEU, which represents an 207% YoY increase. The ongoing carrier space deficit brings little relief to the sky-rocketed ocean freight cost. Ocean carriers have announced GRIs ($1,000 for 40’ standard containers) effective March 15 for cargo originating from Asia and India Sub-continent and destined for the United States and Canada.
- Global vessel schedule reliability dropped to a record low in the past year due to ongoing port congestion. The annual global schedule reliability slid from 78% in 2019 to 63.9% in 2020, and then further fell to 35.8% in 2021, which is the lowest record of all time. Maersk and Hamburg Süd were reported to be the most reliable carriers with an on-time performance of 46.4% and 40.9% respectively, while Evergreen was the only carrier with schedule reliability under 20%. In 2021, the average vessel delays were on an upwards trend and reached 6.86 days.
- German shipping line Hapag-Lloyd has launched a new two-port loop service, China Germany Express (CGX) to provide direct connection between South China (Da Chan Bay) and Hamburg, Germany. The first westbound sailing will commence on April 1 and provide regular weekly departures with a 27-day transit time. The addition of this direct service will add capacity for the China-Europe trade.
- All terminal activities and inland operations at Ukraine’s main seaport Odessa have stopped after Russia ordered military operations in Ukraine. Ocean carriers have suspended port calls at all Ukrainian ports and temporarily stopped accepting bookings for cargo moving to/from Ukraine since February 24. Vessels en-route will be diverted to Black Sea or the Mediterranean ports. Carriers have provided alternative solutions such as free Change of Destination services or suspended cancellation fees on bookings to/from Ukraine as a contingency.
- Cargo fluidity at the twin ports of Los Angeles and Long Beach has significantly improved in the past few weeks. As of week 8, there are 4 container ships at anchor within the 25 mile zone of the port complex and 72 ships waiting outside of the 25 mile zone, with a vessel waiting time ranging from 20 to 40 days. The import dwell time of import cargo at the Port of Los Angeles has dropped from 11 days to 5 days. The historic import volume remains the major cause to the ongoing congestion. The Port of Los Angeles saw the busiest January in its 115-year history with a record-setting throughput of 865,595 TEUs.
- The ports of Los Angeles and Long Beach further delayed the assessment of the “Container Excess Dwell Fee” until March 4. Since the fee was first announced on October 25, 2021, the ports said they have seen a “combined decline of 69% in aging cargo on the docks”. As a contingency plan to accelerate cargo movements, the ports plan to charge ocean containers dwelling at the ports for 9 days or more and rail containers for 6 days or more for $100 per container, with a $100 increment per container for each day that follows.
- The ongoing port congestion at Charleston persists due to a shortage of lift operators caused by the Omicron variant. Currently, there are about 7,500 containers that have dwelled at terminals for over 15 days. About 30 vessels are waiting at anchorage with berthing delays of 5 to 9 days. The backlog of imported containers in Charleston started piling up around Thanksgiving because of holiday inventory orders and was further aggravated after several carriers replaced the usual Savannah port call with Charleston. South Carolina Ports Authority estimates it will take another month and a half to clear the container backlog.
- The congestion at major European gateways shows little sign of improvement. Terminals in Antwerp, Hamburg, and Rotterdam continue to experience high yard density of up to 95% and reduced productivity caused by seasonal stormy weather conditions and COVID-related labor shortages.
Please refer to the below illustration of Century’s assessment of the operating status at the major origin ports throughout Asia. Updated the map
- Cross-border trucking activities between Hong Kong and China remain restricted due to quarantine and COVID-testing requirements for truckers. Some “site codes”, which are required for Hong Kong trucks to pick up or deliver cargo in China, have become invalid after the virus outbreak in Hong Kong.
- The Canadian Government declared a national emergency in response to the trucker protests across the country. The blockade has significantly increased the land transit time for drivers and slowed down the operations of terminals. While the protests have been brought to an end, the downstream impacts might remain. US-Canada cross-border truck rates have soared in the past few weeks due to the disruption in cross-border trade.
- Equipment availability remains low throughout Asia due to the slow circulation of containers. Our local teams in APAC have reported a continuing deficit of 40’HC and 40’ HQ containers, which is particularly severe in Bangladesh, Sri Lanka, and Vietnam.
ASIA PACIFIC LOCAL UPDATE
- To contain the spread of COVID-19, Hong Kong has extended its partial lockdown, which includes strict social distancing measures and a ban on incoming flights from nine countries including Australia, Australia, Canada, France, the U.S., and the U.K. until April 20. Maritime terminals in Hong Kong are operating as usual with reduced labor. Century Hong Kong office is open with skeleton staff, with most teams performing their usual duties remotely.
- China is maintaining its “Zero-COVID tolerance approach” to combat the risks of the Omicron variant. As of February 28th, there are 8 high-risk areas, including 6 in Inner Mongolia and one in Guangdong and Tianjin respectively. Cargo movement to/from these areas will be restricted due to quarantine requirements. Please refer to our latest China COVID-19 Update for more information on port and warehouse operating status.
TRADE & ECONOMIC HIGHLIGHTS
- India and the United Arab Emirates (UAE) signed a Comprehensive Economic Partnership Agreement (CEPA) on February 18 that could boost a bilateral trade to $100 billion by 2030 and gradually grant duty-free access for 90% of Indian goods into the Emirates. This will give India more advantage in highly competitive areas such as textile and leather exports, where Indian exporters are currently facing a 5% duty in the UAE while competitors such as Vietnam and Bangladesh are enjoying duty-free access.
Besides our suite of tools in VMS® that power your supply chains every day, the following solutions we offer also provide you with alternatives to maximize the efficiency in your 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 NVOCC partner, you will have complete visibility to your shipments in VMS® as our NVOCC division leverages VMS® as the operating platform. We also consolidate NVOCC invoicing with your existing invoicing, keeping the number of documents issued for multiple services transparent and at a minimum.
- Warehouse Storage – Besides the normal CFS cargo flow through our warehouse network, we can also work with you to take on dedicated storage space to accept vendor deliveries based on their production schedules. This can help to 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 one stop solution for greater supply chain efficiency. Century can build direct store loads from our Asia CFS facilities to bypass transloads/DCs and streamline inbound delivery.
- Origin Trucking Solution – With support from your carriers, we are able to arrange trucking to alternate ports where carrier space is more readily available, allowing for greater flexibility in space planning to achieve forecasted departure dates.
- Destination Services – Our physical network in North America extends beyond the primary shipping hubs in California. Our coverage in the Pacific Northwest and the East Coast gives you alternative storage and transload options, as well as other destination services such as pick and pack and cross-dock services throughout the United States and Canada.
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 through every step in the supply chain.
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.
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