Freight market update - 20 March 2024

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• E-commerce air cargo is anticipated to constitute approximately one-third of total air cargo volumes, as stated by Ludwig Hausmann, a senior partner at McKinsey, during the IATA World Cargo Symposium (WCS).

• The share of e-commerce in total air cargo volume escalated from 10% in 2017 to 20% in 2022, with projections estimating it to reach between 20-25% by 2027.

• China Southern Airlines is launching its longest direct flight route, from Shenzhen to Mexico City, operating twice weekly.

• China leads in e-commerce exports, accounting for 37% of cross-border e-commerce shipping as of 2023.

• Cross-border e-commerce shipping in 2022 amounted to 8.2 billion orders and 6 million air cargo tons, according to McKinsey's estimates.

• Container ships are opting for longer routes via the Cape of Good Hope to reach Europe, driven by persistent Houthi attacks, which significantly increases both fuel consumption and emissions.

• US carriers American Airlines, Delta, and United Airlines have announced delays in resuming additional China routes that were suspended early in the Covid-19 pandemic, citing lower demand.

Read on for more in-depth updates.

Asia → North America

US/CA

Transpacific Trends and Market Updates

• China Southern Airlines is launching its longest direct flight route, from Shenzhen to Mexico City, operating twice weekly.
• This move aims to address the growing trade demand between the two countries, particularly in the electric vehicle market.
• Additionally, China Airlines plans to resume a direct route from Taipei to Seattle, with five weekly flights starting in July this year.
• Australian investment group IFM has unveiled plans to invest over $650 million USD to scale up production of sustainable aviation fuel (SAF). This investment could potentially double within five years, aiming to increase the use of SAF to 10% of Australia's total aviation fuel consumption by 2030, as the industry grapples with meeting demand amid efforts to reduce carbon emissions.
• The formation of the Gemini Cooperation, leading MSC and Maersk to part ways, has sparked discussions among consultants regarding a potential container vessel sharing agreement between MSC and the remaining members of THE Alliance: ONE, HMM, and Yang Ming.
• According to a recent report from the Baltic Exchange, ocean carrier rates are likely to have peaked and could start facing downward pressure. Rates from Asia to North Europe declined in February, while increases in rates from Asia to North America slowed over the same period.
• Rates are experiencing a decline in the first half of March, particularly noticeable in the UK market compared to North Continent Ports, attributed to low demand post-Q4 extending into Q1 2024.
• Negotiations for long-term deals are being discussed after the Chinese New Year as carriers reevaluate demand patterns.
• While some carriers are open to such deals, the majority are waiting for more clarity on the market situation.
• February's space is fully booked, with availability in March varying by carrier.
• Blank sailings are prevalent this week and the next due to factory closures associated with the Chinese New Year.

Turkey → North America

• Container ships are opting for longer routes via the Cape of Good Hope to reach Europe, driven by persistent Houthi attacks, which significantly increases both fuel consumption and emissions.
• These extended voyages add approximately 9,000 nautical miles, equating to an 80% increase in distance traveled, consequently raising expenses for carbon credits required to comply with the European Union’s Emissions Trading System (EU ETS).
• According to OceanScore, a maritime technology company, the number of EU Allowances (EUAs) for a 14,000 TEU container ship has surged from 1,800 to 5,200 per voyage, resulting in a nearly threefold increase in costs.
• Based on the current carbon pricing of around €55 per tonne of CO2 and a 40% liability requirement, the analysis indicates a rise in EUA costs from €98,000 to €285,000 per voyage this year.
• Danish consultancy Sea-Intelligence warns of a significant increase in CO2 emissions per TEU due to longer sailing distances and heightened speeds, potentially ranging from 31% to 575%.
• The prolonged voyages also impact a ship's Carbon Intensity Indicator (CII), posing additional challenges in emissions management and regulatory compliance.
• The air cargo demand has exhibited a robust recovery at the outset of 2024.
• However, the disruption in the Red Sea region is masking concerns of potential overcapacity in the near future.
• Following robust double-digit growth in January, the air cargo market has continued its upward trend, experiencing an 11% increase in demand compared to February 2023.
• The significant surge is believed to be primarily driven by e-commerce shipments originating from Asia.
• Additionally, some modalities might be shifting due to the ongoing crisis in the Red Sea, affecting trade routes through the Suez Canal.
• These factors collectively contribute to the sustained growth and vitality of the air cargo market in February.
• Carriers are increasing capacity to accommodate the volume typically transported through the Suez Canal.
• Longer travel times via the Cape of Good Hope necessitate deploying additional ships to maintain schedule consistency.
• However, the resolution of the Suez Canal issue may lead to a surge in new-build ships, exacerbating concerns regarding overcapacity.
• This scenario could result in downward pressure on rates and prompt carriers to implement fleet management strategies to address the situation.
• Anticipated strikes are set to affect numerous parts of Europe in the upcoming months, extending into the summer travel season.
• Countries such as Germany, France, and Italy, among others, are likely to experience issues, particularly due to the busy election year across the region.
• Normal operations are expected to be disrupted, leading to delays and potential disruptions in various sectors.

North America → Turkey

• The Biden administration is strengthening the enforcement of existing trade laws and regulations, placing greater emphasis on importers' compliance. Importers face challenges such as tariff increases and supply chain disruptions, requiring careful attention to goods classification, determination of dutiable value, and adherence to trade agreements.
• Importers must ensure verification of country of origin, avoidance of antidumping/countervailing duties, and maintenance of forced labor-free supply chains. Compliance not only helps prevent issues but also facilitates faster clearance, duty savings, and reduces penalties.
• US Customs and Border Protection (CBP) has extended import restrictions on specific categories of archaeological and ecclesiastical ethnological material from Honduras until March 12, 2029. The list of goods subject to these import restrictions is available on CBP's website.
• E-commerce air cargo is anticipated to constitute approximately one-third of total air cargo volumes, as stated by Ludwig Hausmann, a senior partner at McKinsey, during the IATA World Cargo Symposium (WCS).
• Over the past five years, e-commerce air cargo has experienced a ten percent growth and continues to expand.
• The share of e-commerce in total air cargo volume escalated from 10% in 2017 to 20% in 2022, with projections estimating it to reach between 20-25% by 2027.
• The surge in demand for e-commerce air cargo is primarily driven by the rapid expansion of e-commerce companies.
• China leads in e-commerce exports, accounting for 37% of cross-border e-commerce shipping as of 2023.
• Cross-border e-commerce shipping in 2022 amounted to 8.2 billion orders and 6 million air cargo tons, according to McKinsey's estimates.
• Intra-Asia routes dominate e-commerce air cargo, comprising 18% of the total volume.
• The increasing outbound traffic from North America indicates a potential shift that could bring more equilibrium to global trade lanes.
• Intercontinental lanes, necessitating air transportation, account for over 60% of e-commerce orders, according to Hausmann.
• The U.S. economic recovery is sparking a resurgence in Asian import growth, with U.S. imports from Asia showing year-over-year growth since October 2023.
• February volumes, according to data from PIERS, have surged by 30% compared to the same period last year.
• Strong U.S. employment, record-high wages, and a thriving housing market are among the contributing factors to this growth.
• Jeremy Nixon, CEO of Ocean Network Express (ONE), notes a steady rise in imports since November, particularly in the automotive and decarbonization sectors.
• S&P Global predicts a 2.4% GDP growth for 2024, exceeding the initial estimate of 1.7%, with global manufacturing bouncing back to pre-pandemic levels, driving demand for raw materials and components.
• U.S. consumers remain primary import drivers, leading the National Retail Federation (NRF) to revise import expectations upwards to 7.8% for the first half of 2024 compared to the previous year.
• Container lines are responding to the growing demand trend by increasing vessel capacity from Asia to the U.S.
• Drewry Container Capacity Insight indicates a projected 22% increase in ocean capacity for March and April, totaling over 1.3 million TEUs each month, compared to January and February.
• US carriers American Airlines, Delta, and United Airlines have announced delays in resuming additional China routes that were suspended early in the Covid-19 pandemic, citing lower demand.
• This affects over 90 frequencies previously operated by the three airlines. Current passenger capacity is down nearly 80% from March 2019.
• The air cargo market has shown a strong increase in February following double-digit growth in January.
• The 11% growth in demand from February 2023 is largely driven by e-commerce shipments from Asia, with some modal shift due to the ongoing crisis in the Red Sea impacting trade through the Suez Canal.
• Recent reports from the US military indicate a continued increase in Houthi attacks, with 28 drones destroyed in a five-hour period.
• Targets include not only commercial vessels but also US warships.
• Last month, the Biden administration issued an executive order addressing the potential cybersecurity threat posed by reliance on Chinese manufacturers for US port equipment.
• The administration plans to invest $20 billion USD in US port infrastructure over the next five years to bring back crane and equipment manufacturing to the US.
• However, major Chinese manufacturer Shanghai Zhenhua has contested these claims, stating that their equipment poses no cybersecurity threat to the US and criticizing the reports as misleading.

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 3 days waiting time is expected at Port Liberty Terminal Bayonne.
• Average gate turn times: 45 minutes for single transactions, and 68 minutes for double transactions.
• Terminal change to Port Liberty New York.
• MV La Traviata V019 E/W and MV Dalila V026 E/W are expected to arrive in New York on February 1, 2024, and February 17, 2024, respectively.
• All other vessels on AL6 will continue to call Maher terminals.

Norfolk:

• Currently, most vessels berth on arrival, however, the bigger vessels wait approx. 2 days for a berth.
• Average gate turn times are 37 / 51 minutes for single and double transactions respectively.
• Berth congestion had relaxed overall but it is expected to worsen after severe weather delays.
• This is mainly for ships arriving from New York later this week.

Charleston Terminal:

• Waiting time for vessel berthing is 1 day at Wando Welch Terminal and 0.5 days at North Charleston Terminal.
• Average truck turn times: 19  minutes at Wando Welch Terminal, and 20 minutes at North Charleston Terminal.
• Dock construction at Wando Welch terminal is starting in March 2024.
• It is reduced from 3 to 2 berths for one year.
• Berths will be given on a first come, first serve basis.
• Sunday gates are by appointment only.

Savannah:

• Waiting time for vessel berth at the terminal is up to 4 days, depending on the size of the vessel.
• Frequent river closures are expected due to fog during this week.
• Average gate turn times are 34 / 49 minutes for single and double transactions respectively.
• Import dwell time is 4.9 days.
• Berth 2 is back online helping to reduce waiting times.

Houston:

• Barbours Cut Terminal has up to 3 days waiting time for vessel berthing.
• 3 days waiting time at Bayport Container Terminal.
• Bad weather in the Gulf of Mexico continues to cause closures at ports south of Houston and delays on arrival.
• Due to vessel bunching the yard is facing congestion impacting the discharge productivity and extending port stays.
• Average gate turn time at Barbours Cut Container Terminal is 34 minutes and Bayport Container Terminal is 51 minutes.
• Loaded import dwell is at 3.6 days.

Oakland:

• Average wait time of up to 4 days at Oakland Int’l Container Terminal (OICT) and 1 day at TraPac.
• Average import deliveries can take up to 4 days at TraPac and 4 days at OICT.
• Average gate turn times are 64 / 72 minutes for OICT and TraPac respectively.
• OICT - Berth 55 is operational.
• Hoot shifts are being worked to help alleviate the backlog of vessels waiting for berthing.

Seattle-Tacoma:

• No waiting time at Husky and 3 days at WUT at Tacoma.
• 2 days waiting time in Seattle.
• Import deliveries are 1.6 days at Husky – due to EB/WB railcar imbalance, 1.4 days at Washington United Terminal, and 1-3 days at T18.
• The average gate turn times are 30 minutes for T18, 39 minutes for Washington United Terminal, and 56 minutes for HUSKY.
• Terminal 18 will be closed Fridays through March and April 1, 2024.
• Husky terminals will be closed on March 11, 2024.

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 5.8 days, and import units on the street are averaging at 3.8 /5.3 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 / 100 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.

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.