Market Update – November 2021
From the port closures in Shenzhen earlier this year to the more recent cargo logjam on the U.S. West Coast, the supply chain crisis continues to make headlines globally and leaves importers worldwide perplexed about the low inventory levels heading into the busy holiday season. Although the industry recently saw a fall-off in container freight rates, the sole priority of many American importers seems to have become getting their cargo off water in Southern California and on the road to meet sky-high consumer demand.
To help our customers adapt to volatile market conditions, Century stays committed to ensuring we provide you with the critical information concerning international logistics for your timely decision-making. In our November Market Update, we take another dive into the persistent congestion in American ports and the measures that authorities and the industry are deploying to solve this conundrum.
Despite businesses’ best efforts to restock seasonal merchandise, many American retailers are worried that they will be greeting customers with empty store shelves this winter, as the supply chain bottlenecks at the ports in the U.S. continue to be exacerbated by the record imports from Asia. According to latest industry data, the U.S. imports from Asia in October surged to 1.67 million TEUs, up 6.6% from 1.57 million TEUs in the previous month. This is the sixteenth month in a row where the U.S. has witnessed a continuous growth of record imports from Asia, even when hundreds of container ships were stranded off coasts. According to The Marine Exchange of Southern California, as of November 22, there are 61 container vessels waiting for a berthing window at anchor at LA/LB.
To combat the challenges presented by port congestion, authorities are now levying surcharges for idle containers nationwide in hopes of clearing the cargo backlog and accelerating cargo velocity. The twin ports of Los Angeles and Long Beach introduced a “Container Excess Dwell Fee” directed at Ocean Carriers last month in an effort to accelerate import cargo movement. The ports said incoming ocean containers dwelling at the ports for 9 days or more and rail containers for 6 days or more will be charged $100 per container, increasing in a $100 increment per container for each day that follows.
While some remain skeptical about these punitive measures, authorities said the mounting pressure on the shipping hub seems to be easing. In a recent joint official statement, the ports of Los Angeles and Long Beach said they will delay the consideration of the Container Excess Dwell Fee until November 29. The Executive Director of the Port of Los Angeles said the decision to delay the assessment of the surcharge came after the “significant improvement in clearing import containers from our docks in recent weeks”. Since the excessive dwell fee was introduced in late October, the aged cargo on the docks has shown a decline of 33%.
As the supply chain constraints will certainly take time to unwind, the vigorous trade has undoubtedly already resulted in an overflowing cargo volume stronger than what the existing infrastructure can accommodate. Amongst the downstream effects including warehouses stuffed to the ceiling, intermodal rail delays in the Midwest, as well as chassis and equipment shortages, the impacts are now moving upstream and affecting carrier schedules. The line-up of vessels outside the San Pedro Bay has recently caused some carriers to divert their ships serving the Asia-USWC route to other trade lanes. Israeli carrier ZIM said they will temporarily suspend its expedited service to Los Angeles “in view of the long delays on the West Coast”. Similarly, the Taiwan-based carrier Wan Hai also echoed the decision and said they were shifting their ships from Asia-USWC services to intra-Asia lanes.
With the fast-approaching Christmas holidays and the pre-Lunar New Year peak upon us, flexibility and timely bookings continue to be the key for mitigating the potential risks to your supply chains and hitting your target ETD. Timely vendor bookings will not only allow our operations teams to secure carrier space and equipment as early as possible, but also give you the advance visibility needed for better planning of landside resources.
NEW AT CENTURY
With vessel schedules changing daily, gaining visibility into your shipments has become more important than ever to cope with the supply chain vulnerabilities that ware exposed by the pandemic and later magnified by instances like global port congestion. As part of our ongoing efforts to increase shipment visibility, we recently launched an enhanced version of the VMS® Vessel Map to improve user experience and give our users increased control over the interactive map. This recent update not only includes a redesigned vessel map, but also new filtering options and a grid view that allow you to select and export the most relevant data to your supply chain. View details of the enhanced VMS® Vessel Map in our website!
- The transpacific container freight rate saw a dip in week 45 likely due to the reduced factory output in China. As of week 46, the transpacific container rates for exports from China to North America West Coast, excluding premiums, slipped by 31.7% to $14,062 per FEU from the record $20,586 in September. As for the China/Asia-North America East Coast freight rate, prices have dropped to $15,996 per FEU, down 27.8% from the record $22,173. However, many industry experts believe the softened freight rates may be short-lived as China reportedly has started easing its power rationing policy and is preparing for the upcoming pre-Lunar New Year cargo rush. Some carriers have implemented GRIs effective November 15 for cargo originating from Asia and destined for the United States.
- In view of the continuous port congestion related to the pandemic, several carriers under THE Alliance have announced upcoming void sailings in order to prevent further delays in protection of schedule integrity. The cancelled westbound sailings are mostly destined for the U.S. West Coast in Los Angeles, Long Beach, and Tacoma. Click here to read ONE’s advisory for the list of cancelled transpacific service sailings.
- South Korean vessel operator HMM will launch a new service connecting the Far East Asia and Latin America. This new service will be operated solely by HMM, who used to partner with Alliance members (THE Alliance) to offer South America routes. After departing from Busan, the vessel will call at Shanghai, Ningbo, Hong Kong, Shekou, Singapore, Kattupalli, Durban, Santos, Paranagua, Itapoa and Navegantes, before it reaches its destination in Buenos Aires. The additional capacity between Asia and South America is welcomed by many, especially for the port call at Kattupalli in Chennai, India, which will offer transshipment opportunities for Indian exporters. HMM has planned to deploy its Hyundai Platinum with about 5,000 TEU capacity and commence the first sailing on December 7.
- The congestion in the Port of Savannah remains an issue due to increased import volume and labor shortage. As of week 46, there are 23 vessels waiting at anchor with a vessel berthing waiting time of up to 10 days. Previously, several carriers announced that their vessels will be rerouted to the neighboring port of Charleston until the end of the year to prevent excessive wait time. Recently, the Georgia governor inaugurated a new rail yard with 18 tracks that had been under construction for four years that will immediately increase intermodal capacity by over 30%. However, a ripple effect that has surfaced because of the logjam in Savannah is the Ocean Alliance’s recent announcement to temporarily cancel its only Asia-USEC service into Boston until late January. Ocean Alliance said its AWE1/Vespucci service will omit its call on Boston, and the first vessel in the port rotation will make arrival in New York-New Jersey after calling on Charleston. This means that importers in New England are now left without Asia service and are more dependent than ever on trucks to move their goods from the New Jersey ports and will result in increased truck rates.
- In the Pacific Northwest, the Port of Tacoma in Washington also followed the Californian twin ports’ lead and announced that Washington United Terminals and Husky Terminal will be collecting a one-off surcharge of up to $315 on the excessive dwelling of import containers that have exceeded 15 calendar days at the terminals.
- We continue to see port congestion at major European gateways due to COVID-related labor shortages and strong demand for seasonal merchandise. At Rotterdam World Gateway (RWG) terminal, the current yard density has exceeded its operational level as only about 70% of the cranes are in operations due to an insufficient number of crane operators. Officials of the Port of Rotterdam said they expect the ongoing challenges with port congestion and low vessel schedule reliability will last until the end of 2022, unless there is an unexpected major weakening in consumer demand. The port handled a total throughout of 11.5M TEUs during the period from Q1 to Q3 in 2021, up 2.7% from 11.2M TEUs over the same period in pre-pandemic 2019.
- At Yantian International Container Terminal (YICT), the port is maintaining the acceptance of laden containers 7 days before estimated vessel berthing. The current waiting time for vessel berthing is 1 to 3 days and priority will be given to extra loader vessels. In addition, due to the high utilization of yard storage for DG containers, the port has allocated designated yard areas for each carrier for DG storage. Some carriers such as ONE and Yang Ming said they may need to suspend the acceptance of DG goods (including import, export, and transshipment) if their CY space for DG containers reaches capacity.
- China’s State Council has recently relaxed the cabotage rules barring foreign carriers from transporting containers between Chinese ports. Under the new pilot scheme that will last until the end of 2024, international liners will be allowed to transport containers between Dalian, Qingdao, Tianjin, and Shanghai via Shanghai’s Yangshan Port. Currently, foreign carriers need to partner with Chinese feeder operators to handle the domestic leg or use international transshipment ports like Busan to handle transshipments. The three-year pilot program is a part of China’s moves to develop Shanghai’s Lingang Special Area and further details are not available yet.
Please refer to the below illustration of Century’s assessment of the operating status at the major origin ports throughout Asia.
- Due to the massive flooding and landslides in western Canada, sections of railroad tracks used for container transport to and from the Port of Vancouver have been damaged. As a result, on November 18, Canadian Pacific Railway and Canadian National Railway temporarily suspended the acceptance of containers moving through their network to the Port. Canadian Pacific announced it would resume limited service on November 23 and Canadian National advised serve would resume on November 24. Several highways were also washed out by heavy rains and the road closures will affect local truck moves. There will be intermodal and trucking delays until the situation improves. We anticipate the operational disruptions will also add pressure to the overburdened West Coast ports, especially in Tacoma and Seattle, as some shippers will elect to divert shipments to these alternative ports.
- Equipment stock level remains low and an ongoing issue in Asia. Our local teams have reported a continuing deficit of 40’HC and 40’ HQ containers, which is particularly critical in Bangladesh, Sri Lanka, Indonesia, and Thailand. Equipment constraints with all types of containers with CMA CGM were reported in multiple Asian origins. The scarcity of shipping boxes is believed to be caused by the congestion in North American and European ports that has led to a slower circulation of empty containers.
- Due to the ongoing carrier space and equipment constraints, we are seeing an increase in CFS freight volume. Many of our customers and their suppliers are diverting factory loads to our warehouses where their products can be dispatched from as soon as carrier space becomes available.
ASIA PACIFIC LOCAL UPDATE
- The ongoing power crunch policy in China is expected to alleviate as the country’s domestic coal output continues to grow. In October, China’s raw coal output was 360 million tons, which presents a 4% year on year increase. To ensure that the power supply exceeds consumption and that enough energy is preserved for winter, the Chinese government is taking various steps to increase production capacity. The National Mine Safety Administration has accelerated the approval process for coal mines, and since July this year more than 153 coal mines have been approved to commence operations, which will add about 55 million tons of coal output in Q4 2021. We have seen an easing of the blackouts in recent weeks as provinces including Zhejiang and Fujian have eliminated their power rationing policies from November 8, while Guangdong, Guangxi, Yunnan, Guizhou, and Hainan are now back to normal. We expect occasional power rationing may last until the second quarter of 2022 in certain areas and the impacts will be especially adverse for high-consuming and high-polluting industries. Please refer to our recent publication for more insights on how China’s energy crisis may impact your supply chain operations and what Century is doing to help customers address this issue.
- As international oil prices begin to soften, China’s National Development and Reform Commission has announced a reduction of up to ¥95 (about $14.88) per tonne for gasoline and diesel prices. Many truckers remain reluctant to take orders as they are operating with the trucking rates negotiated earlier this year when diesel prices were considerably lower. Trucker availability will remain tight for the time being.
- As China continue to battle the reemergence of COVID-19 in some parts of the country, the government’s “zero tolerance” policy seems to have been working as there are fewer Covid-risk areas after several outbreaks of the highly contagious Delta variant surfaced in July. As of November 24, there are two high-risk areas in Zhuanghe City in Liaoning Province as well as 16 medium-risk areas across China, including 11 which are concentrated in Liaoning Province. Authorities will impose travel restrictions and prohibit transportation in areas designated as high- or medium risk. Located in Liaoning Province in the northeast, the port city of Dalian is among the hardest hit areas over the last month. Following several confirmed COVID-19 cases amongst cold-chain workers, Dalian City has ordered all cold-chain business and storage facilities to shut down since November 8 over fear that the coronavirus can be transported through refrigerated perishable goods.
- On the other hand, many southeast Asian countries have lifted their COVID-19 restrictions and are opening their borders to international travelers. We confirm there is no major COVID-19 impact to your supply chain where Century provides services in Southeast Asia and South Asia and will continue to provide you with the latest information in our bi-weekly COVID-19 update.
TRADE & ECONOMIC HIGHLIGHTS
- Thanks to the strong consumer appetite for holiday spending, U.S. retail sales rose 1.7% (before adjustment for inflation) from the previous month to $638.2 billion in October, for the third straight monthly increase. According to the U.S. Department of Commerce, October retail sales excluding automobile dealers and gasoline sales were up 1.4% compared to September figures, with electronics and appliance sales and non-store retail seeing the biggest surge in sales. The robust consumer spending came as a surprise to many economists after the latest U.S. Consumer Price Index (CPI) increased by 6.2% from October 2020, which is a surge at the fastest pace in more than three decades. Many economists are concerned that the elevated inflation could dampen consumer willingness to spend as costs have significantly increased due to wage increases and inventory shortages.
- Following the full re-opening from COVID-19 restrictions, Bangladesh witnessed another record-setting month in export earnings in October totaling $4.73 billion, the highest ever single-month recorded and up 60.37% from the previous year. As one of the world’s largest apparel exporters, Bangladesh recorded $3.56 billion export earnings in ready-made garment shipments in October alone, which is over 50% increase from the same month in 2020.
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 multiples 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.
- The Port of Los Angeles
- The Marine Exchange of Southern California
- Zim suspends one Asia-LA loop due to port congestion
- Freight Rate Index
- Savannah backlog leaves Boston without Asia service
- Washington United Terminals
- Port of Rotterdam
- China to cut gasoline, diesel retail prices
- S. Retail Sales Jump by Most Since March, Topping Forecasts
- October exports hit historic high at $4.73 billio
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