Freight market update - 31 January 2024

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• Businesses are altering shipping strategies to mitigate potential delays in exporting goods from Asia to Europe and North America.

• Data reveals an 11% rise in average short-term rates from the Far East to the Mediterranean, reaching USD 6,507 per FEU by February 2nd, marking a 243% surge since mid-December.

• Rail workers in Germany have launched a week-long nationwide strike from January 23 to 29, citing disputes over working hours, conditions, and pay.

• ERFA criticizes the strike as disproportionate and expresses concern about severe financial damage to rail freight companies.

• The South Korean Oceans and Fisheries Ministry is providing 400 TEUs of spot capacity for small and medium-sized enterprises and 1,100 TEUs of capacity for cargo owners with long-term contracts.

• The Red Sea conflict's prolonged nature is disrupting global shipping routes, leading vessels to take longer routes around Africa, resulting in higher CO2 emissions, as reported by Sea-Intelligence.

Read on for more in-depth updates.

Asia → North America

US/CA

Transpacific Trends and Market Updates

• Businesses are altering shipping strategies to mitigate potential delays in exporting goods from Asia to Europe and North America.
• Despite higher airfreight costs compared to ocean freight, retailers and manufacturers may find it more economical to use air transport than invest in extra inventory.
• The hybrid sea-air mode is gaining popularity, offering faster transit than ocean shipping and cost-effectiveness compared to pure airfreight.
• Sea-Air transit via Dubai costs just over three times the price of pure ocean freight and is three weeks shorter than ocean freight, according to Xeneta.
• Chief analyst Peter Sand at Xeneta suggests that increased demand for Sea-Air shipping could raise Dubai-to-European air cargo spot rates above pre-pandemic levels.
• A logistics veteran predicts that the Red Sea situation will impact supply chains through midsummer, causing delays even after conflicts cease, with a three-month estimation to restore transport networks to normal.
• Air Indexes show slower responses in rates compared to volumes due to the Red Sea situation, but indications of firmer pricing are emerging, particularly in air cargo rates from South Asia to North America and the Middle East.
• Air cargo volumes from Vietnam to Europe, a significant trade route for apparel, have surged by 62% in the week ending January 14, with increased demand and higher rates due to capacity pressure.
• Looking ahead to 2024, the air logistics industry anticipates improvement, but uncertainties remain regarding the global economy and retailers' purchasing behavior.
• Retailers, having completed post-pandemic inventory destocking, are returning to just-in-time inventory management strategies, but concerns persist about consumer strength.
• The South Korean government is assisting small and medium shippers in addressing Red Sea diversions by ensuring vessel space for spot cargo on routes to Europe and the Mediterranean.
• The South Korean Oceans and Fisheries Ministry is providing 400 TEUs of spot capacity for small and medium-sized enterprises and 1,100 TEUs of capacity for cargo owners with long-term contracts.
• Vietnam has introduced various measures to support its shippers facing increased costs and service disruptions, including seeking carrier justification for freight rate increases on European and North American services.
• Other initiatives in Vietnam include encouraging the return of empty containers, policy changes to incentivize carriers to launch new services, increasing port calls on mainline East-West services, and simplifying customs procedures for export and import cargo.
• Estimates indicate a -10% reduction in capacity on Asia-Europe services ahead of the Lunar New Year, but despite this, cargo bookings remain strong.
• Some outbound bookings are being accepted to be rolled over into the Lunar New Year week instead of cancellations.
• Blank sailings and port omissions are common due to re-routing and schedule changes, disproportionately affecting shippers in South Korea, Japan, and northern China, including Dalian, Qingdao, and Xingang, due to the limited number of weekly services compared with Shanghai or Shenzhen.

Turkey → North America

• Shipping rates are expected to continue increasing in early February due to the ongoing Red Sea crisis, as reported by Xeneta's freight rate benchmarking platform.
• Data reveals an 11% rise in average short-term rates from the Far East to the Mediterranean, reaching USD 6,507 per FEU by February 2nd, marking a 243% surge since mid-December.
• Rates from the Far East to North Europe are projected to increase by 8%, reaching USD 5,106 per FEU, a 235% rise since mid-December.
• Rates from the Far East to the U.S. East Coast are anticipated to climb by 17% to USD 6,119 per FEU, reflecting a 146% increase since mid-December.
• The significant price hikes are a consequence of shipping companies avoiding the Red Sea and taking alternative routes around Africa to Europe.
• Peter Sand, chief analyst at Xeneta, expects rates to continue rising into February despite carriers' efforts to adjust services.
• Early indications suggest potential rate decreases post the Lunar New Year peak, with Sand emphasizing that the Red Sea crisis is causing a capacity problem rather than a demand issue, creating a substantial market imbalance.
• Carriers are no longer offering premium services, indicating a possible decline in demand or available capacity, despite disruptions caused by carriers pausing transits through the Suez Canal. Sand suggests this could be due to fading urgency from shippers or available capacity amid the chaos.
• Rail workers in Germany have launched a week-long nationwide strike from January 23 to 29, citing disputes over working hours, conditions, and pay.
• The European Rail Freight Association (ERFA) warns that the strike is likely to impact Germany's inland freight transport network and raise concerns for the broader North European network.
• Hapag-Lloyd foresees delays in rail freight and ship handling at German ports, although port delays are not expected to worsen due to ships diverted around Southern Africa arriving late in North European ports in the coming weeks.
• The Port of Hamburg Marketing acknowledges the need for adjustments to cope with changes in rail traffic but downplays the expectation of major restrictions.
• The strike's significance extends beyond Germany's rail freight, which holds a 31% share in the European Union market by tonnage, potentially affecting the wider North European network.
• ERFA criticizes the strike as disproportionate and expresses concern about severe financial damage to rail freight companies, particularly in the Rhine-Alpine rail corridor connecting Rotterdam and Milan, a crucial European route.

North America → Turkey

• The Red Sea conflict's prolonged nature is disrupting global shipping routes, leading vessels to take longer routes around Africa, resulting in higher CO2 emissions, as reported by Sea-Intelligence.
• Three key elements contribute to increased emissions: longer sailing distances, potential faster sailing speeds to maintain weekly departures, and a potential shift from large to smaller, less fuel-efficient vessels.
• Using a proxy container service, Sea-Intelligence suggests estimating the scale of the CO2 emissions increase.
• If shipping lines use the exact same vessels at the same speed, emissions would increase on a 1:1 ratio due to the longer sailing distances, with average increases of 31% and 66% for Asia to North Europe and the Mediterranean, respectively.
• Increased sailing speeds also contribute to emissions growth; a 1 knot increase from 16 to 17 knots leads to a 14% rise in emissions, according to Sea-Intelligence's fuel consumption model.
• Rushing to add capacity for extended routes, shipping lines deploy smaller, less fuel-efficient vessels on Asia-Europe, causing a 141% increase in CO2 emissions on a TEU-basis compared to conventional ULCVs, according to Sea-Intelligence analysis.
• Combining these components could result in CO2 emissions increases of 260% and 354% to North Europe and the Mediterranean, respectively, and there is no realistic way to mitigate the increased emissions, especially those due to longer sailing distances, according to Alan Murphy, CEO of Sea-Intelligence.
• Rates in the shipping industry appear to be plateauing, but the Red Sea conflict continues without signs of de-escalation as the Houthis persist in targeting commercial vessels, preventing carriers from resuming routes via the Suez Canal.
• Initially perceived as a short-term crisis, the current situation is now reminiscent of challenges faced during the pandemic, involving disruptions in flows, significant delays in Estimated Time of Arrival (ETA), port congestions, and equipment shortages.
• Alan Murphy, CEO of Sea Intelligence, notes that the vessel capacity drop is the second largest in recent years, with the only event of greater impact being the Ever Given incident in 2021, which blocked the Suez Canal.
• Global retailers are issuing warnings about potential product delays in the coming months, leading companies like Tesla, Volvo, and Michelin to halt production on specific products.
• It is recommended for businesses to closely collaborate with their freight forwarders to minimize disruption in their supply chains.
• Increased Transpacific volumes on the US West Coast are reported due to shippers avoiding potential congestion at US East Coast ports, rerouting vessels due to the Panama Canal, and the seasonal Lunar New Year restock.
• As more freight is rerouted via the US West Coast, congestion is expected to worsen, affecting rail ramps across the US.
• Containerships find it easier to reserve slots as other sectors like dry bulk vacate the route.
• Daily transits for container ships fell to an average of 7.4 in November and December, compared to 8.4 in October.
• Costs are expected to rise as the Panama Canal Authority adjusts the starting sum for auctions in the Neopanamax Locks to $100,000 from January 1st. On high-demand days, especially Fridays, this amount will be adjusted to $110,000.
• Predicted reduction of 3,964 transits through the canal this year may lead to 1,954 additional transits around the Cape of Good Hope and 998 more through the Strait of Magellan.
• Alternative routes could extend journey times by 20%, resulting in a 5% increase in overall costs in maritime trade traversing the Panama Canal, estimated at $1.1 billion.

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: 43 minutes for single transactions, and 70 minutes for double transactions.
• APMT will not have a gate open on Saturday January 20, 2024.

Norfolk:

• Currently, most vessels berth on arrival, however, the bigger vessels wait approx. 2 days for a berth.
• Average gate turn times are 34 / 48 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 22 minutes at North Charleston Terminal.
• Sunday gates are by appointment only.

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 / 58 minutes for single and double transactions respectively.
• Import dwell time is 3.5 days.
• Berth 2 is back online helping to reduce waiting times.

Houston:

• Barbours Cut Terminal has up to 1 day waiting time for vessel berthing.
• 2 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 39 minutes and Bayport Container Terminal is 40 minutes.
• Loaded import dwell is at 3.6 days.

Oakland:

• Average wait time of up to 6 days at Oakland Int’l Container Terminal (OICT) and 3 days at TraPac.
• Average import deliveries can take up to 5.8 days at TraPac and 3.8 days at OICT.
• Average gate turn times are 69 / 68 minutes for OICT and TraPac respectively.
• TraPac has received 6 new RTG’s and are in process of commissioning.

Seattle-Tacoma:

• Wait time of up to 3 days at Husky and 8 days at WUT at Tacoma.
• 2 days waiting time in Seattle.
• Import deliveries are 3.8 days at Husky – due to EB/WB railcar imbalance, 4.8 days at Washington United Terminal, and 1-3 days at T18.
• The average gate turn times are 29 minutes for T18, 34 minutes for Washington United Terminal, and 37 minutes for HUSKY.
• Terminal 18 will be closed on January 26, 2024.
• Husky will be closed on January 22, 2024.
• Washington United Terminal has not confirmed closures for January, 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 4.2 days, and import units on the street are averaging at 4.1 /6.3 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 / 70 minutes, depending on the terminal.

Chassis Pools

All pools operating as normal except for:

• Columbus – Deficit on 20’ and 40’ 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.