Century Weekly Market Update Aug 21 - Aug 27 2023

Welcome to the second installment of 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 updates now feature 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, Trans-Pacific freight rates continued their upward trend, the Panama Canal imposed a lengthy extension to all current restrictions, two tankers collided in the Suez Canal. ODFL joined Estes Express in a bidding war for Yellow's LTL terminals, the number of blank sailings increased yet again W/W, and carrier profits recorded a massive drop Y/Y.

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

Data Analysis Shows Trend of Extended Period of Inventory Drawdowns in the US

• Industry data from the US Bureau of Labor Statistics, US Bureau of Economic Analysis, and US Census Bureau suggests that many import-centric retail trade and wholesale trade sectors are in an extended period of inventory drawdowns.
• The drawdown suggests we are seeing a rather muted traditional peak season for retailer imports during the latter half of 2023.
• Import sectors heavily reliant on air freight for time-sensitive products from Asia to the US are particularly affected, including Furniture and Home Furnishing wholesaling (-9.7% from peak), Apparel wholesaling (-11.7% from peak), Building Material retailers (-5.5% from peak), and Electronics and Appliances retailers (-11,7% from peak).
• On the current trend, soft volumes in ocean and air freight will likely continue into mid-2024 even if an unexpected rebound in demand was to occur in the meantime.
• The US Bureau of Labor and Statistics have already reverted its inbound air freight price index back to February 2020 levels, with containerized volumes currently looking like they will continue to follow their pre-Covid trendline well into next year.

Spot Rate Increases are Putting Pressure on Shippers Delaying Their Asia-Europe Contracts

• The average short-term rates have risen above contract prices for the first time since 2022 after being pushed by the spot rate increases levied by Asia-North Europe carriers at the beginning of August 2023.
• An increase of US$ 30 per FEU in the average rate for new Asia-North Europe long-term contracts suggests that rates have hit their lowest point and will soon begin trending upwards following the spot rates.
• August is the first month since April to see M/M increases in the average rate of new contracts signed and follows a demand rebound for Asia-Europe routes which saw June volumes grow Y/Y by 3.1% for North Europe and 39% for East Mediterranean.
• Additional pressure is expected to come in the form of ramped up blank sailings on Asia-Europe trade lanes throughout Q4 of 2023 in an attempt to mitigate incoming increases in capacity.?

Carriers Stand Firm on Trans-Pacific Capacity Cuts Citing Concerns Over Import Demand

Ocean carriers have maintained shipping capacity restrictions and continued their trend of blank sailings on the Trans-Pacific trade lanes throughout August despite the recent increase in import volumes and freight rates.

Carriers are expected to persist with blank sailings at their current rate for the remainder of Q3 2023 amidst uncertainty surrounding import demand.

Preliminary blank sailing data shows that carriers are on track to cancel 38 sailings on the Asia-USWC lane during August, two higher than in July.

August’s blank sailings figures come amidst an 11-month high for Asia-US imports and a 50% freight rates increase since mid-summer.

Shippers have responded to the uptick in volumes and rates with little more than cautious optimism, with the recent increases partly attributed to the diversion of Canadian freight to US West Coast ports during the July labor action which is not a permanent source of demand.

Weekly Blank Sailings Report

Introducing Century’s Blank Sailings Report for the week of August 21st – 27th. 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 342 port omissions during blank sailings, a 36% increase W/W. Shanghai in particular saw a ramping up of port omissions last week with 39, equating to an 86% W/W increase.
• Similarly, Ningbo recorded 35 port omissions, a 94% rise W/W, whilst Malaysian and South Korean ports recorded a W/W rise of 111% and a 33% in port omissions, respectively.
• Looking towards the coming weeks, Century’s data already shows an expected ramping up of blank sailings as we head towards the latter stages of Q3 2023, likely in anticipation of extremely softened period of consumer demand during the build up to the holiday season.
• Next week’s preliminary data already shows higher rates of port omissions in Singapore, Xiamen, Nhava Sheva, Manila, Jebel Ali, and Vung Tau.

Port omissions data for the most frequently omitted ports during week 35 can be found in the table below:

Our?full Blank Sailings Report for the week of August 21st – 27th below provides a full list of every current scheduled port omission from Week 35 to Week 45 as of August 28th, 2023. 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.

DOWNLOAD the full Week 35 Blank Sailings Report here!

Week in review

Increases in Trans-Pacific Freight rates recorded during every week in August

• Transpacific freight rates from China/East Asia to the US East Coast and US West Coast have risen for an eighth consecutive week since the end of June 2023.
• Rates from China/East Asia to the US East Coast increased by 3% W/W to US$ 3,075.
• Rates from China/East Asia to the US West Coast increased by 5% W/W to US$ 2,029.
• Freight rates from China/East Asia to Northern Europe rose by 2% to US$ 1,747 whilst those to Southern Europe declined 1% to US$ 2,313.

Carrier profits fall 90% Y/Y to just over US$ 3 billion

• Carrier Earnings Before Interest and Tax dropped by 90% Y/Y to US$ 3.2 billion in Q2 of 2023.
• Both ZIM and Wanhai recorded operating losses, with the latter experiencing their first losses in 11 years.
• Reduced negotiating power for carriers during the latest round of contract renewals under the backdrop of a return to post-pandemic ‘normality’ is theorized to be a contributing factor behind the steep decline.

Panama Canal to extend its transit restrictions for another 10 months

• The Panama Canal Authority (PCA) has announced that it expects to maintain the current daily transit restrictions and maximum draft restriction for at least the next ten months.
• The current draft restriction of 13.41 meters (44 feet) and daily transit restriction of 32 vessels will remain in place until the next rainy season in 2024.
• The newly prolonged restrictions are an attempt to give the canal room to preserve water in preparation for what is expected to be an even drier period next year.
• Since the daily transit restrictions were first introduced at the end of July 2023 to address the vessel pileup, shippers have begun seeking alternative routes to avoid the long waiting times and, as a result, the number of vessels waiting to transit has reduced to 115 as of August 24th.

China halves stamp duty on stock trading

• China will reduce the 0.1% stamp duty on stock trading by half effective August 28th, 2023, in an attempt to boost the struggling market and enhance investor confidence amidst a slower-than-expected economic recovery.
• The China Securities Regulatory Commission (CSRC) is simultaneously implementing measures to shore up market confidence, including slowing down IPOs and regulating major shareholders' share reductions.
• Chinese stock exchanges have also lowered margin financing requirements, however, China's industrial firms continue to face profit declines for the seventh consecutive month due to weak demand.
• Investors are calling for a stronger policy response, including increased government spending, to address the market challenges.

Two Tankers Collide on Suez Canal

• A collision between two transiting tankers occurred on the Suez Canal on August 22nd, 2023, which blocked canal traffic for several hours.
• Cayman Islands tanker, Burri, and Singapore-flagged LNG tanker, BW Lesmes, were the two vessels involved in the collision.
• Slight delays in transit occurred throughout the following few days despite the Suez Canal Authority successfully clearing the canal’s waterways within a few hours of the incident.
• The collided vessels were promptly towed away from the main navigational waterways by tugboats for damage assessment and no major disruptions to vessel transit occurred.

Billion-dollar bidding war for Yellow’s LTL terminals between Estes and ODFL

• A bidding war has erupted over the control of the now defunct Yellow’s LTL terminals between Estes Express Lines and Old Dominion Freight Line, the US’s second and fourth largest LTL providers, respectively.
• ODFL has submitted a US$ 1.5 billion counteroffer in response to Estes’s US $1.3 billion offer for Yellow’s 165 remaining terminals last week.
• Control over Yellow’s former terminals is likely to give the winning bidder an unparalleled sway over the future shape and expansion of the US$ 58.7 billion American LTL sector.
• Control over the terminals may be just as much about blocking the expansion of competitors as it is about acquiring rare LTL property assets.
• Some industry experts have theorized that the eventual winning bid for the terminals may reach US $2 billion, which would equate to just over US$ 12 million per terminal, far less than the $80 million Yellow sold one of its terminals for in the Spring of 2023.

CMA CGM to Implement Temporary New Surcharge at Port in Turkey

• CMA CGM has announced that it will introduce a new surcharge of US$ 100 per container at the Port of Iskenderun in Southern Turkey from September 1st to November 30th, 2023.
• The surcharge will apply for dry cargo travelling from Iskenderun Port to the Arabian Gulf and the Red Sea.
• The French carrier has stated that the new surcharge is being applied in response to port congestion.

MSC adds ports of call to India, Malaysia, Singapore, and Korea to Asia-USWC Sentosa Service

• MSC has reinstated port of calls to Indian ports on its Sentosa Service via adding calls at Nhava Sheva and Mundra on India’s west coast to its port rotation.
• The updated service will launch on September 5th, 2023, and offer a 40-day transit from Mundra to Long Beach.
• The Sentosa Service will also add new ports of call in Singapore, Port Klang (Malaysia), and Busan (South Korea).
• Updated port rotation: Port Klang – Singapore - Laem Chabang - Vung Tau – Busan - Long Beach – Oakland – Busan – Qingdao – Shanghai – Ningbo – Shekou – Singapore – Colombo – Mundra - Nhava Sheva - Colombo - Port Klang.

Evergreen to take Detention Case Against FMC to US Court of Appeals

• ?The US Court of Appeals has announced it will hear Evergreen’s bid to overturn the Federal Maritime Commission (FMC)’s ruling against the Taiwanese carrier regarding their decision to assess detention charges against a Port of Savannah drayage provider over the 2020 Memorial Day weekend.
• The FMC ruled last December that Evergreen were wrong to charge $US 510 detention fees to the drayage provider TCW over the 2020 Memorial Day weekend when the Savannah terminal was closed.
• Evergreen argues that TCW had ample notice of the terminal closure and that the container had been in detention for weeks prior. The first arguments will be heard on October 20th, 2023.

US Department of Commerce’s Proposed tin import tariffs split steelmakers and can makers

• The US Department of Commerce has made a preliminary proposal for implementing tariffs on German, Chinese, and Canadian tin.
• The three countries are alleged to have unfairly dumped tin mill product imports on the US at less than normal value which flooded the market and hurt the domestic industry.
• The proposed import tariffs would put a 122.5% tariff on Chinese tin, 7% on German tin, and 5.3% on Canadian tin.?
• Steelworkers have applauded the proposal for protecting and stabilizing the domestic market whilst tin makers are fearing canned food price hikes and job losses.

Sources

Container News

Freightos

Hellenic Shipping News

JOC

JOC

JOC

JOC

Port Technology

Reuters

Sea Intelligence

Supply Chain Dive