Freight market update - 29 November 2023

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• Shippers are concerned about disruptions on the Asia-North Europe trade lane as ships may be laid up before the Chinese New Year in February.

• Robust performances were observed in October at the Los Angeles and Long Beach ports in the U.S. West Coast.

• CMA CGM, a French carrier, announced a $150 per TEU 'Panama Adjustment Factor' starting January 1, 2024.

• Adverse weather conditions, volcanic activity, and conflicts impacting cargo capacity have led to a rise in air freight rates in the past week.

• ONE is on the verge of finalizing twelve contracts for methanol-powered 13,000+ TEU ships with Chinese yards, and several projects are underway for medium-sized ships in the 3,000 to 6,000 TEU size range.

Read on for more in-depth updates.

Asia → North America

US/CA

Transpacific Trends and Market Updates

• Adverse weather conditions, volcanic activity, and conflicts impacting cargo capacity have led to a rise in air freight rates in the past week.
• The TAC Index reported a 4.6% increase in the Baltic Air Freight Index for the week ending November 20 compared to the previous seven days.
• China played a significant role in this surge, with prices from Hong Kong increasing by 11.5%, although still -2.2% lower than a year ago. Outbound Shanghai also saw a 5.3% rise, narrowing its year-on-year decline to 1.3%, attributed to substantial gains in shipments to Europe.
• The overall increase was driven by significant events in China, including disruptions like heavy snowfall in Anchorage affecting Trans-Pacific traffic, volcanoes, earthquakes, and conflicts in Ukraine and Gaza, according to TAC's weekly roundup.
• Iceland is on eruption alert due to recent earthquakes, raising concerns about disruptions similar to the 2010 Eyjafjallajökull volcano eruption that halted European airfreight.
• Cathay Pacific reported network disruptions in Anchorage operations due to extreme weather, leading to more cancellations across the network, as mentioned by Ashish Kapur, the airline's regional head of cargo for Southeast Asia.
• Despite tonnages remaining stable, WorldACD noted an increase in rates compared to the previous week. Operational disruptions at Alaska’s Anchorage Airport due to severe snowstorms might have influenced Asia Pacific to North America prices, according to the data provider.
• Shippers are expressing concern about potential disruptions on the Asia-North Europe trade lane as ocean carriers consider laying up ships before the Chinese New Year in February.
• Liner profitability saw a significant drop in the third quarter, leading carriers to anticipate heavy losses in the fourth quarter. Shareholder pressure to address fiscal losses is intensifying as the new financial year approaches.
• Asia-Europe services, in particular, are facing challenges with the delivery of numerous 24,000 TEU ultra-large vessels amid declining demand.
• Carriers are struggling to integrate these massive ships into the Asia-North Europe loops, leading to management difficulties. In response to weakening demand, carriers may opt to park these large vessels instead of attempting to fill them, causing unease in the market, especially during annual contract rate negotiations with ultra-low spot rates.
• Traditional methods like blanking, super-slow steaming, and sliding have failed to support general rate increases, contributing to a pessimistic outlook for the container liner sector.
• A review from Danish Ship Finance highlights weak fleet utilization due to high fleet growth and low demand, resulting in significant drops in freight rates. Despite attempts to mitigate damage, the review suggests limited success.
• The injection of 1.5 million TEU of new container capacity in the first ten months of the year, equivalent to a 6% increase, and an additional 2.4 million TEU slated for delivery next year, coupled with limited vessel scrapping, aligns favorably for carriers considering suspending more services as a last-resort capacity management tool.
• New container ship orders persist, maintaining the largest vessel orderbook in shipping history, as reported by Alphaliner.
• Although the ordering pace has slowed compared to the busy years of 2021 and 2022, the order book continues to be replenished with new contracts.
• Ocean Network Express is on the verge of finalizing twelve contracts for methanol-powered 13,000+ TEU ships with Chinese yards, and several projects are underway for medium-sized ships in the 3,000 to 6,000 TEU size range.
• The imperative for carriers to modernize their fleets and reduce the industry's overall carbon footprint is driving owners to order more vessels.
• Strong demand, especially for dual-fuel ships, coupled with above-average inflation, has pushed sticker prices for new container ships close to record highs.
• Newbuilding prices seem to have plateaued temporarily, and there is an expectation that the current order wave will conclude by the end of the year.
• Major industry players may place occasional vessel orders in 2024, primarily to meet specific tonnage needs and continue the transition toward LNG, methanol, and potentially ammonia.
• Zim Integrated Shipping Services is set to reinstate its expedited service from China to the US West Coast later this month.
• The premium eCommerce Xpress (ZEX) service, previously suspended in March due to capacity adjustments amid weak demand and dropping rate levels, is being relaunched.
• The move is aimed at targeting the growing demand in e-commerce and providing an alternative to the traditional air freight option often used for time-sensitive shipments on the trans-Pacific route.
• ZEX service promises a 12.5-day transit from South China to Los Angeles, challenging the conventional 16-day ocean transit from Shanghai to the US West Coast recorded in August.
• The decision reflects Zim's strategic response to evolving market demands and the desire to offer faster shipping solutions in the competitive e-commerce landscape.

Turkey → North America

• Robust performances were observed in October at the Los Angeles and Long Beach ports on the U.S. West Coast.
• The Los Angeles port processed 372,455 TEU, indicating a 10.7% increase, while Long Beach experienced a 23.6% jump to 363,300 TEU in imported containers.
• The surge in performance was attributed to holiday cargo owners choosing these West Coast ports over East Coast gateways.
• Gene Seroka, the executive director of the Port of Los Angeles, anticipates a strong November with a final holiday push and warehouse replenishment.
• Mario Cordero, CEO of the Port of Long Beach, notes that import volumes are rebounding due to efforts to regain market share, expecting moderate growth throughout the rest of the year.
• An October analysis by John McCown revealed a 2.4% year-on-year increase in import volumes across the ten largest U.S. container ports, breaking a 15-month trend of decreases.
• October import volumes were 8.8% higher than the same month in 2019, signaling a return to changes driven by underlying economic activity.
• The West Coast outperformed the East and Gulf Coast ports for the third consecutive month, experiencing a 12.7% year-over-year increase in import volumes, while the East and Gulf Coast ports saw a -5.1% decline.
• The port of Savannah suffered the largest decline, with imports down -16.5% year-over-year, but New York & New Jersey remained the top port for container imports.
• The coastal shift of imports from the U.S. West to East Coast ports has reversed, with the market share of containerized imports from Asia at the San Pedro Bay ports rising from 42% to 46% in the past three months.
• Currently, LA’s container terminals are operating at 70% capacity and can scale up to meet increased demand, according to Gene Seroka.
• Due to the likely unchanged draught limit in the Panama Canal in the next six months, a potential 50% capacity cut by February may prompt U.S. importers to shift towards West Coast gateways or Asia-North America East Coast services via the Suez Canal.

Red Sea Shipping Threats

• A series of attacks on merchant shipping near Yemen and Somalia, likely linked to the war in Gaza, has prompted the U.S. to caution vessel operators to exercise extra care in the region.
• On Nov. 19, the Houthis seized the Galaxy Leader car carrier, and over the weekend, a Liberia-flagged chemical tanker, both with Israeli connections, was targeted.
• At least four other suspicious approaches to ships in the Indian Ocean have been reported in the past few weeks, particularly in the Red Sea or the Gulf of Aden, according to the UK navy.
• The U.S. Department of Transportation Maritime Administration (Marad) issued an alert urging caution when transiting these areas and staying aware of evolving threats.
• The recent surge in activity poses a risk to the critical route for global trade between Europe and Asia via the Suez Canal, with potential disruptions affecting commodities and manufactured goods.
• Insurers may increase extra premiums for sailing through these waters, given the existing risks, and the charges could escalate if the attacks persist.

North America → Turkey

• Major shipping companies are imposing additional charges on shipments passing through the Panama Canal due to capacity reductions.
• CMA CGM, a French carrier, announced a $150 per TEU 'Panama Adjustment Factor' starting January 1, 2024.
• MSC (Mediterranean Shipping Company) followed suit with a surcharge of $297 per TEU, effective from December 15, 2023, attributing it to ongoing capacity reductions imposed by the Panama Canal Authority (PCA).
• The PCA has been compelled to reduce daily vessel transits due to a lack of rainfall over the summer, leading to increased operational costs for shipping companies.
• By January 1, booking windows for transiting the canal's neopanamax locks will be reduced by 30%, and a Loadstar analysis indicates that daily transits will be reduced to 18, operating at less than 50% of design capacity.
• The Panama Canal Authority has reduced the maximum draught of vessels transiting the canal from 14.94 meters to 13.41 meters.
• Maersk, a carrier, has warned shippers about potential transit issues but emphasizes that advanced planning can help mitigate delays. The company is working closely with the Panama Canal Authority to secure necessary transit slots and exploring alternative container transport options.
• Public protests in Panama over First Quantum's plans to expand the Cobra Panama copper mine into virgin rainforest, drawing up to 250,000 people, have led to frequent blockades of major roads, including those leading to container terminals at either end of the canal.

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 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: 56 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 33 / 48 minutes for single and double transactions respectively.
• All cranes operating as per schedule.
• Ultra Large Container Vessels (ULCV) berth 1 will be out of service from midnight November 17 to midnight November 18 due to fender repairs and paving work.

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 18 minutes at North Charleston Terminal.

Savannah:

• Waiting time for vessel berth at the terminal is up to 3 days, depending on the size of the vessel.
• Average gate turn times are 37 / 52 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 2 days 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 39 minutes.
• Loaded import dwell is at 3.4 days.

Oakland:

• Average wait time of up to 3 days at Oakland Int’l Container Terminal (OICT) and 4 days at TraPac.
• Average import deliveries can take up to 4.1 days at TraPac and OICT.
• Average gate turn times are 60 / 67 minutes for OICT and TraPac respectively.
• TraPac has received 6 new RTG’s and are in process of commissioning.
• They are likely to be operational mid-December.

Seattle-Tacoma:

• Wait time of up to 5 days at Tacoma and 4 days at Seattle.
• Import deliveries are 9.5 days at HUSKY – due to EB/WB railcar imbalance, 6.4 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 38 / 35 / 49 minutes for T18, Washington United Terminal, and HUSKY respectively.
• T18 will be closed on November 23, 2023.
• Husky Terminal will be closed on November 23 and 24, 2023.
• WUT will be closed on November 23, 2023. Also running hoot gates on November 17, 21 and 22, 2023.

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 3.0 days, on-dock rail dwell is 3.1 days, and import units on the street are averaging at 4.7 /6.1 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 26-93 minutes, depending on the terminal.

Chassis Pools

All pools are operating as normal except:

1. Louisville – Deficit 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.