Century Weekly Market Update Jan 22 - Jan 28

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, Trans-Pacific freight rates continued their sharp increase amidst the Red Sea crisis. Increased voyage distances caused by carrier diversions around Africa is leading to rising CO2 emissions in the industry, Maersk announced changes to its service which will bypass the Panama Canal, whilst a rail strike in Germany ended early to avoid spilling into the wider European region. Additionally, Yellow is embroiled in a US$ 6 billion dispute with the Center States Pension Fund.

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 Industry Trends

The Red Sea Crisis is Driving Asia-Europe Shippers to Air and Rail Alternatives

• Demand for air and rail shipments for Asia-Europe imports is soaring amidst the increasingly costly diversions of ocean carriers to avoid the ongoing the Red Sea crisis.
• Air freight rates and volumes from Asian origins to Europe are rising, while rail operators are reporting a surge in bookings for China-Europe rail services as shippers turn away from ocean shipping.
• Air cargo volume from Vietnam to Europe, a major apparel trade route, increased by 62% compared to the same period in 2023, with double-digit percentage increases in demand for air cargo to Europe from Asia-Pacific, the Middle East, and South Asia are also being observed.
• Rail freight on the China-Europe network is experiencing a significant increase in requests and bookings, increasing approximately 10% since December, as the rail rates are currently lower than ocean rates and rail transit times are significantly shorter.
• The emerging shift in preferred transportation mode is leading to many logistics companies expecting further volume increases through southern routes in Georgia and Turkey.

Potential Disruptions to US East and Gulf Coast Ports Renew Concerns Over West Coast Ports’ Ability to Handle Increased Cargo Volumes

• US imports from Asia in 2023 declined by over 13% compared to 2022, representing a return to levels similar to that of the pre-pandemic figures in 2019.
• However, concerns over these ports in 2024 are arising regarding the potential disruptions in shipping routes including prolonged drought conditions at the Panama Canal and ongoing shipping issues in the Red Sea.
• Retailers may be forced to divert discretionary cargo from all-water services to the US East and US Gulf Coast ports to the more reliable trans-pacific routes on the US West Coast in order to circumnavigate the increasingly costly challenges associated with the Suez and Panama Canal.
• Such increased volume from diverted cargo has the potential to overwhelm US West Coast ports which struggled with the heightened import volumes during the pandemic, leading to congestion and faltering supply chains.
• US West Coast ports’ share of US imports through these ports could rise from 32% to 35% if the situations on the Suez and Panama Canal persist further into 2024, which currently looks likely, and so the ports’ ability to handle the increased volumes will once again come under pressure.
• Contract negotiations between dockworkers and employers at US East and Gulf coasts ports are also stalling, posing the potential for sizeable disruptions if not resolved by Q3 of 2024, with and importers already considering alternative routes, such as the Pacific Northwest.

Supply Chains Will Still Face Tough Challenges Post Resolving of the Red Sea Crisis

• Whilst the Red Sea crisis remains ongoing and has led to supply chain adjustments and longer voyages around Africa, when a resolution is inevitably made and carriers return to the Suez Canal, there may be an overload on port and hinterland infrastructure in Europe and the US East Coast.
• This can cause a loss of cargo during the extended supply chain and an extra surge of cargo when the supply chain shortens, an impact highlighted by the delay of vessels and the subsequent congestion problems when the Evergreen-induced Suez blockade was lifted in 2021.
• As the current diversion around Africa lasts longer, the effects of the Suez Canal re-opening and supply chains contracting are expected to be even more severe with cargo through the canal currently anticipated to double upon its resumption.
• To manage the post-crisis surge effectively, the best case scenario for the return to normal operations for the canal routings would be two to three weeks after the Lunar New Year
• Such a scenario is anticipated to reduce the doubling of weekly flow by delaying the switch back to the Suez until after China's Golden Week in October.
• Alternatively, gradually transitioning over a few months during the peak season is considered preferable as it would mitigate the risks of port congestion.

Weekly Blank Sailings Report

Century’s Blank Sailings Report for the week of January 22nd – January 28th. 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 595 port omissions, a 5.7% decrease compared to the week prior.
• Shanghai recorded the highest amount of port omissions last week with 55, followed by Ningbo with 46 and Singapore with 35.
• Other ports with notably high omissions last week were Port Klang with 27, Busan with 25, and Qingdao and Hong Kong both with 20.
• Busan recorded the biggest W/W decrease in port omissions, declining by 35.9%
• Looking towards the coming weeks, Century’s data shows a 1% increase in currently scheduled blank sailings for week 5, however, decreases in blank sailings for weeks 6 and 7 of 2024.
• Next week’s preliminary data shows notable decreases in port omissions to be expected at ports in Nhava Sheva, Mundra, Port Klang, Haiphong, Rotterdam, and London Gateway.

Port omissions data for the most frequently omitted ports during week 4 can be found in the table below:

Our?full Blank Sailings Report for the week of January 22nd – January 28th below provides a full list of every current scheduled port omission from Week 4 to Week 14 as of January 29th, 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 4 Blank Sailings Report

Week in review

Trans-Pacific Freight Rates Continue to Rise Sharply as Red Sea Crisis Persists ??

• Transpacific freight rates on the US East Coast and US West Coast further increased last week, continue their sharp upwards trajectory as the Global Container Freight Index recorded a 10% W/W increase as the Red Sea Crisis continued.
• Rates from China/East Asia to the US East Coast increased by 21% W/W to US$ 6,152.
• Rates from China/East Asia to the US West Coast rose by 38% W/W to US$ 4,099.
• Freight rates from China/East Asia to North Europe actually declined 1% W/W to US$ 5,456, whilst rates to Southern Europe also declined slightly, dropping 5% W/W to US$ 6,449.

Red Sea Crisis Causes Sharp Increase in CO2 Emissions

• The sudden, extended shipping routes for ocean carriers away from the Suez Canal and instead around southern Africa in light of the ongoing Red Sea crisis has resulted in increased CO2 emissions.
• Longer sailing distances, potential faster sailing speeds to maintain regular departures, and the deployment of smaller, less fuel-efficient vessels are being touted as the three main elements behind the rise in CO2.
• If shipping lines use the same vessels at the same speed, emissions will increase in direct proportion to the longer sailing distances, which are on average 31% and 66% longer for Asia to North Europe and the Mediterranean, respectively.
• If vessels increase their speed to compensate, emissions will further rise due to the non-linear relationship between fuel consumption and sailing speed, with, for example, a 1 knot increase in speed (from 16 to 17 knots) increasing emissions by approximately 14% based on fuel consumption models.
• As shipping lines rush to add capacity for the longer routes, smaller and less fuel-efficient vessels are being deployed on the Asia-Europe trade which can generate a 141% increase in CO2 emissions per TEU compared to conventional ultra-large container vessels.

Port of Long Beach Records 30% Y/Y Rise in Cargo Volumes in December 2023

• Cargo volumes at the Port of Long Beach reached 709,819 TEUs in December 2023, equating to not only a significant 30% Y/Y increase, but also the highest Y/Y increase recorded at the port in 2023.
• In December, loaded imports saw a substantial 38% increase compared to the same period in the previous year, while empty containers also rose by 46%.
• The port's CEO, Mario Cordero, emphasized the successful navigation of challenges posed by the COVID-19 pandemic, reaffirming the Port of Long Beach's position as a premier gateway for trans-Pacific trade.
• The port's focus on expanding rail capacity was highlighted during the State of the Port Address, with executives declaring it the "Year of Rail."
• The port’s Pier B On-Dock Rail Support Facility project, which will double the size of the existing rail yard to 171 acres and expand handling capabilities to 4.7 million TEUs once completed, was specifically highlighted as a key factor for the port’s growth.
• Long-awaited labor stability as well as contemporary challenges to Panama and Suez Canal transit?capabilities are also likely to have contributed to the port’s rising volumes.

Maersk and MSC Reset Asia-US East Coast Container Schedules Through to End of March

• Maersk and MSC have adjusted their schedules for container services on Asia-US East Coast services until the end of March in response to the ongoing ocean carrier diversions around southern Africa due to the deteriorating security situation on the Red Sea.
• The TP17/America service, connecting South China and the US East Coast, will take an alternative route around the Cape of Good Hope in southern Africa for 15 voyages departing between January 24th and March 26th, 2024.
• The TP11/Elephant service from Southeast Asia will divert 16 voyages around the Cape of Good Hope between Jan 25th and March 30th, 2024, with westbound weekly departures to reset with the Maersk Saigon’s departure from Singapore on February 22nd.
• The TP12/Empire and TP16/Emerald services will divert all vessels around the Cape of Good Hope for eastbound voyages to North Asia from the US for departures from February 29th through to March 18th, 2024, respectively.
• 11 scheduled US departures will be affected by the upcoming rerouting of Maersk and MSC ships.

Yellow Corp Embroiled in US$ 6 Billion Dispute with Pension Fund ??

• Former US LTL giant, Yellow Corp., now defunct, currently finds itself embroiled in a legal dispute with the Central States Pension Fund (CSPF) over alleged liabilities totaling US$6 billion.
• Following Yellow's Chapter 11 bankruptcy filing in 2023, the CSPF filed claims seeking US$ 4.8 billion in withdrawal liabilities and US$ 900 million in participation guarantees.
• Yellow rejects these claims, arguing that the pension fund should not receive funds from the company's bankruptcy sales as the government had already rescued the pension plan with US$ 35.8 billion.
• The Teamsters-affiliated CSPF has since requested a federal court for permission to use an arbitration instead of bankruptcy court.
• The CSPF also claims that Yellow is in breach of the collective bargaining agreements and additional contracts it signed related to pensions as it has delinquent payments owed, and that the breach of contract clause allows damages, which would equate to 113 months of payments.

CPKC Eyes Intermodal Opportunity on Panama Canal Railway as Popular Alternative to Canal Transits Amidst Regional Drought

• With the ongoing drought conditions in the Panama Canal region expected to persist for at least the next couple of years, some shippers have begun to turn to rail services to maintain container flow.
• On January 12th, 2024, Maersk announced it would begin transporting containers via the Panama Canal Railway to “safeguard customers’ supply chains” and strengthen its strategic partnership with Class 1 railroad CPKC.
• The 47-mile-long Panama railroad, parallel to the canal route, has the capacity to run 10 trains in each direction 24/7, with the potential for up to 32 trains daily.
• With CPKC now holding ownership of the Panama Canal Railway following the acquisition of Kansas City Southern in 2021, its “unique and complementary service opportunity” opens doors for CPKC to secure additional business from other carriers, benefiting from the rail alternative during the drought conditions in the canal.

Asia-US Carriers are Pushing for Last-Minute General Rate Increases Ahead of the Lunar New Year

• Ocean carriers on the Asia-US trade lane are implementing general rate increases (GRIs) before the Lunar New Year to take advantage of seasonal tightness in the market.
• Proposed GRIs range from US$ 600 to US$ 1,000 per FEU and are expected to take effect on February 1st or February 15th, 2024, however, rates are anticipated to quickly decline after the Lunar New Year period when the factories in Asia close for about two weeks starting on February 10th.
• Carriers are intending to capitalize on the tight vessel space at Asian load ports and the uncertainty regarding the duration of diverting all water services to the US East Coast due to the ongoing Red Sea crisis.
• GRIs, peak-season surcharges, war-risk surcharges, and Panama Canal surcharges are all being leveraged by carriers to boost spot rates.
• However, actual rate increases vary based on carriers' contracts with individual customers, with some customers facing the possibility of additional surcharges whilst others, whom are shipping under contracts prohibiting peak season surcharges, are continuing to move cargo at lower rates.
• The industry is witnessing strong demand and robust bookings, driving carriers' efforts to increase rates, however, the effectiveness of these rate increases remains uncertain, as carriers have previously struggled to sustain rate hikes.

Germany Rail Strike Ends Early and Alleviates Concerns Over Wider Regional Impacts ?

• Rail workers in Germany, represented by the GDL union, held a six-day nationwide strike from January 23rd to January 28th, 2024, over working conditions and pay, which caused disruptions to the country’s inland freight transport network.
• The strike, which initiated after rejecting a pay offer from Deutsche Bahn, was ended a day early by Germany’s train drivers’ union in order to resume talks with the national rail operator.
• Last week's strike was the fourth strike by the union during the current set of negotiations, however, following the resumption of talks over the weekend, both parties have agreed there will be no further strike action until at least March 3rd, 2024.
• GDL union’s strike effectively brought Germany to a standstill from early Wednesday, heavily impacting all rail traffic, however the Port of Hamburg reported no major restrictions to terminal operations barring adjustments to accommodate changes in rail traffic.
• There were concerns over the strike's potential wider impact on the North Europe rail network with potential to affect traffic in the critical Rhine-Alpine rail corridor connecting Rotterdam and Milan, however, the advanced ending to the action and resumption of talks has quelled such concerns.

Extended Producer Responsibility Programs for Textile Recycling are Gaining Traction

• With the apparel and footwear sector contributing to 8-10% of the world’s total greenhouse gas emissions, the industry is facing increasing scrutiny for its contributions to climate change.
• Extended Producer Responsibility (EPR) programs are gaining momentum globally as regulatory tools to make producers financially responsible for recycling or managing a product's environmental impact.
• The European Union aims to implement a mandatory textiles EPR system by 2025, holding producers accountable for collecting textile waste to minimize landfill contributions and incentivize producers to reduce overproduction and invest in more sustainable, circular products.
• The program will include apparel, shoes, blankets, rugs, bed linens, and curtains, and will require producers to pay an estimated EPR fee of around 0.12€ euros (US$ 0.13) per item to cover the costs of waste management.
• Various countries, including France, the Netherlands, Hungary, Sweden, Spain, Australia, Bulgaria, Italy, Norway, Chile, the UK, and the US (California), are either implementing or considering textiles EPR legislation, reflecting a global trend towards addressing textile waste through regulatory measures.

ZIM Launches Its First Standalone Asia-Canadian West Coast Express Service

• ZIM has launched its first standalone Asia-Canadian West Coast express container service between the Port of Cai Mep, Vietnam, and the Port of Vancouver, Canada, augmenting its slot-sharing agreement with MSC for Canadian West Coast services.
• The Pacific Northwest Xpress (ZPX) commenced its maiden voyage on January 21st, 2024, from the Port of Cai Mep and is scheduled to arrive at the Port of Vancouver of February 12th, 2024.
• ZPX will consist of seven ZIM vessels with an average capacity of 3,500 TEUs and cover ports in Vietnam, China, Taiwan, South Korea, and Canada.
• The service will join the ZIM North Pacific (ZNP) service, which is operated by MSC and contains space chartered by ZIM through its cooperative working agreement, between China and Vancouver.
• Eastbound port rotation is as follows: Cai Mep – Yantian – Kaohsiung – Xiamen – Ningbo – Shanghai – Vancouver. Westbound port rotation includes a call at the Port of Busan.

Sourcing:

ABC News

Freightos

JOC

JOC

JOC

JOC

JOC

JOC

Sea Intelligence

Sourcing Journal

Sourcing Journal

Supply Chain Dive

Supply Chain Dive