Century Weekly Market Update Apr 15 - Apr 21

Welcome to the Century Weekly Market Update! We’re excited to bring you the latest news and insights from the supply chain and logistics industry over the past week.

Our weekly market update features a dedicated section on emerging industry trends and a report specifically focused on the frequency and impact of port omissions during blank sailings. These updates provide valuable insights to help supply chain decision makers navigate potential disruptions, optimize their supply chains, and stay informed about the latest industry developments. ?

Last week, freight rates on Trans-Pacific trade lanes recorded notable declines while Trans-Atlantic routes recorded notable rate increases. The Panama Canal Authority expects an increase of daily vessel passage in June, shipments heading to Europe have been stranded in Indian ports following the seizure of the MSC Aries, and CMA CGM Air Cargo announced Transpacific air cargo services this summer. Additionally, Unilever announced the spinoff of its ice cream business due to the higher costs involved compared to their other product lines induced by cold storage warehouses and other requirements for an ice cream supply chain.

At Century, we're committed to helping our customers stay a step ahead in this rapidly changing industry. Our team of experts is dedicated to providing comprehensive and timely insights to help you make informed decisions and stay competitive.

Emerging Trends

Container Rates in the Middle East Effected by Escalation of Red Sea Security Concerns

• The seizure of the MSC Aries near the Strait of Hormuz raised concerns about the safety of ocean freight supply chains in the Middle East.
• Geopolitical unrest, such as this tension in the Red Sea, has impacted shipping routes, leading to increased spot rates for key trades, like Shanghai to Jebel Ali.
• Average spot rates for the Shanghai to Jebel Ali trade surged by 87% between 2023 and 2024, reaching US$ 3132 per FEU; rates then rose further to $3,300 by mid-January before dropping to $2300 per FEU in mid-February as services normalized.
• Recent political tensions caused another spike, with rates rising by 32% to $2,849 per FEU between March 22nd, 2024 and April 17th, 2024.
• Despite the incident last week, container ships have continued to sail through the Strait of Hormuz, showcasing the resilience of ocean freight container services.
• The potential for the Strait of Hormuz to become a chokepoint for container shipping is highlighted by the significant cargo volumes transiting the region; 5.5 million inbound TEU in 2023.
• Escalation of conflict in the Middle East also poses risks to oil trading and bunker fuel oil prices, which could affect maritime transport costs.

Overall Decline in Blank Sailings Expected to Continue

• Spot rates around the globe have been decreasing consistently over recent months, however rates remain higher than pre-Red Sea crisis and pre-pandemic levels.
• Shipping lines have two main strategies to address this decline: increase blank sailings to reduce supply and stabilize rates, or continue booking cargo aggressively at current rates.
• Recent data shows a significant decrease in blanked capacity on key trade routes such as Asia-North Europe, Asia-North America East Coast, and Asia-Mediterranean, suggesting a shift away from reducing supply.
• The Asia-North America West Coast trade route has seen a steady reduction in blank sailings since 2022, with the trend continuing into 2024, nearing zero blank sailings.
• Despite the decline in spot rates, they remain notably higher than pre-crisis and pre-pandemic levels, indicating that shipping lines are aiming to maximize revenue by maintaining capacity rather than cutting back, which could lead to further rate erosion in the long term.

The Gemini Cooperation Aims for Blank Sailing Elimination

• Maersk and Hapag-Lloyd aim to eliminate blank sailings to improve schedule reliability in their new vessel-sharing partnership, Gemini Cooperation.
• The partnership will adopt a hub-and-spoke model, offering faster transit times and reducing vessel speeds.
• Gemini plans to achieve 90% schedule reliability across its 58 global services upon its launch in February 2025.
• The trans-Pacific trade will have nine mainline services between major ports and 14 shuttle services between other Asian ports.
• Gemini expects to maintain full ships on mainline trades through its hub ports, minimizing the need for blank sailings due to demand fluctuations.
• Operating a hub-and-spoke concept with larger feeder ships controlled by Maersk and Hapag-Lloyd aims to reduce transshipment risks and ensure priority handling at terminals, potentially improving overall schedule reliability.

Weekly Blank Sailings Report

Century’s Blank Sailings Report for the week of April 15th – April 21st. Discover the latest insights on the current trend of blank sailings through the most up-to-date carrier data direct from Century.

• Last week saw a total of 194 port omissions, a 15.7% decrease compared to the week prior.
• Shanghai recorded the highest amount of port omissions last week with 21, followed by Busan with 12 omissions, and both Singapore and Rotterdam with 11 omissions.
• Other ports with notably high omissions last week were Ningbo and Kaohsiung with 10 and 8 omissions respectively.
• Singapore recorded the biggest W/W decrease in port omissions, falling by 54.2%.
• Looking towards the coming weeks, Century’s data shows a 9.8% decrease in currently scheduled blank sailings for week 17.
• Next week’s preliminary data shows a notable increase in port omissions expected in Qingdao and notable decrease in Kaohsiung.

Port omissions data for the most frequently omitted ports during week 16 can be found in the table below:

Our?full Blank Sailings Report for the week of April 15th – April 21st below provides a full list of every current scheduled port omission from Week 16 to Week 26 as of April 21st, 2024. The second tab breaks down this data into an easy-to-read table which shows port omissions by?each location per week so you can see which locations are being omitted the most and which locations are experiencing the sharpest increase in port omissions.

Click here to DOWNLOAD the full Week 16 Blank Sailings Report

Week In Review

Trans-Pacific Trade Lanes See Declines Once Again

• Trans-Pacific, and Asia-South/North Europe routes have recorded W/W declines as the Global Container Freight Index dropped 6% W/W.
• Trans-Atlantic rates saw steady or increased rates W/W; North America to North Europe rates rose 2% W/W and Europe to South America East Coast rose 32% W/W.
• Trans-Pacific freight rates began to steady last week, however this week all routes except for China/East Asia to North America East Coast saw declines.
• Rates from China/East Asia to the US East Coast were steady W/W at US$ 4,294.
• Rates from China/East Asia to the US West Coast dipped by 11% W/W to US$ 2,911.
• Freight rates from China/East Asia to North Europe fell 7% W/W to US$ 3,304, whilst rates to Southern Europe saw an increase of 13% W/W now sitting at US$ 677.?

HMM Reveals Bold Strategy to Increase its Container Fleet and Capacity by 2030

• HMM, a leading container line in South Korea, expects to increase its container vessel fleet and lifting capacity over 50% by 2030.
• The president of South Korea recently pledged US$ 4 billion in financing to double the national container shipping fleet to 2 million TEUs, prompting HMM's expansion proposals.
• HMM aims to raise its fleet from 84 to 130 vessels and expand its lifting capacity from 920,000 TEUs to 1.5 million TEUs, including nine 9,000-TEU methanol-enabled ships.
• As the world's eighth-largest container line, HMM operates a fleet of 829,426 TEUs with an additional 251,427 TEUs on order.
• HMM plans to double its bulk shipping capacity, including breakbulk and project cargo, from 36 vessels of 6.3 million metric deadweight tons (dwt) to 110 vessels of 12.3 million dwt.
• The expansion strategy involves further investments in container terminals aiming to bolster competitiveness and ensure stability, particularly with Hapag-Lloyd leaving THE Alliance next year.
• HMM has interests in terminals located in Long Beach, Rotterdam, Singapore, Kaohsiung, and Busan.

WSC Urges EU to Strengthen its Emphasis on Decarbonization Following the Parliamentary Elections in June 2024

• The World Shipping Council (WSC) is calling on the European Union (UN) to prioritize decarbonization and trade barriers as it begins its next five-year term after June's parliamentary elections.
• WSC expects the EU to create policy frameworks that facilitate the role of shipping in the global economy and work towards achieving net-zero shipping by 2050.
• The significance of container and vehicle carriers in EU trade is undisputed, handling two-thirds of the EU's seaborne trade and amounting to US$ 1.81 trillion of imports and exports annually.
• WSC urges the EU to establish effective global greenhouse gas (GHG) reduction regulations and implement a Green Deal environmental policy to meet decarbonization targets by 2050.
• According to WSC, there is also a need for scaling renewable fuels and aligning the EU Emissions Trading System (ETS) with FuelEU Maritime regulations to enhance the uptake of low-carbon fuels and meet decarbonization goals by 2050.

The Seizure of MSC Aries Intensifies the Risk Landscape in the Middle East

• The MSC Aries, a container ship operated by MSC and registered in Portugal, was seized by the Iranian special forces via helicopter near the Strait of Hormuz, a crucial waterway for global oil consumption.
• The seizure of MSC Aries coincides with the ongoing security situation in the Red Sea, which is continuously adding more than two weeks to voyage times of shipments that would normally sail through the Suez Canal.
• The Houthis have claimed that the most recent incidents targeting commercial ships were intended to create an additional conflict zone.
• Experts express concern about potentially heightened security risks in the Strait of Hormuz, which could lead to capacity reduction or a complete halt of shipping services, affecting both container shipping and oil tankers, thereby increasing oil prices.

Significant Shipments Bound for Europe Stranded at Indian Ports Following the Seizure of MSC Aries

• Indian shippers and freight forwarders are facing additional disruptions in cargo flows due to MSC Aries seizure.
• MSC Aries, part of the Himalaya Express (HEX), was scheduled to arrive at Nhava Sheva on April 16th, 2024; there were approximately 2,400 containers planned for loading out of the Port of Nhava Sheva and approximately 350 containers of imports on board destined for the port.
• Efforts to mitigate the impact include suggestions of deploying extra loaders to clear trapped export containers and potentially rolling outbound containers to the next regular HEX sailing.
• Despite potential relief in cargo pressure anticipated in the coming weeks, challenges persist in cargo planning for unscheduled or temporary sailings, as seen in the MSC Katie.
• MSC Katie, another MSC ship, skipped its scheduled call at Nhava Sheva and discharged cargo at Mundra instead.

Panama Canal Expecting the Daily Passage of 32 vessels in June

• The Panama Canal will further increase the number of ships allowed to transit per day starting in May 2024, indicating a gradual return to normalcy, and easing of transit restrictions.
• Due to improved water levels in Gatún Lake, the Panama Canal Authority (PCA) plans to allow up to 32 ships per day to pass through the canal by June 2024.
• The total number of transits through the Panama Canal reported in early April remains 30% lower Y/Y, with a usual booking capacity of 36 to 38 vessels per day under normal circumstances.
• ?Starting May 16th, 2024, after maintenance, the number will increase from 27 to 31 ships per day, including both Panamax and Neopanamax locks; an extra slot will open in the Neopanamax locks on June 1st, 2024.
• Starting from June 15th, 2024, the ACP will also increase the maximum authorized draft for Neopanamax ships by one foot, allowing a depth of 45 fee.
• To alleviate transit delays, the government is exploring projects like the Multimodal Dry Canal, aiming to enhance goods movement through alternative routes while Maersk has announced the restoration of traditional transit through the canal from mid-May, eliminating the need for land bridge services.

Port of Portland to Cease Container Services at T6 in October Due to Financial Losses

• The Port of Portland will cease container services at Terminal 6 (T6) as of October 1, 2024, due to unsustainable financial losses.
• Despite efforts to find a third-party operator for T6 and secure state funding, the port has been unable to mitigate the financial challenges.
• T6 is forecasted to incur a US$ 13.7 million loss in 2024, following a US$ 13.2 million loss in 2023, partly due to a 43% drop in container volume from July 2023 through February 2024.
• The port's financial struggles with the container business have been exacerbated by pandemic-related volume declines.
• Negotiations with container lines, Mediterranean Shipping Co. and SM Lines, resulted in higher lift rates, reducing the requested state aid from US$ 10 million to US$ 8 million.
• The port aims to secure legislative approval for the aid package before June to ensure continuity in cargo contracts, and while the situation is challenging, there is optimism for the future based on the carriers' rate concessions.
• The Port of Portland has two other marine terminals, Terminal 4 and Terminal 5, that will remain operating as normal.

CMA CGM Air Cargo Launches Transpacific Service with Boeing 777 Freighters

• CMA CGM Air Cargo will introduce Transpacific air cargo services this summer ahead of peak season, deploying two Boeing 777-200F aircraft operated by Atlas Air.
• The first freighter will connect airports in Hong Kong, Chicago, and Seoul, South Korea, with delivery scheduled for June.
• A second freighter is expected to be delivered in the fourth quarter of 2024, connecting mainland China to North America.
• This expansion aligns with CMA CGM's broader strategy to build a global air cargo network despite ending its cargo partnership with Air France-KLM earlier this year.
• The carrier plans to further increase capacity with a third B777 freighter in 2025 and the delivery of eight A350F aircraft in 2026 and 2027.
• The move comes amid growing uncertainty in ocean shipping, prompting shippers to turn to air cargo services to mitigate potential delays, with other ocean carriers like Maersk and MSC also expanding their air cargo operations.

Proposed Bill Aims to Address US Reliance on Chinese Agricultural Imports into the US

• Representatives introduced the Securing American Agriculture Act (H.R. 8003) to the House Committee on Agriculture on April 15th, 2024.
• The bill aims to assess and address the United States' reliance on certain agricultural imports, particularly focusing on the animal feed and pet food industry's dependence on China's vitamin and amino acid supply.
• If passed, the bill would mandate the US Secretary of Agriculture to annually assess the country's dependency on critical agricultural products from China.
• The American Feed Industry Association (AFIA) supports the bill, emphasizing the need to understand the interconnectedness of the US food and feed supply with China's input manufacturers.
• The US relies on China for manufacturing key vitamins and essential amino acids used in animal feed and pet food, raising concerns about supply chain disruptions.
• The bill reflects efforts to address the risks associated with dependency on Chinese agricultural imports; “There simply is not enough global production capacity outside of China to meet US demand should there be a disruption in China’s vitamin supply.”

Unilever Spins Off Ice Cream Business to Simplify Operations and Increase Productivity

• Unilever announced the spinoff of its ice cream business as part of a larger restructuring plan aimed at simplifying operations and increasing productivity.
• The decision to separate from the ice cream segment aligns with Unilever's focus on its shelf-stable products, which include items like lotions and mayonnaise.
• The ice cream business requires specialized infrastructure and transportation due to end-to-end temperature control, leading to higher costs compared to other product lines; cold storage warehouses are significantly more expensive to operate than regular ones plus the cold storage market is highly competitive.
• Removing the ice cream segment will streamline operations and reduce complexities associated with managing cold chain logistics, ultimately enhancing control and efficiency.
• The spinoff will allow the ice cream business to operate more independently, optimizing manufacturing, logistics, and distribution networks for improved performance and flexibility.
• Despite the benefits of being part of a larger corporation, the standalone ice cream unit is still attractive to potential buyers, particularly private equity firms, due to its unique market position and growth potential.

Sources

Xeneta

Sea Intelligence

JOC

Freightos

JOC

JOC

JOC

JOC

Sourcing Journal

JOC

Supply Chain Dive

PFP

Supply Chain Dive