Freight market update - 06 September 2023

Asia → North America

US/CA

 Transpacific Trends and Market Updates

• The analysis focused on three major carrier alliances: The 2M, Ocean Alliance, and THE Alliance.
• Sea-Intelligence conducted a comprehensive analysis of post-pandemic schedule reliability on Asia-Europe trade routes.
• It aimed to assess their ability to return to pre-pandemic schedule adherence levels after the COVID-19 pandemic.
• The analysis revealed varying recovery capabilities among these carrier alliances following the pandemic's disruptive impact.
• The 2M alliance displayed rapid improvements in schedule reliability after hitting its lowest point during the pandemic.
• While they continued to make significant progress on the Asia – North Europe route, their recovery rate slowed down on the Asia-Mediterranean lane.
• The Ocean Alliance consistently maintained improvements in schedule reliability.
• THE Alliance had a relatively slower rate of recovery on the Asia-North Europe route, although there has been recent improvement in this regard.
• Ningbo Zhoushan Port, located in East China's Zhejiang province, has achieved a top-ranking position among China's ports.
• During the first seven months, the port recorded a cargo throughput of 789.52 million metric tons, marking a 5% annual increase.
• In terms of container throughput, the port handled 20.86 million TEUs, securing the second position in the country.
• This success can be attributed to the implementation of 20 measures by Ningbo Customs, which have improved the business environment and facilitated cross-border trade, significantly contributing to the port's growth.
• Currently, Ningbo Zhoushan Port boasts a network of 301 container shipping routes, comprising 249 international routes and 125 routes connected to countries and regions involved in the Belt and Road Initiative.
• After more than a year of negotiations and uncertainty surrounding West Coast ports, members of the International Longshore and Warehouse Union (ILWU) have voted in favor of a new six-year contract.
• The contract was approved with a significant majority, as 75% of ILWU members supported it.
• This agreement is between the ILWU and their employers, represented by the Pacific Maritime Association (PMA).
• The new contract is retroactive, commencing from July 1, 2022, and is set to remain in effect until July 1, 2028.
• Key elements of the contract include a substantial 32% pay increase over the course of the six-year agreement and a one-time bonus for the workers who continued to labor during the early days of the COVID-19 pandemic.
• Schedule reliability for ocean carriers remained steady at 64.2% in July 2023, showing no significant change compared to June but lower than the peak in May.
• However, when viewed on a year-on-year basis, there was a substantial improvement, with schedule reliability increasing by 23.8 percentage points.
• Six carriers, including Maersk and Hamburg Süd, achieved schedule reliability in the range of 60%-70%, while the remaining seven carriers had schedule reliability in the range of 50%-60%.
• Yang Ming was identified as the least reliable carrier, with a scheduled reliability rating of 51.3%.
• Notably, in July 2023, nine of the top 14 carriers recorded a month-over-month increase in schedule reliability, and when assessed on a year-on-year level, all 14 carriers demonstrated double-digit improvements.
• Reports suggesting China's decline as the world's leading manufacturer are considered by James Hookham, the director of the Global Shippers Forum, to be "greatly exaggerated" and receiving excessive media attention.
• Hookham acknowledges that there is some movement away from China in manufacturing, but it is marginal and driven primarily by contingency concerns rather than a wholesale replacement of China as a manufacturing hub.
• China continues to be a dominant manufacturing powerhouse due to its size, manufacturing capabilities, and a history of producing high-quality products, as stated by Hookham.
• The discussions about decoupling and reshoring are often associated with concerns regarding potential tensions with Taiwan. However, Hookham points out that China is unlikely to escalate tensions to the extent of harming its export economy, considering the potential consequences, such as disrupting merchant shipping access to the South China Sea, a critical global export corridor.
• Supply chain analysis from Trade Data Service (TDS) supports the perspective that there is no significant global shift in manufacturing away from China. However, there are indications that the United States and Europe are exploring alternative sourcing options as part of their supply chain strategies.

Conclusions

Rates - The rates will remain soft on most origin-destination combinations.

Space - Space open, no issues with equipment.

Recommendations - We recommend blank sailings to continue. Book at least two weeks before the date your vessel gets ready to depart.

Turkey → North America

• Air cargo capacity in the second quarter of 2023 exceeded pre-pandemic levels, as reported by IATA's Q2 market report.
• This increase in capacity, measured in available cargo tonne kilometers (ACTKs), was driven by a rise in bellyhold capacity and an uptick in passenger travel as COVID-19 restrictions were eased.
• Q2 2023 saw available cargo capacity reach 264.7 billion ACTKs, marking a year-over-year increase of 9.9%.
• The report highlighted a trend toward a balanced 50-50 split between dedicated freighters and belly capacity in total international capacity during Q2 2023.
• Notably, for the first time in two and a half years, there were no passenger freighters (preighters) scheduled globally in Q2, a role they played significantly during the pandemic.
• However, air cargo demand, measured in cargo tonne kilometers (CTK), has decreased, with IATA forecasting a slowdown in world trade growth from 2.7% in 2022 to 1.7% in 2023.
• This slowdown was reflected in year-on-year contractions observed during Q2 2023.
• Despite the overall decline, e-commerce continued to drive demand for air cargo in sectors such as automotive, technology, and healthcare, according to a global freight forwarder's air freight industry report.
• Air cargo load factors (CLFs) decreased in Q2, mainly due to the significant growth in cargo capacity and declining demand, according to the IATA report.
• Major trade lanes, including Asia Pacific-Europe and North America-Asia Pacific, had CLFs well above the industry average of 48.6%, standing at 66.9% and 64.2% in June, respectively.

Conclusions

Rates - The rates will remain soft on most origin-destination combinations.

Space for capacity - No capacity issues or issues with space.

Space for equipment - No issues with equipment.

North America → Turkey

• The contract was ratified by 75% of ILWU members and is retroactive to July 1, 2022, with a validity period until July 1, 2028.
• A new collective labor agreement was recently approved between US West Coast dock workers, represented by the ILWU, and terminal employers, represented by the Pacific Maritime Association (PMA).
• This new agreement is expected to enhance the efficiency of handling capacity growth and maintain the competitiveness of West Coast ports in the United States.
• In contrast, the International Longshoremen's Association (ILA), which represents over 80,000 dock workers in East and Gulf Coast ports, is preparing for negotiations with the US Maritime Alliance (USMX) for their collective bargaining agreement, set to expire on September 30, 2024.

Conclusions

Rates - Stable rates over the last week.

Space for capacity - No major capacity or space issue.

Space for equipment - Equipment issues have started owing to low levels of import.

Terminal Updates

• Vessels heading to North America via the North Atlantic Sea are expected to have a change in schedule due to severe weather conditions.

New York:

• No waiting time is expected for a berth at Global Container Terminals Bayonne and APM Terminals.
• No more waiting time at Maher Terminals LLC.
• Average gate turn times: 55 minutes for single transactions, and 78 minutes for double transactions.

Norfolk:

• Berth for large vessels is congested due to previous multi-day periods of severe weather.
• Vessels are waiting for 2 days for a berth.
• Average gate turn times are 31 / 43 minutes for single and double transactions respectively.
• All cranes are up and running again.

Charleston Terminal:

• 2.5 days waiting time for vessel berthing at Wando Welch Terminal.
• 1.5 days waiting time expected at North Charleston Terminal.
• Average truck turn times: 21 minutes at Wando Welch Terminal, and 19 minutes at North Charleston Terminal.

Savannah:

• Waiting time for vessel berth at the terminal is up to 4 days, depending on the size of the vessel.
• Average gate turn times are 33 / 50 minutes for single and double transactions respectively.

Houston:

• Barbours Cut Terminal has up to 1 day waiting time for vessel berthing.
• Due to vessel bunching the yard is facing congestion impacting the discharge productivity and extending port stays.
• The average gate turn time is 44 minutes.

Oakland:

• Average wait time of up to 2 days at Oakland Int’l Container Terminal (OICT) and up to 3 days at TraPac.
• Average import deliveries can take up to 3.5 days at TraPac and 4 days at OICT.
• Average gate turn times are 52 / 61 minutes for OICT and TraPac respectively.

Seattle-Tacoma:

• Wait time of up to 1 day at Tacoma and 3 days at Seattle.
• Import deliveries are 3.3 days at HUSKY – due to EB/WB railcar imbalance, 1-5 days at Washington United Terminal, and 1-3 days at T18.
• Availability of rail cars in Union Pacific Rail and BNSF Rail continues to fluctuate weekly.
• Average gate turn times are 25 / 29 / 36 minutes for T18, Washington United Terminal, and HUSKY respectively.
• T18 will be closed on September 1 and 4, 2023.
• Washington United Terminal and HUSKY will be closed on September 4, 2023.
• WUT has received 2 new Post Panamax Cranes.
• WUT will commence commissioning both at same time in the next 2 weeks, operational by end of August.

Los Angeles/Long Beach:

• All terminal gates are running as published and in line with the Pier Pass program.
• Port of Los Angeles dwell time for local import cargo is 3.2 days, on-dock rail dwell is 3.5 days, and import units on the street are averaging at 4.5 /5.9 days for 20 ft and 40+ ft containers respectively.
• Port of Long Beach dwell times for local imports are stable, and the average terminal gate turn time is between 21-67 minutes, depending on the terminal.
• Chassis Pools: All pools are operating as normal.
• Intermodal Operations: Truck power can be secured within 1-3 days for the majority of locations, including marine terminals, rail ramps, and depots.

Final Thoughts

In light of the latest updates and trends, it is evident that the market is currently in the course of demonstrating robust performance and is equipped with ample capacity and resources.
Individuals and businesses involved in import/export activities must stay well-informed about market dynamics and strategies to make informed decisions. To ensure a smooth and hassle-free experience with your import/export operations, it is recommended to seek guidance from industry experts.

Conduct thorough research on ports that offer available space and suitable equipment despite the ongoing conditions. By doing so, you can minimize complications, facilitate shipments, and maximize efficiency.

Taking proactive measures and staying proactive in your approach will help you navigate the market effectively. We greatly appreciate your continued readership and encourage you to subscribe to our weekly market updates to stay abreast of the latest developments and insights.