Freight market update - 18 October 2023

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• Recent analysis by Clarksons Research indicates that cargo owners are paying higher prices for shipping their goods in the current decade.

• Potential risks for ocean shipping amid Israel-Hamas conflict.

• In September, U.S. container import volumes increased by 0.3% compared to the previous month, totaling 2,203,452 TEUs.

• The Baltic Exchange Airfreight Index (BAI) reported a 0.7% increase in the overall BAI for the week ending on October 9, cutting its year-on-year decline to -29.2%, potentially indicating a peak season rebound.

• CMA CGM is allocating $600 million to enhance its recently acquired terminal operations in New York and New Jersey, aiming to increase capacity by approximately 80%.

Read on for more in-depth updates.

Asia → North America

US/CA

Transpacific Trends and Market Updates

• Recent analysis by Clarksons Research indicates that cargo owners are paying higher prices for shipping their goods in the current decade.
• The 2020s have experienced significant fluctuations in freight markets, primarily due to disruptive events like the COVID-19 pandemic and the conflict in Ukraine.
• Average freight costs throughout the 2020s have surpassed those of the previous decade, as per Clarksons' breakdown.
• This analysis reveals a significant increase in shipping expenses across various types of cargo.
• Container shipping, which enjoyed favorable conditions for most of the 2020s, has seen spot rates rise to levels 2 to 3.5 times higher than the average rates in the 2010s.
• In addition to global disruptions, underlying cost increases and inflation have also contributed to the rising expenses.
• Clarksons notes that the shift to low-sulfur fuel has caused bunker costs for most ships to increase by around 20% compared to the 2010s.
• Clarksons observed that shipping markets remain cyclical, but the 2020s have had a significant impact on transportation costs.
• They emphasized the need for cargo owners to closely monitor challenges in the shipping industry, including decarbonization, fleet rental, and geopolitical factors.
• Potential risks for ocean shipping amid Israel-Hamas conflict.
• Any escalation of the Israel-Hamas conflict beyond Israel's borders could pose risks to two crucial shipping choke points.
• The Suez Canal serves as a vital waterway for all types of commercial vessels, including container ships.
• Similarly, the Strait of Hormuz is essential for the shipping of oil and gas.
• Israel's Civil Aviation Authority (CAA) reassured that international flights to and from Israel are still in operation despite attacks by Hamas, stating that "the Israeli airlines are operating as usual."
• The European Union Aviation Safety Agency (EASA) has issued a Conflict Zone Information Bulletin (CZIB) for Israel's airspace, acknowledging the ongoing conflict.
• Recent improvements in the air cargo industry are generating discussions about whether they signify the start of a complete market recovery.
• The Baltic Exchange Airfreight Index (BAI) reported a 0.7% increase in the overall BAI for the week ending on October 9, cutting its year-on-year decline to -29.2%, potentially indicating a peak season rebound, as noted in TAC Index's weekly update.
• The surge in rates was particularly driven by higher rates from China, with substantial increases noted on routes to Europe and Trans-Pacific destinations.
• Carriers have been actively ordering new container tonnage, with 187 vessels added to the global new building pipeline in the first nine months of 2023.
• These new vessels collectively represent an additional fleet capacity of 1.75 million TEUs, pushing the global vessel orderbook to a record high of 7.88 million TEUs, which is approximately 29% of the current fleet capacity.
• The primary drivers for this substantial ordering include carriers' cash reserves accumulated from post-COVID-19 pandemic profits and a strong commitment to decarbonize liner shipping.
• In 2023, 52% of the new capacity ordered consists of methanol-powered ships, while LNG-powered newbuildings make up 31% of the orders, totaling 83% of 'green' ships.
• The container ship orderbook is shifting toward 'green' vessels, with 28% being LNG-powered and 19% being methanol dual fuel units as of September.
• Some non-'green' ships ordered in 2023 have the potential for future 'green' conversions through retrofits and alternative fuel capabilities.
• The focus is evolving from decarbonizing the vessels to sourcing sustainable fuels, including ammonia as the next 'green' fuel, with 76 methanol dual fuel vessels ordered in 2023.
• Stringent capacity management and the looming threat of significant FAK (Freight All Kinds) rate increases by Asia-North Europe carriers have halted the decline in container spot rates on this trade route.
• Short-term rates are showing a slight increase, although starting from low levels, following a series of weeks with 10% declines.
• Expected FAK rate hikes of approximately $1,800 per 40ft starting on November 1st, combined with a reduced service schedule in the form of a "winter schedule" by the Maersk and MSC partnership within the 2M alliance, are likely to impact market sentiment and potentially trigger a modest rate recovery in this trade lane.
• In contrast, backhaul rates from North European ports to Asia are not profitable for carriers. Nevertheless, this route serves as the most cost-effective option for carriers to reposition their non-urgent equipment back to China.

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

• The latest Global Shipping Report from Descartes Systems Group indicates a departure from the typical decline in U.S. imported container volumes in the last third of the year.
• In September, U.S. container import volumes increased by 0.3% compared to the previous month, totaling 2,203,452 TEUs.
• While year-over-year, TEU volume was slightly lower by -0.6%, it saw an 8% increase compared to September 2019 levels before the pandemic.
• The growth in import volume during the first nine months of 2023 is now within 2.5% of the same period in 2019.
• Transit times at major West Coast ports remained near historic lows, according to Descartes, while top East and Gulf Coast ports experienced longer transit times.
• The Panama drought, although not affecting U.S. container import volume, has led to extended transit times.
• Descartes' logistics metrics suggest that some global supply chain challenges in 2023 have stabilized, with a few deviations from 2019 benchmarks.
• Preliminary data from the National Retail Federation projected September imports at 1.94 million TEUs, a slight decrease from the 1.96 million TEUs imported in August, with final figures yet to be confirmed.

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

• CMA CGM is allocating $600 million to enhance its recently acquired terminal operations in New York and New Jersey, aiming to increase capacity by approximately 80%.
• This investment is being made in collaboration with the states of New Jersey and New York, following CMA CGM's acquisition of the Bayonne and New York terminals less than two months ago.
• Although specific details about the investment's utilization have not been extensively provided, it is evident that the terminals are currently underutilized, presenting opportunities for expanded operations and improved stack density.
• This substantial investment is expected to generate 1,000 union jobs and represents a significant stride in CMA CGM's strategy to modernize and enhance infrastructure on a global scale.
• CEO Rodolphe Saadé affirms that the Port Liberty New York and Port Liberty Bayonne terminals now serve as CMA CGM's flagship terminals in North America, thereby enhancing the company's service offerings to its customers.

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 Maher Terminals LLC and APM Terminals.

●   Up to 5 days waiting time is expected at Global Container Terminals Bayonne.

●   The scheduled maintenance for Crane 6, originally set to start on October 1, 2023, has been postponed indefinitely to reduce congestion.

●   Average gate turn times: 60 minutes for single transactions, and 90 minutes for double transactions.

Norfolk:

●   Currently, most vessels berth on arrival, however, the bigger vessels wait approx. 2 days for a berth.

●   Average gate turn times are 30 / 41 minutes for single and double transactions respectively.

●      All cranes operating as per schedule.

●      Load and discharge of explosives class 1.1, 1.2 and 1.5 suspended by USCG, until further notice.

Charleston Terminal:

●   No waiting time for vessel berthing at Wando Welch and North Charleston Terminals.

●   Average truck turn times: 22  minutes at Wando Welch Terminal, and 16 minutes at North Charleston Terminal.

Savannah:

●   Waiting time for vessel berth at the terminal is up to 4.5 days, depending on the size of the vessel.

●   Average gate turn times are 39 / 55 minutes for single and double transactions respectively.

●   Two new cranes are currently being commissioned on berth 2. Four of the oldest cranes on the same berth are being demolished. Berth 2's capacity to handle vessels will be limited for several months.

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 46 minutes.

●   Loaded import dwell is at 3.3 days.

Oakland:

●   Average wait time of up to 3 days at Oakland Int’l Container Terminal (OICT) and TraPac.

●   Average import deliveries can take up to 4 days at TraPac and 4 days at OICT.

●   Average gate turn times are 59 / 66 minutes for OICT and TraPac respectively.

Seattle-Tacoma:

●   Wait time of up to 4 days at Tacoma and Seattle.

●   Import deliveries are 8.0 days at HUSKY – due to EB/WB railcar imbalance, 7.1 days at Washington United Terminal, and 1-3 days at T18.

●   Rail car availability is a significant concern at present, primarily because there is a low volume of rail cars heading Westbound to balance the high volume going Eastbound. This issue is exacerbated by omissions in Vancouver.

●        The railroads are actively working with all stakeholders to improve the availability of rail cars. However, if more Westbound cargo or empty cars are not made available, this problem will continue.

●       As an alternative to rail transport, inland cargo transportation via truck is also an option to consider.

●   Average gate turn times are 26 / 37 / 46 minutes for T18, Washington United Terminal, and HUSKY respectively.

●   T18 will be closed on Fridays through October.

●   WUT has received 2 new Post Panamax Cranes.

●   WUT has commenced commissioning both, operational by the mid/end of September.

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 3.3 days, on-dock rail dwell is 4.0 days, and import units on the street are averaging at 4.4 /6.0 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 22-75 minutes, depending on the terminal.

●   Chassis Pools: All pools are operating as normal except:

1. Chicago – Deficit on 20’ and 40’ chassis.

2. Kansas City – Constrained on 20’ chassis.

●   Intermodal Operations: Truck power can be secured within 1-3 days for the majority of locations, including marine terminals, rail ramps, and depots.

Port Status

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.