Century Weekly Market Update June 17 - June 23

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, trade lanes originating from China/East Asia experienced a rise in freight rates. Index-linked contracts in ocean freight container shipping carried the possibility for significant costs, labor disputes and uncertainty pose challenges for ports along the US East and Gulf Coast, and the surge in shipping costs from India presents difficulties for trade routes connecting the US and Europe. Additionally, the Verdi Trade Union has initiated strikes at major ports in Germany.

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

Index-Linked Contracts in Ocean Freight Container Shipping Result in Potential Million-Dollar Costs

• Ocean freight container shipping is witnessing an increase in popularity of index-linked contracts, which provide an adjustment mechanism as the cost of transportation rises or falls. However, certain contracts may lead to substantial financial losses for shippers.
• The emergence of index-linked contracts was attributed to market volatility triggered by COVID-19 pandemic and Red Sea Crisis, aiming to share the risks and rewards associated with market fluctuations between shippers and carriers or freight forwarders.
• An issue arises when a shipper transports commodities using 40ft equivalent containers (FEU), while its agreement with the carrier or freight forwarder is based on a 20ft equivalent container index (TEU).
• Such discrepancy potentially results in significant overpayment, as evidenced by the average cost comparison between one FEU and one TEU on the trade between Shanghai and Antwerp, where the price difference ranges from US$368 to US$6,592.
• Index-linked contracts can, however, be highly beneficial, as they provide enhanced financial transparency and foster stronger trust between shippers and service providers.
• To safeguard financial interest and prevent overpayment, shippers should ensure that they apply the correct benchmark or index to the appropriate equipment type (TEU for 20ft containers and FEU for 40ft containers).

Market Dynamics Affect Shipper Loyalty and Causes Costly Expenditures for Carriers

• Amidst a notable surge in freight rates, the absence of enforceable shipper/carrier contracts presents a significant obstacle in container shipping.
• Assuming shippers will reciprocate during a market downturn, carriers are prompted to uphold contractual obligations and maintain moderation in revenue-focused endeavors.
• Maersk exhibited a comparatively slower rise in their global average rate level during the pandemic, yet when rates began to decline, Maersk experienced a decrease that closely mirrored the market’s downward trend, indicating a lack of reciprocal response from shippers.
• Maersk incurred a revenue loss of US$15.7 billion by not aligning with the market, whereas ZIM attained a gain of US$4.2 billion by implementing faster and higher rates increase.
• From the viewpoint of carriers, it is more advantageous to swiftly raise rates rather than relying on shipper loyalty during an economic recession.

US Importers Rush to Overcome Challenges and Optimize Supply Chains

• Due to various global and domestic concerns, US importers prioritize the acceleration of their orders to bring in containerized freight ahead of schedule.
• Those concerns encompass multiple factors, such as the deteriorating situation in the Red Sea, difficulties in ship crewing, and labor issues at ports along the East Coast and Gulf Coast.
• Laden imports from Asia to US experienced a 6.7% growth in May 2024, leading retailers to revise and elevate their import forecasts until September 2024.
• The logistics industry anticipates sluggish development until new economic catalysts are identified, which could potentially be influenced by interest rates.
• As supply chains grow increasingly complex, companies pursue shorter and more reliable supply chains while incorporating flexibility to navigate market volatility.

Weekly Blank Sailings Report: ?

Century’s Blank Sailings Report for the week of June 17th – June 23th. 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 587 port omissions, a 13.5% increase compared to the week prior.
• Singapore recorded the highest amount of port omissions last week with 47, followed by Ningbo and Shanghai with 46, as well as Busan with 44.
• Other ports with notably high omissions last week are Port Klang with 20 and Hong Kong with 20.
• London Gateway Port recorded the biggest W/W increase in port omissions, rising by 500%.
• Looking towards the coming weeks, Century’s data shows a 7.6% decrease in currently scheduled blank sailings for week 26.
• Next week’s preliminary data shows notable increases in port omissions to be expected at ports in Hai Phong and Laem Chabang.

Port omissions data for the most frequently omitted ports during week 25 can be found in the table below

Our?full Blank Sailings Report for the week of June 10th – June 16th below provides a full list of every current scheduled port omission from Week 24 to Week 34 as of June 16th, 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 25 Blank Sailings Report

Week in review

All Trade Routes Departing from China/East Asia Experience a Rise in Freight Rates

• Trade lanes from China/East Asia to North America East/West Coast and MED have all recorded increases as the Global Container Freight Index rose by 8% W/W.
• China/East Asia to MED rates increased by 4% W/W to US$7,169
• China/East Asia to North America West Coast rates surged by 15% W/W to US$6,840.
• The North America West Coast to China/East Asia route saw a significant decline of 31% in rates, now sitting at US$486.
• Freight rates for the following trade lanes also experienced decreases: North America East Coast/North Europe – China/East Asia, North America East Coast – North Europe, and Europe – South America East Coast.

Labor Dispute and Uncertainty Threaten US East and Gulf Coast Ports

• Negotiations between the International Longshoremen's Association (ILA) and the United States Maritime Alliance (USMX) have been suspended, raising uncertainty regarding the stability of labor relations on the US East and Gulf coasts.
• In response to container lines' record-breaking profits during the pandemic, the ILA has intensified pressure on ocean carriers to agree with substantial wage increases.
• The reason for canceling future negotiations was ILA’s allegation that Maersk and its subsidiary APM Terminals violated the existing agreement by utilizing technology.
• Shippers who depended on labor to uphold peace at gateways in Houston, Savannah and Virginia are now exploring alternative ports like Los Angeles-Long Beach.
• A surge in import volumes, insufficient vessel and container equipment capacity, as well as limited West Coast routing options have resulted in a surge of spot rates in the eastbound trans-Pacific to over US$7,000 since mid-April 2024.

Global Container Shipping Struggles with Capacity Challenges and Soaring Rates Amidst Supply-Demand Imbalance

• Despite the additional 1 million TEUs of new shipping capacity in global container shipping for Q1 2024, there was minimal impact on monthly effective capacity in the market.
• A full utilization of available capacity on the Asia-Europe and trans-Pacific trades is attributed to longer voyages around southern Africa and port congestion in Asia and Europe.
• Carriers operating between Asia and North Europe raised the deployment of ships by 24% and total capacity by 17%, leading to a mere 2% increase in monthly effective capacity to 1.1 million TEUs.
• The imbalance between supply and demand has caused a substantial increase in spot rates, with rates on the North Asia-North America West Coast route surging by US$1,300 to reach US$7,500 per FEU.
• Supply chain infrastructure has been strained due to the early peak season and surge in demand, while the duration of significant demand remains uncertain.
• The Red Sea crisis is anticipated to persist, resulting in prolonged transit times and ongoing capacity challenges in the near future.

Shipping Costs from India Surge and Pose Challenges for US and Europe Trade Routes

• Shipping rates from India to Europe are expected to rise as carriers introduce price hikes and additional charges in the upcoming month.
• Mediterranean Shipping Co. will adjust its rates to Antwerp and Valencia at US$5,300 and US$6,000 per FEU, while Hapag-Lloyd will increase its base ocean tariff to European ports by US$500 per container.
• Hapag-Lloyd and CMA CGM will implement an equipment imbalance surcharge of US$300 and an emergency space surcharge of US$500.
• Carriers operating in the India-US trade have announced general rate increases and peak season surcharges, varying between US$500 and US$2,400 per container.
• Substantial capacity reductions and blank sailings may bring difficulties for making bookings to the US East Coast.

Changes in India-US East Coast Trade Pave the Way for Gemini Cooperation Alliance

• Hapag-Lloyd has decided to discontinue its Indamex service, which is a major trade route connecting West India and the US East Coast.
• Hapag-Lloyd will launch a standalone service called TPI, encompassing ports in Pakistan, western India, as well as multiple destinations along the US East Coast.
• CMA CGM’s enhanced Indamex service will merge the two existing strings into a single loop, with additional stops at Savannah and Charleston.
• The newly introduced Indamex service will provide a round-trip voyage of 77 days around the Cape of Good Hope, utilizing vessels with a capacity of approximately 8,500 TEUs.
• CMA CGM's rebranded loop may potentially form a vessel-sharing partnership with Cosco Shipping or its subsidiary OOCL.
• The evolving service modifications in Indian trades lay a foundation for the upcoming initiation of the Gemini Cooperation alliance between Maersk and Hapag-Lloyd, scheduled to commence in the early 2025.

Red Sea Crisis Disrupted Shipping Routes and Encouraged Alternative Voyages

• Circumnavigating Africa has become a more affordable option for shipping companies due to high costs of crew bonuses, expensive war-risk insurance, and additional Suez transit fees.
• Voyages around Africa incur an additional US$1 million in fuel costs and extend the journey by approximately 11,000 nautical miles.
• Container shipping through the Red Sea experienced a substantial drop of 90%, causing a global impact as over 65 countries redirected their cargo around Africa.
• The Suez Canal has suffered a substantial financial setback, witnessing a 64.3% decline in revenues to US$337.8 million, along with reduced ship traffic and cargo volume.
• Until the end of 2024, the Suez Canal Authority will be providing extended fee discounts to promote greater ship traffic through the gateway.

Verdi Trade Union Called for Strikes in German Ports

• Work stoppages occurred at major German ports including Hamburg, Bremen, Bremerhaven, Brake and Emden.
• The strikes aligned with ongoing contract negotiations between the Verdi trade union and the Central Association of German Seaport Companies (ZDS).
• Container pick-up, container drop-off and rail departures were disrupted during the negotiation.
• Verdi requested a US$3.22 increase in hourly wages and a corresponding adjustment in shift allowances.
• Maersk and other ocean carriers implemented additional measures to mitigate the impact on future vessel schedules and possible cargo delays, which involved diverting vessels and imposing restrictions on move counts.
• If an agreement is not reached and further strikes are initiated, cargo will be redirected to larger ports in Northern European like Rotterdam and Antwerp.

Export Shipment from Bangladesh Hindered by Scarcity of 40ft Containers

• The shipment of export cargo from Bangladesh is severely affected by a critical shortage of 40ft high-cube containers, prompting major liner operators to undertake equipment repositioning from nearby ports.
• Port congestion in Singapore has further worsened the situation, resulting in delayed berthing and leaving numerous containers bound for Bangladesh stranded.
• Due to the ongoing Eid holidays, importers have postponed the collection of their 40ft containers at Chittagong port.
• The Bangladesh Inland Container Depots Association reports a widespread scarcity of 40ft containers across various carriers.
• Most of Bangladeshi exports utilize 40ft containers, while imports predominantly rely on 20ft boxes for transportation.

Uncertainty Persists for Freight Market Recovery Despite Surging US Truck Tonnage in May

• US truck tonnage experienced a surge in May 2024 due to increased freight demand, marking the first seasonally adjusted gain since February 2023.
• From April to May 2024, the seasonally adjusted American Trucking Associations (ATA) for-hire truck tonnage index rose by 3.6% and the unadjusted gain amounted to 7.1%.
• The seasonally adjusted ATA index recorded a 1.5% Y/Y increase, which was the first annualized gain in 15 months.
• It remains uncertain to conclude whether this uptick signifies the beginning of a long-anticipated recovery in the truck freight market.
• The Cass Freight Shipments Index, which incorporates intermodal and various types of freight, maintained stability M/M but dropped by 5.6% Y/Y.
• The Michigan State University truck ton-mile index exhibited a 0.7% M/M rise, yet once seasonal adjustment was applied, it revealed a 0.5% decline in April 2024.

SC Ports Suspend Construction Project to Clear Vessel Backlog

• To address the backlog of vessels outside Charleston, the South Carolina Ports Authority (SC Ports) will temporarily pause a construction project at the Wando Welch Terminal.
• Following the holiday on July 4th, 2024, the suspension is scheduled to take place with the objective of restoring operation to all three berths at the terminal.
• The closure of one berth during construction and a software malfunction recently led to a substantial rise in the number of anchored vessels, peaking at almost 20.
• The backlog of vessels has reduced to 10, and SC Ports intend to further decrease it to single digits by the end of June 2024.
• The construction project involves reinforcing the toe wall to accommodate larger container ships and maintain harbor depth.
• To alleviate supply chain disruptions, the SC Ports have implemented various measures such as providing early morning slots for loading and unloading, as well as offering estimated berth times to ocean carriers.

Sources

Xeneta

Sea Intelligence

JOC

Freightos

JOC

JOC

JOC

JOC

Sourcing Journal

Sourcing Journal

The Loadstar

JOC

JOC