Century Weekly Market Update Nov 20 - Nov 26

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 diverged on US East Coast and US West Coast. The Mersin International Port unveiled a US$ 455 million capacity expansion project. Australia’s four biggest ports experienced protected industrial actions, whilst China and Saudi Arabia signed a new currency swap agreement. Additionally, Maersk inked its largest ever deal with a methanol supplier for alternative fuel.

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

US Agricultural Exports Slip Y/Y as Soft Import Volumes Hinder Availability

• US Agricultural exporters are struggling to ship their commodities to European and Asian markets during the peak 2023 harvest season due to a shortage of containers.
• A 17% drop Y/Y in US containerized imports in 2023 has led to a shortfall of containers, especially those which are typically shipped to inland population centers like Chicago, Kansas City, and Dallas to then be refilled with agricultural goods for export.
• The shortage, which has emerged over the past two weeks, has US agricultural exporters worried that the lack of containers will persist throughout peak harvest season.
• An aggressive ramping up in blank sailings recently has further exacerbated the shortage by disrupting shipping schedules and withholding container equipment.
• The spike in blank sailings, as carriers attempted to prevent spot rates from collapsing, coupled with western US railroads dedicating far less capacity to the inland US agricultural hubs, has raised concerns over the export capabilities for this year’s peak harvest season.

Green Shipping Services are Being Embraced by Shippers, But Slowly

• Cargo owners are slowly showing interest in emissions-cutting transport options offered by carriers, however, with the low rates and absence of laws mandating green services, little incentive is present for shippers to pay a premium for them.
• Maersk has secured commitments from Europris and Amazon for their eco-friendly shipping products, including shipping 20,000 FEUs via vessels operating on bio-fuels in 2024, but overall acceptance of green products in the industry remains sluggish.
• Hapag-Lloyd's ShipGreen product, offering CO2 reduction of up to 100%, has accounted for just 65,000 of the carrier’s 12 million TEUs shipped since the beginning of 2023, and the carrier has only sold 1% of its annual container volume via ShipGreen.
• The lethargic start to this year’s green shipping initiatives seem to indicate a lack of willingness from customers to pay for sustainable transport premiums, which is likely hindered by the absence of legislation which would make it obligatory rather than voluntary.
• Carbon pricing is hailed as a crucial tool to fund net-zero spending, with the European Union implementing its Emissions Trading System (ETS) from 2024, leading to six major carriers subsequently announcing surcharges ranging from €12 to $120 per TEU, however, there are concerns regarding calculation methods and carrier transparency.
• Despite the challenges, momentum seems to be slowly building, and some shippers expect biofuel requirements to reappear in contracts in 2024, with a potential willingness to pay up to 5% over current market rates for carbon reductions.
• However, the current low rate levels on major trade lanes limit the feasibility of significant rate increases, and with the current westbound trans-Atlantic and Asia-North Europe trade lanes sitting at loss-making levels, a 5%, green shipping induced increase would have little impact on rates.

Panama Canal Restrictions Becoming the Norm is Pushing Shippers to Re-evaluate Their Options

• The transit and draft restrictions increasingly imposed by the Panama Canal Authority (PCA) on vessels transiting the canal since May of 2023, including tightening capacity and reduced transit frequency, are slowly being accepted as, and expected to be, the norm for at least the near future.
• Persistent dry conditions in the region caused by El Ni?o have resulted in a record drought and critically low water levels on the Panama Canal which it is yet to recover from despite the arrival of the rainy season and increasingly drastic water-saving procedures by the PCA.
• Currently, all container ships across all size classes are seeing a 20% capacity reduction to meet to new draft limits whilst larger vessels are losing around 350 TEUs of capacity for each foot of draft reduction.
• Despite the sustained and significant loss of capacity utilization, the PCA has stated that significant relief for the depleted water levels is unlikely to arrive until 2028 when a US$ 2 billion investment to construct a new reservoir and additional pipelines is slated to come into fruition.
• With this news, carriers and shippers alike are beginning to accept that the canal’s issues will become a regular occurrence over the next few years and so have begun considering their contingency options.
• Alternative routes such as via the Suez Canal or deploying smaller vessels are already being considered, with transloading operations between East Coast and West Coast ports in the US and Mexico as well as taking the long journey around South America also on the table.
• These alternatives come with significant drawbacks such as increased travel time/distance, logistical complexities, service disruptions, and higher operating costs, and come amidst a depressed trans-Pacific trade market which is mounting further strain on financial viability for some lanes.
• How carriers and shippers alike choose to navigate the seemingly more permanent challenges associated with the Panama Canal may become a key competitive advantage over the coming years.

Weekly Blank Sailings Report

Century’s Blank Sailings Report for the week of November 20th – November 26th. 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 478 port omissions, a 7.4% decrease compared to the week prior.
• Shanghai recorded the highest amount of port omissions last week with 44, followed by Ningbo with 40 and Singapore each with 24.
• Other ports with notably high omissions last week were Busan with 22, Rotterdam also with 22, and Xiamen with 18 omissions.
• Port Klang recorded the biggest W/W decrease in port omissions falling 52.6%.
• Looking towards the coming weeks, Century’s data shows a 5.2% decrease in currently scheduled blank sailings for week 49 and further preliminarily decreases for weeks 50 and 51 as we head towards the winter holiday period.
• Next week’s preliminary data shows notable decreases in port omissions to be expected at ports in Shanghai, Yantian, Kaohsiung, Ho Chi Minh, Hai Phong, Kingston, and Hamburg.

Port omissions data for the most frequently omitted ports during week 48 can be found in the table below:

Our?full Blank Sailings Report for the week of November 20th – November 26th below provides a full list of every current scheduled port omission from Week 48 to Week 52 as of November 27th, 2023. 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 48 Blank Sailings Report

Week in review

Trans-Pacific Freight Rates Move in Diverging Directions for US East Coast and US West Coast

• Transpacific freight rates for the US East Coast recorded a small decline last week whilst, in contrast, rates to the US West Coast rose slightly as the Global Container Freight Index remained steady W/W.
• Rates from China/East Asia to the US East Coast dipped 1% W/W to US$ 2,362.
• Rates from China/East Asia to the US West Coast climbed 3% W/W to US$ 1,613.
• Freight rates from China/East Asia to Europe declined last week, with rates to North Europe decreasing once again by 6% W/W to now sit at US$ 1,211, whilst rates to Southern Europe remained steady W/W at US$ 1,492.

US Imports from Asia in October Record 2023 High?

• Despite the recorded 13% rise Y/Y in Q3 2023 container volume compared to Q3 of 2022, the comparative figures are heavily skewed by the steep decline in demand experienced in the same period last year.
• The recently released container volume figures look promising in isolation, with the recorded 5% rise Y/Y on Asia-North Europe, 14% rise Y/Y on Asia-West Med/North Africa, 43% rise Y/Y on Asia-East Med/Black Sea, and 12.9% rise Y/Y for Asia-Europe overall seeming optimistic.
• However, these positive figures come amidst the context of a massive collapse across the Asia-Europe trade lanes in Q3 of 2022 due to the absence of a need for European retailers to replenish their stocks within a soft consumer market.
• Overall, Asia-Europe volume fell by 300,000 TEUs between August and September 2022 thus heavily impacting the Y/Y comparisons now being made with 2023.
• Weak European import demand is actually leaving carriers heavily oversupplied, despite them blanking 21% of available capacity on Asia-Europe trade in November 2023, and thus carriers are now set to blank 24% of the available capacity on Asia-Europe in December.

Maersk Signs its Largest Ever Deal to Source Methanol from Chinese Supplier

• Last week, Maersk signed its largest ever deal with Chinese methanol producer, Goldwind Science & Technology Co., Ltd., to provide 500,000 metric tons of methanol per year as the carrier looks to secure enough supply to power its new fleet of methanol-ready vessels.
• The Chinese energy developer is set to provide the first methanol volumes to Maersk in 2026 and is expected to propel over half of Maersk’s methanol-enabled vessels currently on order.
• The fuel to be supplied by Goldwind is a mix of green bio-methanol and e-methanol which are both produced via wind energy at its production facility roughly 1,000 km (621 miles) north of Beijing.
• Maersk has stated that the scale and price of its new agreement confirm methanol as the most viable solution for low-emission ocean shipping.
• The carrier has also stated that the deal de-risks the initial stages of its own journey towards achieving net-zero by 2040 and supports its expectations for a competitive green methanol market by 2030.
• As carbon rules tighten and taxes increase, demand for alternative fuels is rising as carriers ramp up orders for vessels which run on both fossil fuels and greener alternatives, typified by the 125 methanol-equipped vessels on order representing over 15% of the current orderbook.

US$ 455 Million Capacity Expansion Project Unveiled at Mersin International Port

• A US$ 455 million expansion project has just been unveiled at the Mersin International Port on Turkey’s Southern coast intended to boost the port’s container capacity from 2.6 million to 3.6 million TEUs by Q1 of 2026.
• The East Med Hub 2 (EMH2) Project is being undertaken by Mersin International Port Management (MIP), which is a joint venture between Akfen, IFM, and PSA International.
• The focal point of the EMH2 Project is the extension of the quay by an additional 380 meters to bring the total length to 880 meters and thus enable the terminal to accommodate larger vessels, including two 400-meter-long Ultra Large Container Vessels simultaneously.
• Mersin will also increase its draft to 18 meters to facilitate the handling of deep-draft vessels and purchase eight new automated rail-mounted gantry cranes and four additional ship-to-shore cranes.
• The first phase of the project is set to be completed by Q1 of 2025
• MIP's shareholders have also just signed an agreement with Mersin Tarsus Industrial Zone to establish a logistics park adjacent to the port spanning 200,000 SQM (2,152,782 sq ft) to complement the terminal expansion efforts and further reinforces the region's logistics capabilities.

Landside Forwarders Prepare for New European Toll System Linked to CO2 Emissions

• Germany will officially implement its hefty toll hikes linked to CO2 emissions on December 1st, 2023, that will significantly increase fees for landside forwarders and freight operators.
• Heavy goods vehicles are to be categorized into five tiered classes based upon their CO2 emissions levels which will then determine the toll rates for each respective vehicle.
• Estimates from DKV Mobility anticipate a €200 charge per ton of CO2 for all commercial vehicles weighing over 7.5 tons, subsequently increasing trucking industry toll costs in Germany by up to 83%.
• Truckers foresee the increased costs being substantial enough to threaten the sustainability of current operating models and thus are under the expectation that these additional costs will be passed onto shippers, consequently raising rates within, and transiting through, affected countries.
• The tolls are the latest decarbonization challenge for the European haulage industry to navigate amidst increasing regulatory pressure to reduce its Greenhouse Gas emissions.
• Austria will join Germany in January 2024 when it will also implement CO2 toll hikes, with the rest of the EU expected to follow by March 2025.

Estes Increases Investment in Technology in Wake of Recent Cyberattack

• Estes Express Lines announced that it is proactively responding to the cyberattack experienced in October by increasing its investment in technology and committing to a more robust IT system.
• During the cyberattack, Estes lost access to many of its systems, including email communications. Freight pickup operations continued amidst the disruptions with no direct impacts being reported to its financial systems.
• Despite the IT systems shutdown caused by the cyberattack, the US’s second largest LTL provider has seen a notable recovery in freight volumes in November, back to experiencing a Y/Y increase, as previously diverted volumes return in the aftermath of the disruptions.
• Prior to the cyberattack, Estes had already been prioritizing technological advancements by expanding its partnership with Optym, a prominent trucking software developer, and adopting new products to enhance operational efficiency.
• With the restoration of affected systems, Estes aims to standardize technology and processes, actively engaging with industry organizations like the Digital LTL Council to drive industry-wide improvements.
• Estes plans to spearhead the adoption of standardized application programming interfaces (APIs) and electronic bills of lading among its esteemed clientele, envisioning a more resilient LTL ecosystem and facilitating expedited recovery measures in the face of future disruptions.

Port of Virginia to Invest Nearly US$ 60 Million on New Resin Packaging Capacity

• The Port of Virginia is set to expand its presence on the US East Coast through a US$ 59.9 million investment from resin packager Katoen Natie as they look to boost their capabilities in Norfolk.
• The planned increased resin packaging capacity, which includes a 450,000 sq ft (41,806 SQM) warehouse, railyard, and new spur, is intended to boot Virginia’s capabilities for handling plastic production from the Shell petrochemicals plant in Pennsylvania.
• Virginia is one of the fastest-growing export gateways for plastic resins from the US and has been identified for resin packaging investment due to its central location on the East Coast, dual rail service via Norfolk Southern and CSX, and natural deep-water harbor.
• US demand for ethylene is increasing amidst a rise in exports, which has seen the Port of Virginia experiencing the sharpest growth in the handling of export containers of polyethylene resins, reaching 7,788 TEUs for September 2023, a 400% Y/Y increase from 1,559 TEUs in 2022.
• Whilst US domestic demand remains weak, demand for polyethylene is increasing and bringing competitive pricing and healthy margins which are expected to drive strong growth of US exports to Europe and Asia.

Protected Industrial Action at DP World Ports in Australia

• The DP World Australia ports of Brisbane, Freemantle, Melbourne, and Sydney are currently receiving protected industrial action from the Construction, Forestry, Maritime, Mining and Energy Union - Maritime Union of Australia Division (CFMMEU-MUA).
• The action first began on October 6th, 2023, following the collapse of negotiations for a new enterprise agreement, however, was briefly paused during DP World’s recent cyberattack on November 10th, which caused over a week of operational shutdowns across the four ports.
• Following the resumption of operations after the cyberattack, the CFMMEU-MUA has since resumed the industrial action, starting November 20th, until December 4th.
• All four ports are experiencing various work bans and stoppages which include several consecutive days of two-hour-long stoppages commencing at regular intervals three times a day at Brisbane, Melbourne, and Fremantle, and similar one-hour-long stoppages are planned at Sydney.
• The full breakdown of work stoppages and bans detailed by DP World Australia can be found at: https://centurysc.com/wp-content/uploads/DP-World-Australia-PIA-updates-Nov-20-2023.pdf

Saudi Arabia and China Sign Currency Swap Agreement

• The Saudi Central Bank and the People's Bank of China announced the signing of a local currency swap agreement worth US$ 6.93 billion (￥50 billion / 26 billion SAR) on November 20th, 2023.
• The currency swap agreement is valid for three years and has the option to be extended via mutual arrangement.
• This is the latest currency swap arrangement agreed with China, adding to its currency swap network of over 40 countries including Argentina, Brazil, Pakistan, and Thailand.
• The two countries intend the swap deal to continue the momentum of bilateral relations between them as they look to take relations further beyond hydrocarbon ties and expand collaboration into new areas such as technology and security.
• Saudi Arabi and China, the world’s top exporter of oil and the world’s biggest energy consumer, respectively, also intend to expand the use of their local currencies through the agreement to promote bilateral trade and investment via financial cooperation.
• China imported US$ 65 billion worth of crude oil from Saudi Arabia in 2022, accounting for roughly 83% of China’s total imports from the kingdom, however, Russia remains as the country’s top supplier of crude oil despite its premium prices.

New Life Cycle Assessment Reveals Corrugated Cardboard Packaging is Making Environmental Progress

• The latest Corrugated Packaging Alliance’s life cycle assessment for corrugated cardboard packaging has revealed that the industry has reduced per-unit Greenhouse Gas (GHG) emissions for the average US corrugated box by 50% between 2006 and 2020.
• The assessment was performed in collaboration with Anthesis, the National Council for Air and Stream Improvement, and third-party review by the Athena Institute, and examined the entire cradle-to-grave life cycle of an average corrugated cardboard box produced in the United States in 2020.
• This analysis encompassed the impact on land, air, and water, considering factors such as raw material sourcing, manufacturing, distribution, use, and end-of-life, and concluded a 93% recycling rate for corrugated cardboard, far higher than any other packaging material.
• The industry's progress is being attributed to advancements in energy efficiency, establishment of robust recycling infrastructure, sustainable forest management practices, and a steadfast commitment to continuous improvement.
• Corrugated boxes use a mix of new and recycled fibers; fresh fibers from sustainable forests remove CO2, while reusing old boxes reduces emissions by diverting them from landfills which boosts circularity and sustainability.

Sourcing:

Container News

Daily Cargo News

DP World

Freightos

Journal of Commerce

Journal of Commerce

Journal of Commerce

Journal of Commerce

Journal of Commerce

Journal of Commerce

Journal of Commerce

Journal of Commerce

Reuters

Supply Chain Dive