Century Weekly Market Update Sep 30 - Oct 6

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 continued to experience decrease for the third week in a row, with this week's index dropping by 17%. The strike at US East and Gulf Ports was promptly resolved through USMX and ILA reaching a tentative wage agreement. Additionally, shippers remain hesitant about relying on rail despite recent advancements in domestic intermodal services, and tariff adjustments for Chinese electric vehicles were decided upon by the EU.

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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Global Schedule Reliability Maintains Stability Alongside 2024 Trends

• Global ocean freight schedule reliability increased to 52.8% in August 2024, reflecting a fluctuating trend between 50% and 55% throughout this year.
• August 2024 witnessed a notable Y/Y drop by 10.2 percentage points, indicating a broader decline compared to last year.
• The average delay for late vessel arrivals rose to 5.28 days in August 2024, exceeding the peak delays observed during the pandemic in 2021 and 2022.
• Maersk demonstrated the highest reliability among the top 13 carriers, achieving a schedule reliability of 54.7%, while PIL was the least reliable at 37.2%.
• On a Y/Y basis, HMM and Yang Ming were the only carriers to enhance their performance, contrasting with six carriers experiencing significant double-digit decreases.

US Economic Growth Expected to Decelerate in 2025 Amid Softening Freight Market Environment

• The US economy is foreseen to experience a slowdown in 2025, which is likely to have repercussions on the freight market by decreasing rates in the truckload, intermodal, and LTL sectors.
• Despite the resilient consumer behavior in 2024, experts project a decline in consumer spending due to increasing unemployment and debt, potentially impacting the trucking industry.
• Due to surplus capacity in the truckload market, significant rate increases are not expected until later 205, with truckload pricing forecasted to rise by only mid-single-digit percentages.
• A slower recovery in warehousing and industrial sectors may occur if manufacturers hold back on investments, especially in the event of weakened consumer spending.
• LTL pricing retains its strength amid favorable market conditions; however, challenges emerge in tonnage growth comparisons after the bankruptcy of Yellow, a once-dominant US trucking company.
• Domestic intermodal encounters tough competition from abundant truck capacity and low rates, stressing the importance of preparing for potential drops in import volumes and fostering growth.

Indian Authorities Propose a Strategic Approach for VSAs to Enhance Fair Competition

• Indian shipping regulators are suggesting prolonged waivers for vessel-sharing agreements (VSAs) in return for consortium participation privileges.
• A recent proposal for a three-year immunity suggests dedicating 5% of space to Indian-flagged vessels and domestic NVOs.
• The preliminary legislation seeks to improve competition and transparency while enhancing the presence of Indian shipping companies in international trade.
• The Directorate General of Shipping intends to oversee VSAs for anti-competitive practices and inform the Competition Commission of India about any breaches.
• Stakeholders are encouraged to submit their feedback on the draft guidelines by October 8th.
• The strategy of the Indian government is focused on enhancing local container shipping interests, as the SCI seeks to expand its fleet for market re-entry.

Weekly Blank Sailings Report: ?

Century’s Blank Sailings Report for the week of September 30th – October 6th. 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 605 port omissions, an 28.7% increase compared to the week prior.
• Shanghai recorded the highest amount of port omissions last week with 47, followed by both Ningbo and Singapore with 59.
• Other ports with notably high omissions last week are Busan with 35 and Shekou with 33.
• Kaohsiung recorded the most significant W/W increase, a 200% rise in port omissions.
• Looking towards the coming weeks, Century’s data shows a 7.7% increase in currently scheduled blank sailings for week 41.
• Next week’s preliminary data shows notable increases in port omissions to be expected at ports in Ningbo and Shanghai.

Port omissions data for the most frequently omitted ports during week 40 can be found in the table below:

Our?full Blank Sailings Report for the week of September 30th – October 6th below provides a full list of every current scheduled port omission from Week 40 to Week 50 as of October 7th. 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 40 Blank Sailings Report

Week in Review:

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Global Container Freight Index Decreases for Third Week in a Row

• The Global Container Freight Index has dropped for three consecutive weeks, with this week's index falling by 17% to US$ 3,798.
• China/East Asia to North America East Coast rates significantly dropped by 22% W/W to US$ 6,744.
• China/East Asia to North America West Coast rates declined by 15% W/W to US$ 5,760.
• Besides the downward trend in rates from North America East Coast to North Europe, the majority of trans-Atlantic routes witnessed an increase in rates.
• While rates fell on all trans-Suez routes W/W, the most significant W/W decline of 20% to US$ 4,075 was seen on the China/East Asia to North Europe route.

Rail Shippers Brace for Intermodal Rate Hikes in 2025 Contracts

• Domestic rail shippers are advised to prepare for higher expenses in 2025, but the contract rates are expected to increase by only low-single-digit percentages.
• Intermodal contract rates are subject to the movements of truckloads, with anticipated rises in the national average truckload rates ranging from 1% to 6% in Q1 2025.
• Bid timing is also a crucial factor that impacts rates, where early bids could align closely with the national inflation rate, typically around 2% to 3%.
• In August 2024, the average US contract intermodal rates decreased Y/Y from US$ 1.58 per mile to US$ 1.49 per mile, while truckload rates dropped from US$ 2.09 to US$ 1.97 per mile during the same period.
• Intermodal contracts in Southern California may witness increases above the average, especially in outbound routes such as Los Angeles to Atlanta, highlighting regional volume growth trends surpassing national averages.

Shippers' Caution Persists Despite Improvements in Domestic Intermodal Services

• Despite advancements in domestic intermodal service within the recent two years, shippers remain cautious about relying on rail for time-sensitive cargo.
• During Q3 2024, US Class I railroad intermodal train speeds saw an increase from 28.3 mph to 29.5 mph, while the number of intermodal trains held due to service problems decreased from 69 per day to 20 per day, and the count of idled intermodal cars fell from 1,820 to 1,050.
• 90% of intermodal shippers expressed satisfaction with rail service in the first half of 2024, recognizing the improvement.
• Nevertheless, shippers worry about the potential resurgence of service failures, particularly during periods of tight truck capacity, which hamper railroads and intermodal providers from converting up to 10 million loads suitable for intermodal transport.
• Industry leaders stress the importance of innovative strategies to drive growth in intermodal transportation, underscoring the significance of adapting to leverage forthcoming opportunities.
• Service disruptions that have occurred recently in major ports like Los Angeles, Long Beach, and Tacoma highlight the persisting weaknesses in the supply chain, urging railroads to proactively tackle potential disruptions and enhance communication with customers.

UP Increases Fees for Low-Volume California Outbound Shippers Amid US West Coast Import Surge

• Union Pacific Railroad (UP) raises surcharges for low-volume customers surpassing their peak season allotment for California outbound lanes due to increased US West Coast import volumes.
• The rate adjustment will only impact low-volume shippers without specific contracts, leaving those with such contracts unaffected.
• Intermodal shipments have experience growth, largely influenced by the uptick in California outbound volume, while routes with high traffic like New York to Chicago have remained consistent.
• Containerized imports have shown a remarkable Y/Y surge at US West Coast ports, resulting in heightened fees for surpassing allotments, reaching US$ 750 per container in Los Angeles and US$ 300 per container in Northern California.
• Demand for railroad-owned containers in California is expanding, leading to proactive measures to meet shipper demands amidst market constraints.
• Intermodal operators selectively apply peak season surcharges, prompting shippers to adjust strategies, such as delaying shipments to avoid additional charges.

ILA Suspended Three-day Port Strike at US East and Gulf Coast Ports Upon Reaching Tentative Wage Agreement

• The ILA, involving approximately 45,000 dockworkers, caused the shutdown of 36 ports on the East and Gulf Coasts (including major hubs like New York, Baltimore and Houston) since October 1st, impacting a substantial portion of the nation's maritime transportation.
• ILA announced the suspension of the strike action on October 3rd after reaching a tentative agreement on wages with USMX.
• USMX proposed a US$ 4 hourly raise to ILA, representing a 62% wage increase for longshore workers over the 6-year contract term.
• Such salary enhancement marks a significant improvement from the initial 50% offer, as the union advocated for a 77% raise.
• Both parties agreed to extend the Master Contract until January 15, 2025, allowing for further negotiations on any unresolved matters, particularly concerning safeguards against automation.
• Operations at container terminals in East and Gulf Coast ports returned to normal on October 4th as negotiations proceeded.

Tensions Rise as Montreal Port Labor Disputes Await Government Action

• Montreal port workers initiated a three-day strike at the Port of Montreal on September 30th, resulting in the closure of two terminals that manage more than 40% of the container traffic at Canada's second-largest port.
• It is unlikely that Prime Minister Trudeau will intervene to avert Montreal port workers from initiating further strikes.
• Previous union strikes at specific terminals had a considerable impact on cargo flow, prompting government intervention through back-to-work legislation in April 2021.
• Despite recent labor disruptions in major ports and railways, the government and Parliament exhibit hesitancy in swiftly introducing back-to-work legislation or exerting substantial pressure.
• The lack of intervention from the federal government suggests that the chances for a rapid resolution in confrontations over salary and vacation policies are very limited.

US Trucking and Freight Demand Strained by Hurricane Helene's Aftermath

• In the wake of Hurricane Helene, US supply chains will face challenges as truck capacity is affected, with a priority on rescue efforts rather than infrastructure reconstruction.
• The devastating impact of Hurricane Helene results in significant loss of life, extensive damages and infrastructure collapse, particularly along I-40 near the North Carolina-Tennessee border.
• Similar to the aftermath of Hurricane Harvey, Hurricane Helene’s repercussions will trigger a prolonged surge in freight demand, as trucks are needed for relief operations and reconstruction, leading to delays in operations.
• Immediate stress on the flatbed sector arises as reconstruction projects prioritize transporting construction materials, leading to increased demand and capacity constraints.
• Obstacles like road closures and power outages in the Southeast temporarily impede the movement of goods, with expected improvements in the upcoming week.

EU Votes to Impose Chinese-made EV Tariffs

• The European Union (EU) voted on tariff adjustments for Chinese electric vehicles (EVs) on October 4, with varying rates applicable to distinct brands and potentially peaking at 45% for specific manufacturers.
• Subsequent to vote passed and the provisional tariffs’ expiration, the proposed tariffs on Chinese EVs in the EU are extended for an additional five years.
• Key EU countries, including France, Italy, Greece and Poland, are expected to support the approval of the tariff increase.
• A substantial portion of the EU population must unite to stand against the proposal in order to prevent the tariff increases.

Breakbulk Reefers Survive Amidst Changing Trade Dynamics

• The specialized reefer breakbulk sector, which acted as an alternative for breakbulk cargo during the COVID-19 pandemic, is maintaining its presence and exploring fresh markets.
• Shifting towards direct connections between buyers and sellers enhances the utilization of reefer containers, whereas the older breakbulk reefer fleet faces challenges in complying with current emission standards.
• Container carriers are penetrating segments of the reefer cargo market that were previously dominated by breakbulk reefer operators, partly driven by the emergence of regional trade events.
• Global reefer volumes are anticipated to reach 152.5 million metric tons by 2028, alongside a corresponding uptick where 89% of shipments are containerized.
• Numerous ports across the globe are investing in cold storage facilities to accommodate breakbulk reefer cargo demands, including ports in China (Dalian, Taizhou and Guangzhou) and the U.S. (Mobile, New Orleans and Wilmington).?

Sources

Sea Intelligence

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Freightos

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Reuters

CBS News

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Supply Chain Brain

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