Century Weekly Market Update Mar 18 - Mar 24

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, freight rates on all major trade lanes recorded notable decline with the exception of Asia-South Europe rates increasing. Carriers in India lowered spot rates in hopes of more bookings, Biden’s administration plans to expand the FLOW program, and APM Terminals announced they will be collaborating with Vietnam's Hateco Group in order to enhance the development of a container terminal at Haiphong Port. Additionally, ?a study revealed a price tag of US$ 1 trillion for the US to upgrade to electric truck infrastructure.

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 Alliance to Resume Trans-Pacific Container Services Amid Rising Demand and Freight Rates

• ?East Coast 4 (EC4) and ?Pacific Northwest 3 (PN3) services operated by THE Alliance are set to restart in the second quarter after being suspended last year due to plummeting ocean freight rates.
• The EC4 service will resume with a vessel scheduled to depart on April 15th , 2024 from Kaohsiung.
• The EC4 service will use a rotation of 13 ships operated by THE Alliance members Ocean Network Express (ONE) and Yang Ming, with uncertainty about Hapag-Lloyd and HMM's involvement.
• The PN3 service will also restart with the first voyage of a vessel scheduled to depart on April 19th, 2024 from Hong Kong.
• Rates for trans-Pacific shipping have risen since the suspension, with Asia - US West Coast spot rates at US$3,000 per FEU and rates to the US East Coast at US$4,500 per FEU, approximately double the rates from mid-October.
• Stronger demand for Asian imports, evidenced by US imports reaching 1.42 million TEUs in February 2024 with a 40% Y/Y growth, is a key driver behind the significant rate increases in trans-Pacific shipping.

Shipping Line Revenues and Profitability Trends in 2023

• In 2023, all shipping lines experienced significant Y/Y declines in revenues, ranging from -46.6% to -62.6%.
• However, the annualized revenue growth rate in 2023 was in line with that of 2018-2019, indicating that the sharp decline in 2023 was likely due to abnormal revenue growth in 2021-2022 rather than fundamental revenue loss.
• ZIM, Yang Ming, and Wan Hai all recorded their earnings before interest and taxes (EBIT) losses in 2023, with profitability levels nowhere near those of 2021-2022.
• EBIT per TEU (twenty-foot equivalent unit) is used to visualize profitability, with Maersk, Hapag-Lloyd, ONE, and HMM showing varying levels of EBIT/TEU, some higher than pre-pandemic years.
• ZIM's EBIT/TEU loss was driven by a non-cash impairment loss recorded in the third quarter, resulting in a significant negative value.

Transatlantic Air Cargo Corridor Trends and Rate Pressures in 2024

• The Transatlantic air cargo corridor experienced a weak start in 2024, contrasting with the global market, with demand from Europe to North America down 4% Y/Y.
• This decline in demand on the Transatlantic corridor is also reflected in ocean freight shipping, which saw a 4% Y/Y decline in January 2024, contrasting with double-digit Y/Y growth globally.
• Despite increasing cargo carrying capacity, supply has surpassed pre-pandemic levels, putting downward pressure on rates, which fell sharply by 27% Y/Y in February 2024, ending at US$1.82 per kg.
• With summer schedules approaching, there's anticipation of further downward pressure on spot rates due to increased passenger belly capacity, historically leading to a surge in capacity and subsequent rate decreases.
• Freight forwarders are increasingly allocating cargo volumes on the spot market, with the share of volumes shipped under spot rates increasing to 46% during the week of March 4th, 2024, up 15 percentage points from the same period in 2019.
• As rates continue to face downward pressure, carriers are expected to see cargo-only revenues on the Transatlantic fall to pre-pandemic levels, with air cargo revenues already reduced by 38?% in the first two months of 2024.

Weekly Blank Sailings Report ?

Century’s Blank Sailings Report for the week of March 18th – March 24th. 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 413 port omissions, a 29.6% decrease compared to the week prior.
• Ningbo recorded the highest amount of port omissions last week with 35, followed by Shanghai with 28 and Singapore with 24.
• Other ports with notably high omissions last week were Laem Chabang with 20, and Shekou, Qingdao, Kaohsiung, and Port Klang all with 16.
• Shanghai recorded the biggest W/W decrease in port omissions, falling by 54.1%.
• Looking towards the coming weeks, Century’s data shows an 8.7% decrease in currently scheduled blank sailings for week 13.
• Next week’s preliminary data shows notable increases in port omissions to be expected at ports in Busan, Shanghai, and Hong Kong.

Port omissions data for the most frequently omitted ports during week 8 can be found in the table below:

Our?full Blank Sailings Report for the week of March 18th – March 24th below provides a full list of every current scheduled port omission from Week 12 to Week 22 as of March 24th, 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 12 Blank Sailings Report

Week in review

Freight Rates Continue Falling Overall

• Trans-Pacific, trans-Atlantic, and Asia-North Europe have all recorded W/W declines as the Global Container Freight Index dropped 9% W/W.
• Trans-Pacific freight rates have now recorded five consecutive weeks of declines.
• Rates from China/East Asia to the US East Coast declined by 10% W/W to US$ 5,284.
• Rates from China/East Asia to the US West Coast dipped by 12% W/W to US$ 3,728.
• Freight rates from China/East Asia to North Europe fell 18% W/W to US$ 3,189, whilst rates to Southern Europe saw an increase of 9% W/W to now sit at US$ 4,532.?

Decline in Trans-Pacific Container Spot Rates Affects Service Contract Negotiations

• Container spot rates from Asia to the United States are experiencing a seasonal dip following Lunar New Year celebrations but remain higher compared to rates at this time in 2023.
• Despite the recent drop, there are indications of future growth, with US retailers projecting increased imports from Asia for the second quarter and beyond.
• Spot rates from Asia – US West Coast are currently at US$3,000 per FEU and US$4,500 to the US East Coast, down from previous weeks.
• Large retailers are negotiating service contracts with carriers, seeking rates that carriers believe are significantly below operating costs, potentially impacting the entire market.
• The decline in spot rates is shifting bargaining power back towards shippers, with negotiations occurring amidst ongoing disruptions in container shipping routes and uncertainties regarding the security situation in the Red Sea.
• Despite the threat of overcapacity due to a large order book for new vessels, negotiations for the upcoming service contracts in the trans-Pacific trade are progressing, with mid-tier retailers and NVOs awaiting the outcomes of negotiations with major retailers to set pricing benchmarks.

India-US Carriers Lower Spot Rates for the End of March in Hopes of More Bookings

• Spot rates on the India-US trade lane are decreasing as container carriers struggle to fill overcapacity.
• Updated rate quotes for the week of March 25th, 2024, from West India to the US East Coast show a decline W/W of about US$200 per TEU/FEU, with carriers like Hapag-Lloyd, Maersk, and CMA CGM offering varying rates.
• Maersk remains the lowest among major operators on the trade lane as the market softens and carriers such as MSC canceled rate increases that were previously scheduled for March.
• Mediterranean Shipping Co. and CMA CGM have postponed other rate increases, citing surplus vessel space and flattened demand, with expectations of further rate drops.
• Indian export industry stakeholders are cautiously optimistic as national goods outflows surged in February 2024, but the outlook depends on new contracts with carriers to be signed amidst increased freight costs.
• Despite hopes for recovery, the oversupply of tonnage and uncertain market conditions suggest continued pressure on spot rates in the India-US trade lane.

Biden Administration Plans to Expand the Freight Logistics Optimization Works (FLOW) Platform

• The Department of Transportation announced the Freight Logistics Optimization Works (FLOW) ?platform is expanding its data coverage to provide an enhanced view of container import volumes and traffic last Wednesday, March 20th, 2024.
• Launched in March 2022 to address congestion at West Coast ports, FLOW provides real-time insights on port congestion and cargo shifts, aiding supply chain planning and mitigating delays and fees.
• The platform collects and anonymizes data on inbound containerized freight, aiding decision-making and managing trade uncertainties such as Red Sea diversions and Panama Canal backlogs.
• Newly published data will include information on inland freight hubs, such as rail terminals and warehouse end destinations, enabling users to make informed capacity decisions and mitigate supply chain challenges.
• Participants share data starting from import purchase orders, and the platform aligns future demand volumes with current regional capacity to facilitate the movement of ocean containers, covering bookings, marine terminal slots, chassis availability, and gate moves.
• The Biden administration's expansion of FLOW is part of its broader efforts to bolster national supply chain operations, including investments in port security and initiatives to enhance supply chain resilience.?

Port of Charleston Plans for Container Terminal Growth

• The Port of Charleston plans to enhance its North Charleston container terminal to accommodate larger neo-Panamax ships.
• The South Carolina State Ports Authority (SC Ports) board approved the purchase of a 280-acre property formerly occupied by a WestRock paper mill to expand the terminal.
• The expansion will triple the size of the terminal's container yard to 400 acres and double its berth length to 5,000 feet.
• SC Ports aims to modernize the terminal with an optimized layout, upgraded cargo-handling equipment, and increased container capacity.
• Currently limited to ships of 8,000 TEUs, the terminal intends to welcome vessels of 15,000 TEUs and larger, necessitating collaboration with the South Carolina Department of Transportation to raise the Don Holt Bridge.

Potential Buyer's Market Emerges for Mergers and Acquisitions

• Mergers and acquisitions in the logistics and transportation sector slowed significantly in 2023 but are expected to pick up in 2024 due to soft shipping demand and attractive company valuations.
• 2023 saw a decline in deal making activity after an unprecedented surge in mergers and acquisitions during the pandemic, with average deal values dropping from US$529 million in 2021 to US$343 million in 2023.
• Despite the slowdown, top investors are ready to spend substantial funds once market conditions improve and valuations revert to historic levels.
• Notable deals in 2024 include CMA CGM's acquisition of Bolloré Logistics for EUR 4.85 billion and its attempted acquisition of Wincanton, though it lost a bidding war to GXO Logistics.
• The dynamics between buyers and sellers regarding price expectations post-pandemic continue to shape deal making sentiments in the logistics industry.

Truckload Carriers Surveyed Handled More Loads Monthly in 2023 to Sustain Revenue and Viability

• Despite lower rates, US trucking companies are taking on more work, leading to increased trucking capacity.
• A survey by Truckstop.com revealed that carriers drove an additional 3,000 miles on average and handled two extra loads per month in 2023, contributing to improved utilization of existing assets.
• The improved utilization of existing assets leads to a surplus in truckload capacity despite the number of active US motor carrier operating companies decreasing ?by 24,569 in 2023 and dropping further by 4,652 in the first two months of 2024.
• The remaining motor carriers are compensating for the exit of competitors, but they absorbed costs for 17% of their miles as unpaid "deadhead" travel last year.
• While attrition among smaller trucking companies has been significant, supply still exceeds demand, as evidenced by falling spot and contract rates in 2023.
• Recent data suggests a slight uptick in the truckload market, with broker-posted dry van truckload spot rates increasing by 1.7% from the previous week as of March 16th, 2024.

APM Strengthens Collaboration for Mega Container Terminal Development at Haiphong Port

• APM Terminals announced on Tuesday, March 19th, 2024, they will be collaborating with Vietnam's Hateco Group to enhance the development of a container terminal at Haiphong Port, aiming to support the ports growth as a key trans-Pacific shipping hub.
• Hateco Group initiated the construction of Haiphong International Container Terminal in 2021, projected to feature two berths capable of accommodating 18,000-TEU vessels and anticipated to commence operations by 2025.
• APM commits to providing expertise in safety, port automation, artificial intelligence, and decarbonization as part of the memorandum of understanding, building upon its existing market presence in Vietnam through the Cai Mep terminal.
• Haiphong's current container terminals can handle ships up to 13,000-TEU capacity, lagging behind Cai Mep terminal in terms of volume handled, but efforts are underway to attract more trans-Pacific services to Haiphong, including calls from major shipping alliances such as THE Alliance and Ocean Alliance.
• Despite Haiphong's lower volume compared to other ports like Vung Tau where Cai Mep is situated, there's a concerted effort to bolster its capacity and attractiveness for ultra-large container ships, with APM Terminals playing a pivotal role in this development initiative.

Study Reveals US$1 Trillion Price Tag for Electric Truck Infrastructure Upgrade in the US

• The Clean Freight Coalition released a study estimating the cost of upgrading US infrastructure for electric trucks at US$1 trillion.
• They express concerns about aggressive timelines set by regulators for transitioning to electric trucks, citing potential supply chain disruptions and higher costs.
• The US$1 trillion estimate does not include the cost of purchasing battery-electric vehicles, which are significantly more expensive than traditional trucks.
• Industry leaders argue that transitioning to electric trucks will result in substantially higher rates for customers due to the increased costs.
• Some companies, like Schneider National and PepsiCo, have begun adopting zero-emission vehicles, albeit at significantly higher costs than traditional diesel trucks.
• The trucking industry advocates for a phased approach to implementing clean truck mandates, prioritizing drayage and short hauls before transitioning to other segments and emphasizes the importance of bridge technologies and innovation alongside electric vehicles.

Efforts to Reduce Rail Container Backlog at Los Angeles and Long Beach Ports

• Terminal operators at the ports of Los Angeles and Long Beach are addressing a backlog of rail containers resulting from consecutive months of strong imports.
• Strong volumes are expected for summer and fall due to returning discretionary cargo that left West Coast ports last year.
• BNSF and Union Pacific are responding to the backlog by deploying more intermodal railcars and adjusting operations to reduce dwell times.
• BNSF set a record for on-dock intermodal container moves in February 2024 and expects to clear the backlog by the start of April 2024.
• Rail container backlogs vary among terminals, with some experiencing surges in imports leading to temporary restrictions and increased dwell times, while others have not encountered significant issues.

Sources

JOC

gCaptain

Sea Intelligence

Xeneta

Freightos

JOC

JOC

Sourcing Journal

Supply Chain Dive

JOC

Supply Chain Dive

JOC

JOC

JOC

JOC