Freight Market Update - Decemer 14, 2022

Editor's Insights on Freight Market

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 US Freight Highlights

• Less than 100 ships waiting offshore at North American ports

• 100% utilization of Prince Rupert port

• South Korean strike comes to an end

• Highway diesel prices have dropped this week

Read on for more in-depth updates.

Ocean Freight Market Update

Asia-US Market Updates

U.S / CA 

Updates From China

All vessels calling Vancouver are proceeding to arrive off schedule. The vessels are accepted on a first-come, first-serve basis.

Several Chinese factories are closing in about two weeks. This is earlier than usual as the production will be completed earlier, however there are varying degrees of declines in orders.

A ten-point directive has been released by the Chinese Government to ease COIVD restriction, it demonstrates that the country’s zero COVID stance is waning. The policy updates include changes that permit people with COVID (but with mild or no symptoms) to quarantine at home. Furthermore, most businesses will permit patrons to enter without scanning their health kits. Mandatory negative tests are now relaxed and the government no longer requires people traveling between regions to submit negative tests or scan health kits. This final point is most pertinent to shippers as they can move between regions with ease now.

South Korean government has intervened with the back-to-work orders for truck drivers. The strike finally ended on 9 December 2022. Those who refused to return to work would face imprisonment, fines, and license suspension among other potential punishments.

The number of blank sailings might decrease in some regions, especially those coming from Shanghai. This is not due to improvements in capacity cuts.

We notice some long-term blank sailings equivalent in service suspension. This resulted in a deduction of these values from our blank calculations.

Conclusions

Rates: Rates continue to show signs of reduction.

Space: Space open, no issues with equipment.

Recommendation: We recommend blank sailings to continue. Book at least two weeks prior to the date your cargo gets ready for vessel departure.

Turkey → North America

Areas of congestion continue to exist in the USA including Houston, Baltimore, and Savannah.

We recommend customers share their production cycles and potential changes for the upcoming months in advance.

North American ports have fewer than 100 ships waiting offshore. This shows us a significant drop in congestion since July.

Back in July, the number of waiting vessels was over 150.

The capacity is now set to increase on average by 30% due to much bigger vessels entering the Northern Europe (NEUR) and Mediterranean (MED) markets.

They are headed to the US East Coast (USEC). New York and Savannah have been reinstated as weekly calls.

Conclusions

Rates: MSC spot rates have dropped due to low volumes. We advice customers to plan in advance and check MSC spot rates. The downward trend may continue past the New Year as well.

Space for capacity: No equipment, space, or capacity issues have been detected. As usual, Hapag-Lloyd is experiencing full vessels.

North America → Turkey

The Transatlantic Lane is impacted by turbulent weather on many occasions.

Especially during the winter season, considerable disruption is experienced. This period may be expected this year as well.

Capacity, congestion, and equipment conditions have all improved amid a drop in market demand.

This continued drop in market demand has not resulted in much notable change in rates.

The Gulf Coast to NEU and MED services continue to experience very high utilization levels.

This consistent increase is over 100% utilization level.

Conclusions

Rates: Stable rates have been recorded.

Space for capacity: No serious capacity issues or severe equipment problems. The capacity problem persists only in the Gulf region. We suggest you get a booking at least 2-3 weeks prior to your vessel’s departure.

Terminal Updates

Oakland continues to struggle with labor shortages. This shortage of labor is directly imapcting operations, resulting in 10-12 day vessel waiting times.

The status of the line-up, yard, and rail conditions remain impacted.

Two of the port’s cranes were expected to be down due to maintenance and repair. This might continue for a week this month.

The congestion in Vancouver persists with the line-up, yard, gate, and rail status all impacted considerably.

Centerm is experiencing twenty-day waiting times for TP1 currently.

The waiting time is thirty-eight days for TP9 services that connect ports in NE China and Busan, Korea to the Pacific NW.

With the combination of the TP1 and TP9 services into a weekly service in Vancouver and Prince Rupert, we expect vessel waiting times to drop.

This reduction in vessel waiting time may drop to two-day waits.

Intermodal & Chassis Trends

• Chassis shortages continue consistently in Memphis and Dallas.

• We are witnessing >29 and >10 days of terminal dwells respectively in these two places. Furthermore, most inland markets are constrained.

US Domestic Trucking Market Trends

• Across the board, highway diesel prices have dropped month over month.

• The truckload demand remains high and strong despite the headline-grabbing talks of freight recession.

• As anticipated, dry van capacities have tightened. The number of carriers posting their equipment in search of loads is now 24% higher than last year.

• This indicates the spot market capacity and how it remains oversupplied as we crossed the Thanksgiving peak.

• Flatbed rates in Texas turned the corner last week. It has increased to almost $0.02/mile to $2.15/mile after remaining flat for the previous few weeks.

• The largest market in the state noticed spot rates in Houston increase by a penny per mile to $2.26/mile. If this rate continues, flatbed carriers are witnessing the second-highest December outbound rate in seven years.

• In contrast to this, the high-volume lane North to Ft. Worth had lower rates of load movement. It decreased by 1% w/w with linehaul rates continuing their downward trend.

• At $2.40/mile, the rates on this lane are $0.80/mile lower than the previous year and $1.55/mile lower than May’s peak of $3.95/mile.

• Houston has much lower breakbulk import tonnage which peaked in May this year. It contributed to the decline in outbound spot rates subsequently.

• Ever since this incident occurred, import volumes have dropped by 25% following November’s 11% m/m decrease.

• The Load to Truck Ratio (LTR) count also needs to be taken into consideration. It has flatbed load posts that dropped back by 18% last week.

• The volumes observed throughout November were still 75% lower y/y.

• The flatbed carrier posts remained at their highest level recorded in six years. It is 31% higher than what was recorded in 2019 and 40% more than last year.

• This resulted in last week’s LTR dropping from 11.15 to 7.83 which is the lowest level for flatbeds in the last six years.

• In terms of spot rates, the flatbed linehaul rates have dropped to nearly the monthly average of November. This was following the last week’s $0.02/mile decrease to a national average of $2.04/mile.

• Comparing these figures to last year, we can notice an average spot rate of 21% or $0.55/mile lower in the past week.

• This is identical to this time in 2017 and 2018 but yet, $0.19/mile higher than the oversupplied 2019 flatbed market.

  Concluding Freight Thoughts

With the given updates, we can safely conclude that the market is faring well with a sufficient supply of equipment and capacity.

 Although some regions are facing congestion and prolonged vessel wait durations, the delays are compensated by other places. The strike in Korea and COVID issues have been sorted, thanks to due intervention by the respective governments.

This has given us new scope to proceed with shipping ventures provided prior planning is done carefully. We can expect a steady and consistent increase in the market owing to these trends. 

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