Century Weekly Market Update Sept. 23 - Sept. 29

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 declined by 3% W/W, along with rates on most major trade lanes. Both US East and West Coast ports prepared for the potential ILA strike, the FMC denied delay on container billing rules, and a lithium battery fire erupted at LA and Long Beach Ports leading to closures. Additionally, US railroads suspended grain shipments to Mexico due to capacity issues.

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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Rising Freight Rates and Diverging Trends in Reefer Shipping from Europe to the Middle East and Southeast Asia

• Since the end of 2023, freight rates for refrigerated cargo from North Europe to the Persian Gulf have surged by 58%, driven by route changes due to conflict in the Red Sea.
• Reefer trades from North Europe to Southeast Asia have remained relatively stable, with only minimal fluctuations in long-term contract rates throughout 2024.
• The Red Sea conflict disrupted trade routes to the Persian Gulf, resulting in missed port calls and a sharp rise in freight costs, whereas Southeast Asian routes were unaffected.
• Demand for reefer shipments to Southeast Asia has grown 6.8% in 2024, while shipments to the Middle East have dropped by 2.5% Y/Y in the same period.
• Global demand for refrigerated container transport reached an all-time high in 2024, with a 5.1% increase in the first seven months compared to 2023.

MSC Gaining Competitive Edge in EU's Carbon Emissions Trading System with Optimized Route Design

• The EU's Emissions Trading System (ETS) requires all vessels sailing to or from EU ports to pay a carbon emissions tax, which is applied to 100% of emissions between two EU ports and 50% between an EU and non-EU port.
• Ships calling at a non-EU port closest to their first or last EU port of call can significantly reduce their ETS costs, paying for only 50% of the emissions from the non-EU port to the EU port.
• MSC has optimized its network, cutting the reportable emissions distance between Asia and Europe nearly in half, giving it a significant cost advantage under the ETS.
• Ocean Alliance's current network design offers only a marginal 7% reduction in reportable ETS sailing distances between Asia and Europe, putting them at a cost disadvantage compared to competitors like MSC, which achieve significantly greater savings. Ocean Alliance has yet to publish its 2025 network, but it is expected they will adjust their routes to reduce exposure to higher ETS costs.

2025 Budget Planning Amidst Ongoing Market Volatility and Freight Challenges

• The unpredictable nature of global supply chains makes it essential to use both historical and real-time data to anticipate spending patterns and market shifts when planning the 2025 budget.
• Forward-looking data and dynamic pricing strategies allow companies to stay ahead of market trends and justify additional budget increases, such as for unplanned surcharges or geopolitical disruptions.
• Monitoring how and why the freight market shifts is critical to adjusting budgets, enabling organizations to manage service levels and costs associated with expedited shipping, alternative routes, and inventory holding.
• Aligning logistics and finance teams helps improve budget accuracy, ensuring that all relevant parties are prepared for unexpected external factors that can dramatically affect logistics costs.
• Index-based contracts offer a flexible budgeting solution, protecting against extreme price fluctuations while allowing procurement managers to respond more efficiently to changes in market conditions.

Weekly Blank Sailings Report: ?

Century’s Blank Sailings Report for the week of September 23rd – September 29th. 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 470 port omissions, 10.8% increase compared to the week prior.
• Ningbo recorded the highest amount of port omissions last week with 42, followed by Shanghai with 40 and Singapore with 30.
• Other ports with notably high omissions last week are Busan with 21 and Rotterdam and Port Klang both with 19.
• Antwerp saw a significant increase in blank sailings W/W, increasing by 250%, from 4 to 14 blanks.
• Looking towards the coming weeks, Century’s data shows a significant 35.1% increase in currently scheduled blank sailings for week 40.
• Next week’s preliminary data shows notable increases at Qingdao, Shekou, and Kaohsiung.

Port omissions data for the most frequently omitted ports during week 39 can be found in the table below:

Our?full Blank Sailings Report for the week of September 23rd – September 29th below provides a full list of every current scheduled port omission from Week 39 to Week 49 as of September 29th, 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 39 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 decreased for three weeks in a row with this week’s rates decreasing by 3% W/W to US$ 4,564.
• China/East Asia to North America East Coast rates decreased by 3% W/W to US$ 8,693.
• China/East Asia to North America West Coast rates increased by 1% W/W to US$ 6,816.
• The only major routes that saw W/W increases were: North America East Coast – China/East Asia, and Europe – South America (both coasts).
• Every trans-Suez route saw a decrease in rates W/W except for Mediterranean – China/East Asia which saw stead rates W/W.

Zim and MSC Partnership Signals Changes for Indian Shippers

• Zim Integrated Shipping Services is set to charter container slots from Mediterranean Shipping Co. as part of a new strategic partnership to enhance service levels for Indian shippers.
• The alliance will provide Zim with access to MSC's existing two weekly sailings on the West India-US trade lane, branded as the Indus and Indusa services, improving port coverage.
• Zim's CEO highlighted that this partnership is a result of their fleet renewal program, positioning the company to take advantage of evolving market conditions effectively.
• Currently, Zim has no direct services from India's key ports, Nhava Sheva and Mundra, and instead relies on transshipment through Sri Lanka’s Colombo Port via a vessel-sharing agreement with Maersk.
• Spot rates for shipping from India to the US East Coast have been declining since a peak in late July 2024, with recent rates reported around US$ 4,000 per FEU for regular customers from Nhava Sheva to New York.
• There is concern that the recent realignments and partnerships could lead to significant excess capacity in the market, affecting price stability and competition.

Pacific Northwest Ports Ready to Absorb Cargo Diversions Amid Potential East and Gulf Coast Strikes

• Ports in the Pacific Northwest, including Seattle-Tacoma and Vancouver, are prepared to handle an increase in cargo should strikes at East and Gulf Coast ports occur.
• Terminals in Seattle-Tacoma are currently operating at 55% to 65% utilization, with fluidity restored after a surge in import volumes and a brief rail worker stoppage in Canada.
• Rail container dwell times, which spiked due to congestion, are improving at ports like Vancouver, where September 2024 data shows on-dock dwell times trending towards seasonal norms.
• Import volumes in the Pacific Northwest have surged this summer, with Seattle-Tacoma seeing a 34.6% Y/Y increase in August 2024, as retailers front-loaded shipments to avoid disruptions from potential labor strikes.
• North American railroads expect to manage elevated container volumes through the fall, coordinating efforts to reduce rail dwell times and maintain sufficient equipment to prevent terminal congestion.

Railroads Implement Container Drop-off Deadlines Amid Potential Longshoremen's Strike

• Exporters are facing strict drop-off deadlines for containers due to a looming strike by the International Longshoremen’s Association (ILA) on Oct. 1st, 2024, which could halt operations at major East and Gulf coast ports.
• CSX required refrigerated containers to be at terminals by Sept. 26th, 2024, and dry containers by Sept. 29th, 2024 to avoid being stranded if the strike occurs, with additional storage options available if the strike extends.
• Canadian National Railway stopped accepting exports destined for East Coast ports from Montreal and Toronto starting Sept. 25th, 2024, while all Gulf Coast exports must arrive by Sept. 26th, 2024.
• Norfolk Southern Railway issued staggered drop-off schedules with varying deadlines for major terminals, including those in Virginia and New York/New Jersey, to streamline cargo flow amid potential disruptions.
• CSX stated that containers stranded on the rail during a strike may be inaccessible and cannot guarantee that terminals or ports will unload them before the strike begins.
• Railroads are preparing for operational challenges if the strike occurs, with plans to stage railcars in key locations to ensure quick freight movement resumption, although limited storage space may complicate logistics.

New Shipping Alliances Set to Reshape Trans-Pacific Service Landscape in 2025

• The Gemini Cooperation and Premier Alliance will launch in 2025, expanding shipping options for companies by adding to the existing network of global carriers, while Mediterranean Shipping Co. (MSC) will continue as a standalone operator with select partnerships.
• The newly structured networks will connect 24 ports in Asia to 27 ports across North America, providing 648 port-port combinations, although only 266 will have direct services, necessitating transshipment for the others.
• Yantian to Savannah emerges as the most connected route with nine weekly direct services from various alliances, indicating significant competition in this corridor.
• Los Angeles/Long Beach and New York-New Jersey will have the highest number of origins serviced by all four alliances, facilitating numerous options for shippers in key markets.
• The competitive landscape will intensify, with 36 port pairs serviced directly by all alliances, and 139 unique port combinations available only through a single alliance, providing shippers with a variety of choices.
• Different service models across alliances may lead to variations in transit times, on-time reliability, and potential freight rates, allowing shippers to tailor their selections based on specific needs and preferences.

?FMC Denies Delay on Container Billing Rules: Implications for Shippers and Carriers

• New rules implemented by the FMC prevent ocean carriers from billing parties other than the original contract holder for container storage and late fees, providing greater clarity for shippers and truckers.
• The Ocean Carrier Equipment Management Association requested a delay citing confusion from a recent correction in the rule's preamble, but the FMC found the statutory language clear and unambiguous.
• The FMC emphasized that delaying the implementation would lead to significant confusion in invoicing practices and disrupt the operational flow within the shipping industry.
• The new rules are part of a broader regulatory effort under the Ocean Shipping Reform Act of 2022, aimed at improving transparency and accountability in container billing.
• The FMC noted that the detention and demurrage rulemaking had already been delayed due to extensive public feedback, indicating the importance of timely enforcement.
• This decision signals to shippers and carriers that they must adapt quickly to the new billing practices to avoid unexpected charges and ensure compliance with regulatory expectations.

Lithium Battery Fire at LA and Long Beach Ports Last Week Lead to Closures

• A truck carrying lithium-ion batteries overturned and caught fire, Thursday, September 26th, causing several terminals at the Ports of Los Angeles and Long Beach to close temporarily.
• Terminals affected included APM, Fenix Marine, Everport, and Yusen terminals.
• Firefighters removed the container of hazardous batteries to an open lot, allowing the fire to continue safely while minimizing traffic and port disruptions.
• Traffic around the area was rerouted, and alternative routes were advised to avoid congestion near the incident site.
• The Port of Los Angeles and Port of Long Beach resumed full operations by Saturday, September 28th, following successful containment and cleanup of the hazardous materials.

U.S. Railroads Suspend Grain Shipments to Mexico Amid Capacity Issues

• Major U.S. railroads, including Union Pacific and BNSF, have paused grain shipments to Mexico due to increased demand and capacity constraints in the Mexican rail system operated by Ferromex.
• Union Pacific has halted grain shipment permits until Ferromex lifts its embargoes or the backlog of trains is cleared, while BNSF has extended its permit suspension through September 30th, 2024.
• Agricultural exporters are increasingly relying on Mexico to compensate for lost business with China, but Mexico's transportation system struggles to manage the growing trade demand.
• Approximately two-thirds of grain shipments to Mexico are transported by rail, representing over US$ 30 billion in U.S. agricultural exports in the past year, which could be negatively impacted by ongoing disruptions.
• Rail capacity issues have been prevalent since late 2023, with higher cycle times in Mexico and ongoing competition for capacity between Union Pacific and BNSF exacerbating delays.
• The Mexican Railway Association disputes claims of insufficient capacity, asserting that it can efficiently manage U.S. grain imports as it has for nearly three decades.?

DP World Explores Expansion into Mexico to Enhance U.S. Cargo Operations

• DP World is negotiating with the Mexican government to start operations in Mexico, which would allow the company to handle cargo destined for the U.S. market.
• The company has faced political challenges in expanding its operations in the U.S. but has successfully invested in five terminals along Canada’s coasts to facilitate U.S. imports.
• Establishing a presence in Mexico would allow DP World to create an industrial park near a port, similar to its successful Jebel Ali Free Zone in Dubai, enhancing cargo flow and efficiency.
• The increasing trend of nearshoring, where companies move manufacturing closer to the U.S. due to external factors, is expected to increase cargo volumes and the demand for efficient logistics solutions.
• DP World has been expanding its North American footprint through acquisitions in logistics rather than seeking direct ownership of container terminals, including a US$ 1.2 billion purchase of Syncreon in 2021.

Addressing the Challenges and Opportunities in Domestic Intermodal Transportation

• Intermodal transportation presents a viable alternative to the ongoing truck driver shortage, yet its share of the domestic freight market has stagnated at around 10% over the last six quarters despite an increase in inland intermodal moves.
• While domestic intermodal container shipments have only increased by about 5%, the surge in imports from Asia has driven a significant rise in inland point intermodal (IPI) moves, highlighting a disconnect between domestic and international intermodal trends.
• The current long-haul trucking market remains relatively stable, with an oversupply of trucking capacity putting downward pressure on rates, making intermodal options less appealing to shippers focused on cost.
• A rebound in freight volume and a potential end to the trucking capacity glut could lead shippers to consider intermodal solutions as a more attractive alternative if truck space becomes scarce.
• The rise in transloading practices, where international freight is transferred into domestic containers at ports, coupled with a manufacturing shift from China to Mexico, presents new growth opportunities for intermodal transportation.
• Building shipper confidence in intermodal solutions is crucial, as many remain hesitant, underscoring the need for the intermodal industry to showcase its benefits through practical demonstrations and improved communication.

Sources

Xeneta

Sea Intelligence

Xeneta

Freightos

JOC

JOC

JOC

JOC

JOC

World Cargo News

Supply Chain Dive

WSJ

Supply Chain Brain