Century Weekly Market Update July 29 - August 4

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, the global container freight index declined, along with many trans-Pacific trade route’s rates. Air cargo rates remained elevated, the FMC finalized rules on unreasonable refusal of vessel space, and the WSC proposed a Green Fuel Mechanism to align costs and decarbonization efforts. Additionally, the Port of Los Angeles faces a power supply issue that hinders their transition to green technology.

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:

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Long-Term Ocean Freight Rates Begin to Rise Amidst Softening Short-Term Rates and Volatile Market Conditions

• Recent sharp increases in spot rates for ocean container shipping contrast with more stable long-term contract rates, though this stability may be changing.
• The Global Xeneta Shipping Index for long-term contracts rose 2.5% in July 2024 to 151.5 points but remains 4.0% lower than December 2023 levels.
• The Far East Export sub-index surged 12.6% to 178.8 points in July 2024, reflecting rising long-term rates on major trades to Europe and the US, despite recent softening in short-term rates.
• Long-term rates for major Far East exports are starting to increase, which could potentially narrow the gap with short-term market rates. This shift may impact future growth trajectories.
• Far East import rates fell significantly in July 2024 to their lowest since Q1 2020, while US import rates rose for the second consecutive month but are still down Y/Y.
• European import rates saw a modest increase in July 2024, while European export rates continued to decline for the fifth month, reaching their lowest level since January 2021.

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Global Schedule Reliability Declines in June 2024 with Major Carriers Experiencing Mixed Performance

• Global schedule reliability for ocean freight dropped to 54.4% in June 2024, continuing a trend of fluctuating reliability between 50%-55% this year.
• Schedule reliability in June 2024 was significantly lower Y/Y by 9.8 percentage points, reflecting a broader decline compared to last year.
• The average delay for late vessel arrivals increased to 5.19 days in June 2024, now one of the highest figures since the pandemic.
• Hapag-Lloyd emerged as the most reliable carrier among the top 13 with a 55.4% schedule reliability, while ZIM was the least reliable at 44.4%.
• Seven out of the top 13 carriers saw month-on-month improvements in reliability, with Yang Ming showing the largest gain of 6.1 percentage points.
• On a Y/Y basis, only HMM and Yang Ming improved their schedule reliability, while MSC experienced the largest decline of 18.5 percentage points.

Carbon Emissions in Ocean Shipping Show Slight Improvement in Q2 2024 Despite Overall Demand Surge

• Carbon emissions in ocean container shipping saw a slight improvement in Q2 2024, with the Carbon Emission Index (CEI) falling to 98.6 points, down 8.3% from Q1.
• The CEI now stands below the benchmark of 100 points, reflecting improved emissions efficiency compared to 2018 levels, despite ongoing high emissions overall.
• The reduction in CEI is partly due to non-Red Sea trades achieving their best scores, while long-haul routes affected by Red Sea conflicts have seen increased emissions.
• Despite the drop in emissions per ton of cargo, total global CO2 emissions from container shipping have risen due to record demand and increased cargo volumes.
• The US West Coast to Far East backhaul trade achieved the lowest CEI score ever recorded at 68.5 points in Q2 2024, highlighting significant efficiency improvements.
• Larger ships operating on key routes, such as the Far East to US West Coast, have contributed to reduced emissions per ton of cargo, benefiting from economies of scale.

Weekly Blank Sailings Report: ?

Century’s Blank Sailings Report for the week of July 29th – August 4th. 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 558 port omissions, a 6.7% increase compared to the week prior.
• Shanghai recorded the highest amount of port omissions last week with 47, followed by Ningbo with 45 and both Singapore and Busan with 33.
• Other ports with notably high omissions last week are Qingdao with 25 and Rotterdam with 22.
• Antwerp and Rotterdam recorded the most significant W/W increases in port omissions; Antwerp increased 175% while Rotterdam increased by 100%.
• Looking towards the coming weeks, Century’s data shows a 1.6% increase in currently scheduled blank sailings for week 32.
• Next week’s preliminary data shows notable increases in port omissions to be expected at ports in Singapore and Antwerp.

Port omissions data for the most frequently omitted ports during week 31 can be found in the table below:

Our?full Blank Sailings Report for the week of July 29th – August 4th below provides a full list of every current scheduled port omission from Week 31 to Week 41 as of August 5th, 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.

Century consistently strives to enhance customer satisfaction by proactively addressing challenges in the shipping process. In our commitment to securing space for our valued customers amidst ongoing carrier constraints, our dedicated operators diligently undertake additional measures. After working through meticulous analysis of Carrier Booking and the Actual Shipped Ratio, we found that our teams are currently, on average, making two carrier booking requests per container in order to help ensure our customers' cargo flows as smoothly as possible.

Click here to DOWNLOAD the full Week 31 Blank Sailings Report

Week in Review:

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China/East Asia – North America West Coast Rates Saw Significant Decline in Rates W/W

• Majority of trans-Suez trade lanes saw steady or increased rates W/W while the Global Container Freight Index decreased by 3% W/W to US$ 4,924.
• China/East Asia to North America East Coast rates decreased by 2% W/W to US$ 9,661.
• China/East Asia to North America West Coast rates declined by 10% W/W to US$ 6,891.
• All trans-Pacific routes saw steady or declining rates, whereas all trans-Suez routes saw all steady or increased rates.
• The MED – China/East Asia trade lane saw steady W/W rates for the fourth week in a row.

Industry Concentration Remains Stable Despite Market Turmoil

• The global Herfindahl-Hirschmann Index (HHI) for the top 30 carriers remains low at under 1,200, indicating a low level of industry concentration.
• Despite recent market turmoil, the concentration among the top 10 largest carriers has not significantly changed, suggesting stable competitive pressure.
• The third-tier carriers (ranked 21-30) have also experienced little change in concentration levels.
• There has been a slight increase in concentration among carriers ranked just below the top tier, but it remains well below the 1,500 HHI threshold for moderate concentration.
• Overall, industry concentration has not exceeded typical levels for marginal concentration, indicating that market dynamics since 2020 have not markedly shifted the balance of power.
• Shippers' concerns about high industry concentration are not fully supported by the data, which shows that global concentration levels remain within standard ranges.

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Air Cargo Rates Remain Elevated Amid E-Commerce Surge and Disruptions, with Peak Season Anticipated

• Air cargo rates from Asia remain elevated due to sustained high demand and disruptions in ocean shipping, with spot rates holding steady despite a global IT outage in July 2024.
• The average air freight rate from Shanghai to North America in July was US$ 5.53 per kilogram, nearly 25% higher Y/Y, while rates to North Europe rose 44% Y/Y to US$ 3.93/kg.
• Air cargo volumes are expected to continue strong growth into August and September 2024, with the potential for a peak season boost as the year progresses.
• E-commerce demand and disruptions in ocean shipping, including Red Sea diversions and unrest in Bangladesh, have driven up air cargo rates, particularly from the Middle East and Central Asia to Europe.
• Spot rates from Southeast Asia to North America and Europe more than doubled Y/Y in July, reaching US$ 5.78/kg and US$ 3.85/kg, respectively.
• Congestion at the port of Jebel Ali and prioritization of passenger baggage at Dubai airport have led to delays and increased air freight rates, as shippers shift cargo from overburdened ocean routes to air freight.

FMC Finalizes Rules on Unreasonable Refusal of Vessel Space Under Ocean Shipping Reform Act

• The Federal Maritime Commission (FMC) has issued a final rule defining what constitutes an "unreasonable" refusal of vessel space under the Ocean Shipping Reform Act of 2022.
• The rule clarifies that violations can occur during both the negotiation phase and the execution stage of a transaction if a carrier unreasonably denies cargo space.
• Examples of unreasonable conduct include failing to provide adequate notice of scheduling changes or providing inaccurate vessel information.
• The final rule will take effect on September 23rd, 2024, except for two sections related to ocean carriers' export policies are still under review.
• Shipper complaints will be assessed individually, with not all refusals necessarily constituting a violation, provided carriers can justify their actions on a reasonable basis.
• The FMC's guidelines include non-binding examples of unreasonable behavior to assist in evaluating whether a carrier's actions breach the law.

WSC Proposes Green Fuel Mechanism to Align Maritime Fuel Costs and Accelerate Decarbonization Efforts

• The World Shipping Council (WSC) advocates for regulations that would increase fossil fuel prices to make green maritime fuels economically viable and stimulate investment in low-carbon alternatives.
• The WSC has revised its “green balance mechanism” proposal to include a fee on high greenhouse gas (GHG)-intensity fuels, with funds allocated to lower GHG-intensity fuels to balance costs and drive green fuel demand.
• The International Maritime Organization (IMO) is expected to discuss carbon emissions and green fuel mechanisms at its climate meeting starting September 30th, 2024, focusing on making green fuels competitive.
• The revised proposal aims to accelerate green fuel adoption by providing financial incentives based on GHG reduction performance, ensuring that the cleanest fuels are prioritized.
• The IMO's updated emissions targets include a 20-30% reduction in GHGs by 2030, 70-80% by 2040, and 100% by 2050, with the WSC's proposal contributing to these goals.
• Container carriers are increasing orders for vessels capable of running on low or zero-emission fuels, with significant investments in methanol and LNG-powered ships reflecting the industry's shift toward greener technologies.

SeaLead and TS Lines Expand Trans-Pacific Capacity with New Vessel-Sharing Agreement Amid High Freight Rates

• SeaLead Shipping and TS Lines have entered a vessel-sharing agreement to expand their trans-Pacific capacity, adding two more ships to SeaLead’s existing service to the Port of Long Beach.
• The agreement allows the Asia West Coast (AWC) service to operate up to six ships, with potential expansion to eight, accommodating 2,700 to 6,500 TEUs each.
• The AWC service includes stops at Chinese ports (Nansha, Ningbo, Shanghai, Qingdao) and Busan in South Korea.
• Despite a recent softening, trans-Pacific spot freight rates remain significantly higher than last year, with current rates at US$ 6,400 per FEU, down from over US$ 8,000 in July 2024 but still up 237% Y/Y.
• Small carriers and shipowners are increasing their operations on the trans-Pacific route, with more Panamax and feeder ships calling at the US West Coast.
• In July 2024, 14 ships with capacities of 6,000 TEUs or smaller visited the Los Angeles-Long Beach port complex, a notable increase from five in April 2024.

?Maersk Raises Full-Year Guidance Amid Red Sea Disruptions and Strong Demand

• A.P. Moeller-Maersk has revised its full-year guidance upward for the third consecutive month due to high demand and disruptions in the Red Sea region affecting shipping routes and freight rates.
• The company is facing challenges from vessel shortages and port congestion as ships are rerouted around the Cape of Good Hope to avoid conflict zones, impacting global shipping networks.
• Maersk anticipates ongoing supply-chain disruptions from the Red Sea crisis through at least the end of 2024, with global container market growth now projected between 4% and 6% for the year, up from previous forecasts.
• The company has significantly raised its gross earnings forecasts, expecting US$ 9 billion to US$ 11 billion, reflecting strong container demand and increased freight rates.
• Despite the improved financial outlook, Maersk's preliminary second-quarter earnings fell short of analyst expectations.
• Maersk's free cash flow forecast has increased to at least US$ 2 billion, up from the previous guidance of US$ 1 billion, indicating a strong cash position despite operational challenges.

?Port of New York and New Jersey to Expand Container Capacity for MSC

• A US$ 197.6 million project to restore a public berth at Port Newark will allow Mediterranean Shipping Co. (MSC) to increase its vessel capacity on the US East Coast after its 2M Alliance with Maersk ends in early 2025.
• The restoration will involve demolishing old wooden structures and installing modern concrete and steel pilings, with the project expected to be completed by late 2028.
• The currently unused berth will initially be dedicated to dry bulk operations but will eventually be repurposed to support container operations once bulk cargo activities are relocated.
• Port Newark Container Terminal (PNCT) is preparing for an expansion, including becoming a four-berth facility, to accommodate MSC's needs after the end of the 2M Alliance.
• PNCT's expansion will include one berth for Panamax-size ships and another for super post-Panamax cranes, allowing it to handle up to three ultra-large container ships simultaneously.
• MSC's Terminal Investment Limited (TIL) and Ports America will manage the expanded terminal, which is necessary due to Maersk's new alliance with Hapag-Lloyd potentially reducing access to APM Elizabeth Terminal.

?Panama Canal to Boost Daily Vessel Transits Amid $1.6 Billion Expansion Project for Water Management

• The Panama Canal plans to increase daily vessel transits to 36 starting in September 2024, aiming to return to normal levels after recent rainfall improvements.
• The usual number of transits ranges between 36 to 38 per day, with ideal conditions allowing up to 42 vessels.
• The canal is undertaking a US$ 1.6 billion expansion project to enhance its water catchment, including the construction of the Río Indio reservoir to secure water supplies.
• This project will boost daily transits by 11 vessels and provide additional drinking water, with construction and related infrastructure expected to be completed by 2030.
• The project follows a period of severe drought in 2023 that reduced transits and caused significant congestion, emphasizing the need for reliable water management and infrastructure improvements.

Power Supply Issues at Port of Los Angeles Hinder Green Technology Transition

• Terminal operators at the Port of Los Angeles are experiencing power surges and outages, which are disrupting crane operations and other cargo handling equipment, raising concerns about meeting the 2030 mandate to phase out diesel machinery.
• At least nine power-related outages have been reported this year, impacting container terminals and causing delays as machinery needs recalibration and repairs.
• The Port of Los Angeles’s reliance on the Los Angeles Department of Water and Power (LADWP) for electricity has led to issues with power distribution, exacerbated by the port’s reliance on exposed overhead power lines.
• LADWP is addressing the power reliability issue with a US$ 500 million project to install underground power lines, aimed at improving stability and reducing outages by 2029.
• In contrast, the neighboring Port of Long Beach, which sources its power from Southern California Edison, reports fewer power issues and uses battery backup systems to mitigate short-term outages.
• Both the Ports of Los Angeles and Long Beach are investing heavily in electric and battery-powered equipment to meet California’s emission reduction goals, which will significantly increase their power needs in the coming years.

Sources:

Xeneta

Sea Intelligence

Xeneta

Freightos

Sea Intelligence

JOC

SupplyChainDIve

JOC

JOC

WSJ

JOC

JOC

WSJ