Century Weekly Market Update Sep 11 - Sep 17

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 declined for a third consecutive week. A series of last-minute blank sailings brought cancellations in 2023 in line with pre-pandemic years. In addition, Maersk unveiled the world's first green methanol vessel. Estes Express increased its bid for Yellow's vacant container terminals, while MSC established a long-term partnership with the City of Hamburg. At the IANA conference, intermodal shipping providers expressed skepticism about the North American Railroads' preparations for a volume rebound.

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

Sharp Rise in ‘Last Minute’ Blank Sailings Ahead of China’s Golden Week

• Carriers have significantly ramped up the number of blank sailings over the past two weeks prior to China’s Golden Week.
• The figures now align with the blank capacity rates observed during 2017 to 2019.
• Over the past two weeks, blank sailings have increased from 2.2% to 16.1% on Asia-North America West Coast, from 3.7% to 14.1% on Asia-North America East Coast, from 7.7% to 21% on Asia-Mediterranean, and from 6.8% to 19.9% on Asia-Northern Europe.
• The graph below shows the 2023 scheduled capacity (red line) for the Golden Week and the subsequent three-week period as of two weeks ago, in comparison to the 2017-2019 capacity. It shows the newly updated 2023 capacity (red dash line), which is more in line with the pre-pandemic years.

Lack of Demand is Overwhelming Carriers’ Ability to Control Supply Through Blank Sailings

• The absence of the traditional demand surge ahead of China’s Golden Week, which has historically been the peak season for imports, is severely impacting carriers’ supply control.
• Despite increasing the number of blank sailings to support freight rates, the sustained low demand throughout the traditional peak season is proving too challenging for blank sailings to address.
• Virtually all carriers implemented a General Rate Increase (GRI) of US$ 1,000 per FEU from September, ahead of the anticipated peak season which drove Trans-Pacific spot rates above US$ 2,000 per FEU.
• However, due to the continued lack of demand, shippers have sufficient vessel space available under their regular service contracts, resulting in little necessity to book on spot rates.
• Freight rates have now started to decline again after the buildup for Golden Week, and carriers are now pinning their hopes for a demand surge leading up to the Chinese New Year period in February 2024.

Intermodal Providers are Split on Whether North American Railroads are Prepared for a Volume Rebound

• Intermodal providers are divided on whether North American Class 1 railroads have implemented the necessary structural changes to handle the next surge in cargo.
• Many logistics providers remain unconvinced that the railroads have taken the required steps to avoid repeating the mistakes made during the pandemic, which often led to dismal service.
• Railroads were criticized for excessively cutting expenses to satisfy shareholders, which ultimately led to their networks being less nimble to react to freight surges.
• A key issue in the past was the operation of fewer but longer trains without adequate infrastructure at terminals to efficiently handle the increased loads.
• The railroads assert that they have implemented crucial changes to their services to ensure reliable service even during demand surges. These changes include improving infrastructure to handle larger loads and investing in technology for smoother communication and operations.
• Additionally, railroads are currently attempting to regain market share lost over several years to the long-haul trucking industry, which has been attributed to unreliable service, uncompetitive pricing, and failure to address customer needs. The upcoming demand surge (whenever it happens) will either provide an opportunity for the railroads to demonstrate their improvements or further expose the lack of progress.

Weekly Blank Sailings Report

Century’s Blank Sailings Report for the week of September 11th – September 17th. 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 359 port omissions during blank sailings, a 16.6% increase W/W.
• Shanghai recorded the highest amount of port omissions last week with 30.
• Other ports with notably high omissions last week were Ningbo and Singapore, recording 21 and 20 port omissions, respectively.
• Looking towards the coming weeks, Century’s data shows an increase of blank sailings already scheduled for weeks 39, 40, and 41, all currently scheduled to record an increase of at least 9% in port omissions during the build up to China’s Golden Week.
• Next week’s preliminary data already shows that a ramping up in port omissions should be expected at ports in Ningbo, Yantian, Qingdao, Hong Kong, Port Klang, Singapore, Laem Chabang, Haiphong, London Gateway Port, and Piraeus.

Port omissions data for the most frequently omitted ports during week 38 can be found in the table below:

Our?full Blank Sailings Report for the week of September 11th – 17th below provides a full list of every current scheduled port omission from Week 38 to Week 49 as of September 18th, 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 38 Blank Sailings Report

Week in review

Trans-Pacific Freight Rates Decline for a Second Straight Week

• Transpacific freight rates from both China/East Asia to the US East Coast and US West Coast declined for a third straight week in the build up to China’s Golden Week.
• Rates from China/East Asia to the US West Coast decreased by 1% W/W to US$ 1,866.
• Rates from China/East Asia to the US East Coast dropped by 5% W/W to US$ 2,884.
• Freight rates from China/East Asia to Europe continued their sharp decrease, with rates to Northern Europe declining 6% W/W at US$ 1,517 and rates to Southern Europe declining 9% W/W to US$ 1,818.

Extended Panama Canal Restrictions are Impacting Tanker Markets

• Depleted water levels in the Panama Canal have led to delays in crossing, and this is now starting to affect the tanker shipping markets, particularly from the US Gulf.
• According to Gibson Shipbrokers’ latest weekly report, the additional 10,000 nautical miles required to sail around the South American continent increases bunker consumption, transit time and has ripple effects on vessel TCEs, supply chains, and carbon emissions.
• While larger MR tankers have been less affected by the extended restrictions of the canal due to low transits even during regular market conditions, smaller, versatile MR tankers, which typically service markets requiring canal transits, have experienced increased volatility in waiting times, severely impacting intraregional flows.
• The impacts are expected to result in increased regional ton miles, leading to lower vessel availability. This, in turn, presents an opportunity for tankers from East Asia to compete for South American West Coast markets as pricing out of the US Gulf becomes less economically attractive.
• Additionally, the increased transit times caused by the canal restrictions are likely to result in higher carbon emissions in the latter half of 2023.

Alliance of Global Cargo Owners Launch Zero-Emissions 600,000 TEU Tender

• In an effort to accelerate the decarbonization of container shipping, the Zero Emission Maritime Buyers Alliance (ZEMBA) has launched a tender to transport 600,000 TEUs over a three-year period using ships powered by zero-emission fuels.
• The ZEMBA RFP includes a negotiated “green premium” that the alliance would pay to ensure their cargo is shipped on vessels utilizing zero-carbon fuels, in addition to the base rate.
• The zero-emissions tender encompasses more than 20 ZEMBRA members, including Amazon, Bauhaus, Brooks Running, Chewy, Electrolux Group, Flexport, Green Worldwide Shipping, IKEA, Levi Strauss & Co. and lululemon.
• The timeline for bid acceptance primarily depends on the response time of interested carriers.

CMA CGM to Invest US$ 300 million into Recently Acquired Staten Island Terminal

• CMA CGM has announced plans to enhance the utilization of its recently acquired Howland Hook container terminal, which is part of its Port of New York and New Jersey assets acquisition.
• The container terminal, situated on Staten Island, is the fourth largest among the six container terminals in NY/NJ area. CMA CGM aims to increase its capacity by 50% by 2030 through a $300 million investment.
• The investment is intended to entice ships back to the container terminal, addressing concerns raised by vessels citing insufficient crane capacity and the drive to consolidate services.
• The President of CMA CGM North America has stated that they intend to make the acquisition the “preeminent gateway to America’s supply chain and America’s consumer”.

Estes Express Increases Bid for Yellow’s Terminals to US$ 1.525 Billion

• Estes Express, the second-largest LTL provider in the US, has increased its initial bid for Yellow’s vacant terminal of US$ 1.3 billion by an extra US$ 225 million.
• The increase in the bid comes amidst an ongoing bidding war between Estes and its competitor, ODFL who had countered Este’s initial offer with a bid of US$ 1.5 billion.
• In conjunction with raising its bid, Estes is acquiring Superior Brokerage Services (SBS), a Minneapolis-based international freight forwarder and brokerage business who specializes in international and domestic transportation, warehousing, and US customs brokerage.
• The acquisition of SBS is anticipated to double Este’s annual revenue, projecting it to surpass US$ 1 billion in 2025, as well as increase their international business from 7% to 35% to total revenue.

NVOs and Forwarders Now Liable For US Export Control Violations

• The US government has announced more stringent requirements on freight forwarders and NVOs regarding the reporting of customers who export illegal components to geopolitically sensitive destinations.
• NVOs and freight forwarders are now liable for customers in breach of US security requirements and could face hefty fines and even criminal prosecution for failing to report them.
• The US Department of Commerce (USDC) is urging forwarders and NVOs to “know their customer”.
• The announcement builds upon a previous policy clarification made in April 2023, which expanded the responsibility of reporting potentially suspicious dual-use components. Initially, the responsibility fell on electronics manufacturers, but it has now been extended to include shippers and transportation providers.

Venezuela Enters New Strategic Partnership with China

• Venezuela and China have agreed to establish a new strategic partnership following a meeting between the leaders of both countries in Beijing on September 13th.
• This marks the first official sit-down between China and the South American nation since 2018 and signifies a reconciliation of ties after years of detachment.
• Several cooperation agreements have been signed, encompassing various industries such as agriculture, mining, oil production, and even space exploration.
• Trade between Venezuela and China has already risen by 17% in the first half of 2023, with Chinese companies currently holding contracts worth US$ 66 billion within Venezuela.

Maersk Unveils World’s First Green Methanol Vessel

• Maersk revealed the world’s first container vessel powered by green methanol on September 14th, 2023, which marks a significant milestone in the industry’s energy transition.
• The vessel, which was ordered in 2021, comprises of two engines: one that operates on traditional fuels and another that runs on green methanol (biomass or captured carbon and hydrogen via renewable power).
• The new vessel is expected to emit 100 tons less carbon dioxide per day compared to vessels powered by traditional fuels.
• Following Maersk’s initiative, an additional 125 vessels utilizing the same technology and energy transmission have been ordered within the industry, setting an emissions-conscious trend for the future of global shipping.

MSC and City of Hamburg Establish Long-Term Strategic Partnership

• MSC has made a commitment to progressively increase its annual container volume at the HHLA terminal in the Port of Hamburg to 1 million TEUs between 2025 and 2031 in a sustainable manner.
• The Swiss shipping company has moved to purchase all free-floating A-Shares of Hamburg’s HHLA terminal, intending to launch a voluntary public takeover offer at 16.75€ (US$ 17.86).
• MSC’s German headquarters will also be established in the city with several hundred employees.
• HHLA will now be operated as a joint venture between MSC (49.9%) and the City of Hamburg (50.1%).

New Garment Tracking System to Boost Textile Transparency Ahead of Incoming EU Regulations

• Swedish software platform TrusTrace piloted its Digital Product Passport (DPP) last week with the aim of boosting transparency and sustainability within the textiles industry.
• The DPP functions as a digital product tag which will be able to connect and exchange individual textile’s information with numerous computer systems regarding every step of its journey.
• The DPP is being developed in line with the EU’s proposed regulations on the transparency and circularity of the textiles industry.
• The DPP is being piloted through tagging some items of fashion brands Kappahl and Marimekko via an ID carrier that tracks the supply chain data and presents it to the consumer through an attached QR code.
• The QR code data includes Global Trade Identification Number, commodity codes, compliance documents, manufacturer information, substances of concern, and more.

Sources

Bloomberg

CNBC

Hellenic Shipping News

JOC

JOC

JOC

JOC

JOC

JOC

JOC

Sea Intelligence

Supply Chain Dive