Century Weekly Market Update Jan 8 - Jan 14

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 remained inflated as the Red Sea security crisis shows little sign of being imminently resolved. Maersk announced changes to its service which will bypass the Panama Canal, whilst the Port of Virginia became the first on the US East Coast to use 100% Clean Energy to power its terminals. Additionally, the CBP issued a new ruling which prevents US Customs brokers from using offshore data companies

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

Increasing Green Vessel Orders are Bloating the Container Ship Orderbook

• The shipping industry experienced a surge in orders for methanol-powered and liquefied natural gas (LNG)-powered container ships in 2023 due to mounting regulatory pressure to decarbonize and invest in alternative fuel options.
• A report by DNV revealed that shipowners ordered 106 methanol-capable vessels and 48 LNG-powered vessels in 2023.
• Currently, there are a total of 152 methanol-capable container ships in operation or on order, with most expected to be delivered in the next two years, as well as an additional 71 LNG-powered vessels in operation and 201 on order.
• The growing demand for green vessels adds to an already bloated order book, estimated to reach a capacity of 30 million twenty-foot equivalent units (TEUs) by the end of the year, with container fleet capacity and demand projected to grow by 10% and 3-4% in 2024, respectively.
• The profitability of container carriers in recent years, along with regulatory pressure, has driven the building boom for alternative-fuel vessels with cutting emissions as the primary goal.
• This green vessel boom, led by Maersk, is perpetually exacerbating the need for sufficient methanol infrastructure in key bunkering ports worldwide, and so it is anticipated that a shift towards primarily catering for alternative-fuel vessels will take precedent in the coming years.

Report Identifies Extreme Weather Events as the Top Risk Facing Supply Chains in 2024

• A report by Everstream Analytics has identified extreme weather events as the top risk facing supply chains in 2024, assigning a 100% risk score to the possibility of it causing disruptions.
• Several extreme weather-related disruptions occurred throughout 2023, with the US, specifically, experiencing shipment decreases of 20-30% due to the disruption of transportation systems in areas which experienced heavy rain and flooding in California, Nevada, and Utah, as well as up to 75% decreases in Chicago due to the prolonged reduced visibility from Canadian wildfires.
• Globally, droughts caused severe supply chain disruptions on the Panama Canal, whilst extreme rainfall, typhoon, and cyclone activity caused numerous delays to shipments across Asia, with these risks anticipated to be maintained or even heightened in 2024.
• Of the top five supply chain risks for 2024 identified by Everstream, three pertained to environmental-based challenges, including the potential shortage of food commodities such as sugar, rubber, and fuel crops, as well as challenges surrounding incoming environmental regulations.
• As we begin 2024, Everstream implores supply chain actors to keep solutions and contingencies for potential disruptions caused by extreme weather events at the forefront of planning as they become an increasing occurrence within contemporary logistics challenges.

Supply Chain Operations Costs Set to Rise at a Slower Rate in 2024

• Following rising costs being a key challenge to supply chains last year, manufacturers expect this trend to continue its prevalence in 2024 and have highlighted five key cost sectors which are set to pose the most significant challenges to mitigate.
• Labor costs: manufacturing employment is expected to increase by 2% with wage and benefits costs projected to rise by 5.2%, however, the rate of increase in labor costs is expected to be milder compared to previous years due to easing inflation and cooling voluntary turnover.
• Supply prices: forecasts of raw material price increase of 3.2% in the first five months of 2024 bring optimism and indicate a slower rate of increase compared to the past. Prices are expected to stabilize for the rest of the year, with some decreases in commodity prices also anticipated.
• Lead times: it is anticipated that lead times for obtaining supplies are likely to continue improving as supply chains return to pre-pandemic settings, expecting them to continue falling in 2024, already down to an average of 87 days last year from the 100 days average in 2020.
• Cybersecurity costs: a ramping up of data breaches and cyberattacks in 2023 has reminded manufacturers of the need to allocate greater budgets for cybersecurity infrastructure in 2024 and invest in patching network vulnerabilities to mitigate risk.
• Insurance costs: inflationary pressures are affecting insurance claims for manufacturers, especially in terms of facilities, equipment, and interruption losses. The potential impacts of climate change and extreme weather events on insurance coverage will be a focus for this year.

Weekly Blank Sailings Report

Century’s Blank Sailings Report for the week of January 8th – January 14th. 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 255 port omissions, a 22% decrease compared to the week prior.
• Singapore recorded the highest amount of port omissions last week with 17, followed closely by Busan with 16.
• Other ports with notably high omissions last week were Shanghai with 15, and Ningbo and Antwerp both with 13.
• Port Klang recorded the biggest W/W decrease in port omissions, falling by 56.3%
• Looking towards the coming weeks, Century’s data shows an 11% increase in currently scheduled blank sailings for week 3 and as well as an incremental increase in blank sailings for week 4 of 2024.
• Next week’s preliminary data shows notable increases in port omissions to be expected at ports in Ningbo, Qingdao, Shanghai, Jakarta, Laem Chabang, and Rotterdam.

Port omissions data for the most frequently omitted ports during week 2 can be found in the table below:

Our?full Blank Sailings Report for the week of January 8th – January 14th below provides a full list of every current scheduled port omission from Week 2 to Week 13 as of January 15th, 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 2 Blank Sailings Report

Week in review

Trans-Pacific Freight Rates Remain Well Above Recent Averages Amidst Red Sea Crisis

• Transpacific freight rates on the US East Coast and US West Coast remained far above recent averages last week as the Global Container Freight Index recorded a 4% W/W increase amidst the ongoing Red Sea Crisis.
• Rates from China/East Asia to the US East Coast increased by 7% W/W to US$ 4,278.
• Rates from China/East Asia to the US West Coast actually recorded a slight decrease of 5% W/W to US$ 2,588 but still remain 56% higher than two weeks ago.
• Freight rates from China/East Asia to North Europe reached US$ 4,757, a 8% W/W increase, whilst rates to Southern Europe have also risen to US$ 5,440, a 5% W/W increase.

?Red Sea Crisis is Causing a Major Short-Term Capacity Impact

• With the security crisis around the Red Sea seemingly still very far from being resolved, and all major ocean carriers continuing their diversions around southern Africa, carrier transit times and capacity have been severely impacted.
• Whilst the situation around the Red Sea is certainly a serious problem, the disruptions caused by the crisis are far milder than those seen during the pandemic, and so carriers should be better placed to mitigate the impacts of the current supply chain issues.
• Due to a combination of services delaying their departure dates from Asia in the short-term to await re-routing, and other services arriving late in Asia, mid-January 2024 is experiencing a rapid shortfall in capacity with a steep drop anticipated by the beginning of Week 4.
• A capacity crunch on Asia-North Europe is to be expected for shippers in the immediate term as the Red Sea crisis remains ongoing, with the Asia-MED and Asia-US East Coast lanes already experiencing this capacity deficit.

National Retail Federation Urges Restarting of Negotiations at US East Coast Ports to Avoid Strike

• The National Retail Federation (NRF) has urged dockworkers and maritime employers at US East Coast and Gulf Coast ports to resume contract negotiations ahead of the expiration of their labor contract on September 30th, 2024.
• In a letter sent to the International Longshoremen's Association (ILA) and United States Maritime Alliance, the NRF expressed concerns about potential disruptions in light of the discussions having been on hold for months.
• Contract negotiations for approximately 70,000 dockworkers across 36 ports on the East and Gulf Coasts began in February 2023 but stalled in October due to disagreements over wage increases.
• The concerns over possible strike action if a deal is not reached by the deadline have been heightened by the labor action by union dockworkers on the US West Coast in 2023 which sparked from a similar situation that saw negotiations continue for 11 months after the contract expired.
• US East Coast negotiations are considered to be more critical due to geopolitical factors and the current state of global chokepoints like the Panama Canal and the Suez Canal.
• The ILA has not had a coast-wide strike since 1977.

Port of Virginia Becomes First on US East Coast to Power All its Terminals with 100% Clean Energy

• The Port of Virginia has become the first port on the US East Coast to power all of its terminals via 100% clean electricity, reducing its carbon emissions by 45% per container through addressing both its scope 1 and scope 2 emissions.
• The port has surpassed its clean energy target eight years ahead of its initial schedule set for 2032.
• The shift to clean electricity is facilitated through a Power Purchase Agreement with Dominion Energy and collaboration with Rappahannock Electric Cooperative; it ensures sufficient generation and allocation of clean energy for present and future operational needs.
• The Port of Virginia is looking to position itself as "America’s Most Modern Gateway", currently utilizing four electric rail cranes, 116 electric stacking cranes, and 27 electric ship-to-shore cranes, with expansion plans to further increase the size of its electric crane fleet.
• The port is also investing $220 million in establishing an offshore wind logistics hub to support the largest offshore wind project in America.

Maersk Announces Changes to its OC1 Service Pertaining to the Panama Canal

• Maersk has announced plans to eliminate Panama Canal transits on its OC1 service between Oceania and the US East Coast citing the ongoing drought in the region which has reduced ship transits and container capacity through the waterway.
• The Danish carrier will instead utilize a “land bridge”; a 50-mile (80 km) rail service across the Isthmus of Panama to transport cargo between the Atlantic and Pacific.
• The OC1 service will be divided into two separate loops: the Pacific loop will drop off northbound cargo at Balboa for rail transport to Manzanillo, where the Atlantic loop will resume waterborne service.
• Maersk has stated that the changes will not create delays for its northbound cargo, however, southbound cargo may experience some delays.
• Other Maersk services from Asia to the US East Coast will continue to use the Panama Canal.

FMC to Hold Hearing on February 7th to Explain Waiver for Carriers Red Sea Crisis Surcharges

• The US Federal Maritime Commission (FMC) will hold a public hearing on February 7th, 2024, to explain its decision to allow ocean carriers to immediately impose surcharges to cover rising costs caused by ship diversions from the Red Sea.
• The FMC typically requires carriers to provide 30 days’ notice before implementing such charges, but waivers were granted due to the urgent need to reroute vessels away from the Bab al-Mandeb Strait amidst the deteriorating security situation.
• Some shippers have called for more transparency regarding the surcharges citing that they may exceed the actual costs of diversions.
• The FMC has acknowledged the additional costs but emphasized the importance of understanding how surcharges are determined and implemented, stating that the surcharges have come at a sensitive time as spot rates in the Red Sea crisis are already rising.
• Carriers such as CMA CGM, Hapag-Lloyd, MSC, Maersk, Ocean Network Express, and APL have received FMC waivers to implement the surcharges, however these charges can be disputed by shippers through regular FMC channels.

Groundbreaking MoU Signed to Bring Uzbekistan’s Cotton Industry Back into Supply Chains

• Multiple business and human rights organizations have signed a groundbreaking memorandum of understanding (MoU), "Enhancing Transparency and Accountability in the Cotton Industry of Uzbekistan”, aimed at improving working conditions and combating forced labor in Uzbekistan's cotton and textile production.
• The two-year agreement includes signatories such as the Center for International Private Enterprise (CIPE), the Association of Cotton-Textile Clusters of Uzbekistan, the Solidarity Center, and the Uzbekistan Ministry of Employment.
• Financed by the US Department of Labor, it will focus on the establishment of a worker-led reporting and grievance remedy system as well as an education and incentive program promoting transparency, labor rights, and good corporate governance.
• The signing of the MoU seeks to build on previous efforts from the World Bank and International Labour Organization to reform Uzbekistan's cotton supply chain after international brands boycotted the country due to concerns over forced labor.
• Uzbekistan has made notable progress in addressing its labor issues since signing an agreement with the World Bank in 2015, leading to the International Labour Organization declaring the country "free" of child and forced labor in 2022 and the cotton industry’s aligned boycott coming to an end.

South Carolina Ports Authority Requests Feasibility Study for Deepening of its Shipping Channel ?

• The South Carolina Ports Authority (SCPA) has made a request for the Army Corps of Engineers to perform a feasibility study for the possibility of dredging its shipping channel to deepen it to 52 feet (15.85 meters).
• The proposed update would enable vessels of all sizes to call at the North Charleston Terminal (NCT) and is part of the SCPA’s plan to expand capacity from 500,000 TEUs to 2.5 million TEUs within the next decade.
• The dredging project is set to cover the section of the Cooper River between the NCT and the Hugh Leatherman Terminal, the latter of which is currently only partially in use due to an ongoing legal dispute.
• The proposed depth of 52 feet is intended to increase the competitiveness of NCT against other ocean terminals at US East Coast ports such as the Port of Virginia's Norfolk Harbor and the Port of Savannah’s Garden City terminal, the latter of which is also expanding its river channel.
• SCPA is also considering raising a major bridge nearby that will accommodate 20,000-TEU ships through the terminal.

New CBP Ruling Prevents US Customs Brokers from Using Offshore Data Companies ?

• US Customs and Border Protection (CBP) has issued a ruling stating that US customs brokers cannot use offshore data entry companies for the performing of certain trade compliance processes for imports into the US.
• The ruling came in response to a request from a Georgia-based broker, Heizwerthy Customs & Freight Solutions, and prohibits the use of unlicensed third-party companies to handle reviews of shipping documents.
• Brokers will be prevented from using offshore labor to reduce operational costs associated with import entry preparation and other brokerage services with all customs-related work required to be done by broker company employees within the US.
• “Digital” customs brokers, who typically use offshore labor or automation services, will be particularly affected by the CBP’s new ruling along with importers who handle entry generation themselves or through third parties abroad.
• It is currently unclear about how brokers can now collect data from Bills of Lading and commercial invoices, as data for imports often originates from the exporting country.?

Department of Labor Awards US$ 12 Million to Organizations Protecting Worker Rights in Mexico

• The US Department of Labor has allocated a total of US$ 12.4 million to three organizations involved in combating child and forced labor, as well as supporting migrant workers in Mexico, through fair recruitment initiatives and enhancing workers' awareness of their rights.
• The International Labour Organization (ILO) will receive US$ 3 million to promote the labor rights of migrants, particularly Mexican nationals participating in temporary foreign worker programs in the US.
• Verité, a nonprofit monitoring group based in Massachusetts, will receive US$ 4.4 million to address child and forced labor in the municipalities of Chiapas and San Luis Potosí.
• The project aims to strengthen collaboration among stakeholders, including local government, the private sector, workers, and civil society, to combat these issues.
• The Pan American Development Foundation, an NGO headquartered in Washington, D.C., will receive $5 million to address child labor, forced labor, and labor violations affecting domestic workers in Mexico City and Querétaro.
• The funding aligns with the United States' obligations under the US-Mexico-Canada Agreement and supports Mexico's 2019 labor reform.

Sources:

Container News?

Freightos

JOC

JOC

JOC

JOC

JOC

National Centers for Environmental Information

Sea Intelligence

Sourcing?Journal?

Sourcing?Journal?

Sourcing?Journal?

Supply Chain Dive

Supply Chain Dive