Century Weekly Market Update Sept. 9 - Sept. 15

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 1% W/W, along with most trans-Suez rates. An Air Canada pilot strike was avoided with a last-minute deal, the Gemini Corporation updated their service network with new routing options and port changes, and potential reefer shortages may affect Latin American perishable exports later this year. Additionally, the avocado shortage actually drove record revenue for distributors amongst strong consumer demand.

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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Red Sea Crisis Continues to Impact Global Shipping

• The Red Sea crisis has caused a severe drop in deep-sea port calls, with a 33% decline in the East Mediterranean and Gulf of Aden, and a drastic 85% drop in the Red Sea from pre-crisis levels.
• Ports in the Red Sea were the most affected, with Jeddah experiencing a 74% decline in calls between December 2023 and January 2024, while King Abdullah Port stopped receiving deep-sea services entirely.
• While there has been some recovery, such as a doubling of Red Sea port calls in July 2024, it remains uncertain if this trend will continue or if it is temporary.
• East Mediterranean ports like Piraeus and Port Said, and the Gulf of Aden's Salalah, also saw significant reductions in deep-sea port calls, particularly in early 2024.
• Schedule reliability in the Red Sea and East Mediterranean has returned to pre-crisis levels, while the Gulf of Aden remains behind in recovery.
• Delays for late vessel arrivals, which spiked to 10-14 days in early 2024, have now improved across all regions, dropping back to 4-5 days.

Xeneta Suggests Relying on Real-time Data as Supply Chain Challenges Continue

• Optimizing supply chain costs while maintaining service levels is increasingly challenging due to inflation, fluctuating demand, and global disruptions.
• Geopolitical uncertainties and unstable freight rates, make budgeting for 2025 more complex.
• Accurate budgeting requires balancing historical market data with real-time insights to anticipate rate changes and spending patterns.
• Monitoring both long-term and short-term freight rates helps identify trends and better predict future budget needs.
• Real-time data offers shippers a clearer understanding of market shifts, supporting more informed decisions and proactive budget management.
• Understanding freight rate movements allows companies to adjust budgets for additional costs like expedited shipping or alternative routes.

US Retailers are Frontloading Imports Amid Rising Volumes and Potential Port Strike

• US retailers are increasing their September import forecasts, with shippers frontloading cargo to avoid potential disruptions from a threatened dockworker strike on October 1st, 2024, at US East and Gulf Coast ports.
• August US imports are projected to have reached 2.37 million TEUs, marking a 21% increase Y/Y, the highest level since May 2022, with September imports also expected to rise by 14% Y/Y.
• Retailers and industry leaders are urging dockworkers and port management to negotiate and avoid a strike, warning that a disruption would hurt both the supply chain and the US economy just as inflation is declining.
• US imports from Asia saw strong growth through August, with volumes from the West Coast up 22.2%, East Coast imports up 9.8%, and Gulf Coast imports rising 8.3% Y/Y.
• If forecasts hold, 2024 will see seven consecutive months of US imports exceeding 2 million TEUs, the longest stretch since the pandemic, with total imports for the year projected to increase by 12.3% over 2023.

Weekly Blank Sailings Report: ?

Century’s Blank Sailings Report for the week of September 9th – September 15th. 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 519 port omissions, 5.8% decrease compared to the week prior.
• Shanghai recorded the highest amount of port omissions last week with 55, followed by Ningbo with 52 and Singapore with 35.
• Other ports with notably high omissions last week are Busan with 26 and Kaohsiung with 22.
• Nhava Sheva and Shekou both saw a significant decrease in blank sailings W/W, both decreasing by 55%.
• Looking towards the coming weeks, Century’s data shows a 14.8% decrease in currently scheduled blank sailings for week 38.
• Next week’s preliminary data shows notable decreases in port omissions at Ningbo and Shanghai with numbers back down into the 30s

Port omissions data for the most frequently omitted ports during week 37 can be found in the table below:

Our?full Blank Sailings Report for the week of September 9th – September 15th below provides a full list of every current scheduled port omission from Week 37 to Week 47 as of September 16th, 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 37 Blank Sailings Report

Week in Review:

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Trans-Suez Trade Lanes Only See Decreasing Rates or Stead Rates W/W

• The Global Container Freight Index decreased slightly by 1% W/W to US$ 5,019.
• China/East Asia to North America East Coast rates increased by 2% W/W to US$ 9,309.
• Other routes that saw W/W increases are: North America West Coast – China/East Asia, North Europe – North America East Coast, and Europe – South America West Coast.
• China/East Asia to North America West Coast rates remained steady for the second week in a row with rates at US$ 6,819.
• All trans-Suez routes saw steady or decreased rates.

Market Dynamics are Shifting as Freight Rates Decline on Key India Trade Routes

• Spot rates for container shipping from West India to North Europe have dropped by US$ 600 - US$ 1,000 per container, as carriers aim to maintain vessel space utilization despite reduced demand.
• Booking space is readily available for September sailings out of Nhava Sheva, with expectations for rates to soften further due to lower cargo volumes.
• Ocean freight rates from India to the US East Coast have also decreased significantly, halving over the past three weeks because of void sailings and reduced demand.
• Major carriers have adjusted India-US East Coast rates, with current rates ranging from US$ 3,949 to US $6,032 per container, depending on the carrier.
• General rate increases and peak season surcharges planned for early August have been postponed to October, reflecting carriers' skepticism about market conditions supporting higher rates.
• The early rise in ocean rates in mid-2024Z created challenges for Indian exporters seeking to benefit from increasing trade diversification within Asia.

Air Canada Reaches Last-Minute Deal with Pilots, Avoiding Strike and Lockout

• Air Canada reached a last-minute agreement with its pilots' union, averting a potential strike or lockout that would have shut down operations by September 18th, 2024.
• The new four-year deal, pending a ratification vote, will provide C$1.9 billion in value to over 5,200 pilots, marking a 46% increase over the previous contract.
• The agreement addresses key issues including compensation, retirement, and work rules, reflecting the pilots' demands for better pay and benefits.
• Air Canada was preparing to cancel flights and halt operations over three days if a deal hadn't been reached, which would have affected 670 daily flights and freight services.
• The new contract aims to narrow the pay gap between Air Canada pilots and their U.S. counterparts, such as those at United Airlines.

?DSV's €14.3 Billion Acquisition of DB Schenker Facing Regulatory and Union Scrutiny

• The €14.3 billion acquisition of DB Schenker by DSV faces approval hurdles from German transport unions and the Bundestag, with concerns focused on potential job losses.
• DSV has pledged to invest €1 billion in Germany and committed to preserving DB Schenker jobs for two years post-acquisition to address these concerns.
• The transaction, expected to finalize in the second quarter of 2025, aims to make DSV the world’s largest forwarder, enhancing its air and sea business capabilities.
• The acquisition will add significant warehousing space to DSV’s portfolio, increasing its total to 17.5 million square meters across 60 countries.
• Regulatory approvals and the completion of the sale are pending, with both companies continuing their operations separately until the deal is finalized.?

Refrigerated Container Shortages Threaten Latin American Perishable Exports in Late 2024

• Market pressures and equipment shortages may impact Latin American perishable exports in late 2024 and early 2025, particularly affecting Brazilian beef and mango shipments.
• Extended transit times and high demand, coupled with diversions around the Cape of Good Hope, are straining the availability of refrigerated container equipment.
• A predicted shortage in refrigerated containers is exacerbated by reduced beef production in the US and a drought-driven culling of herds in Australia, increasing reliance on Brazilian beef.
• Brazil is expected to increase beef production by 7.1% and exports by 13.4% in 2024, adding further strain to the already tight reefer equipment market.
• Concurrent high demand for refrigerated containers during the peak perishable season could lead to equipment being diverted, affecting shipping schedules and availability.
• Shippers may face increased competition for reefer equipment, with higher-paying perishable cargo potentially receiving priority over beef shipments.

Supply Chains Must Adapt to Rising Hurricane Risks and Extreme Weather Challenges

• This hurricane season is expected to be severe, with recent storms like Beryl and Debby posing risks to manufacturing and distribution sites, impacting peak shipping periods.
• Previous hurricanes have significantly affected supply chains, with storms causing drops in service levels, increased export dwell times, and delays in import dwell times.
• Modern technology and increased awareness have improved supply chain resilience, by allowing better tracking of storms and affected shipments, though challenges remain.
• To mitigate storm impacts, companies are diversifying their carrier base and suppliers geographically, reducing reliance on single sources while also adapting to changing geopolitical conditions.
• Diversification and increased buffer stock can help but must be balanced to avoid excessive costs and waste, with a strategic approach to stock levels being crucial.

Gemini Cooperation Updates Service Network with New Routing Options and Port Changes

• The Gemini Cooperation's updated service network offers new routing options via the Cape of Good Hope and the Suez Canal, with ports in Asia regaining direct calls and benefiting from the revised schedules.
• The updated network, effective February 2025, includes 27 Suez Canal-based mainline services and 30 shuttle services, and an alternative Cape of Good Hope network with 29 mainline and 30.
• Busan and Vung Tau have regained hub status, with Busan included in six trans-Pacific services and Vung Tau in three mainline services via the Suez Canal.
• Hong Kong has been removed from the Gemini network, with cargo shifted to Yantian, affecting the throughput at Hong Kong’s Kwai Chung terminals.
• The revised networks offer diverse routing options, but carriers are focusing on operational efficiencies and fleet optimization, impacting service offerings and reliability.
• Shippers can start booking space on the Gemini network from December, with a transition period expected to last about three months before the network fully launches in February.

?Air Cargo Industry Braces for Record Peak Season Amid Severe Capacity Constraints

• The air cargo industry is facing an unprecedented peak season driven by booming e-commerce demand and rising traditional air freight, leading to significant capacity constraints.
• Global air cargo demand has increased by 14% over the past eight months, while capacity has only grown by 7%, causing a severe supply-demand imbalance.
• Load factors on major routes like Asia-North America are at 87%, indicating that flights are nearly at full capacity and further relief from this imbalance is unlikely.
• Freighter fleets are operating at near-maximum utilization, with aircraft flying up to 15 hours a day, suggesting limited room for increased capacity.
• E-commerce is driving most of the growth in air freight, with expectations for its share of the market to grow from 1.5 million tons in 2022 to 5.2 million tons by 2025.
• Forwarders are struggling to secure sufficient capacity for their traditional customers due to high demand from e-commerce, which is consuming much of the available space.

Decreasing Truck Driver Detention Rates Highlight Supply Chain Efficiencies and Ongoing Challenges

• Truck driver detention at docks has decreased, with significant reductions in instances of detention lasting two hours or more, though it remains a problem causing supply chain inefficiencies.
• From 2014 to 2023, the percentage of drivers held for over four hours dropped from 7.7% to 4.9%, but detention for one to two hours has increased from 24.5% to 29.4%.
• Despite improvements in dock and yard management and appointment scheduling, driver detention persists, contributing to higher shipping costs and reduced efficiency across the supply chain.
• Driver detention is costing trucking companies an estimated US$ 3.6 billion in unrecovered expenses annually, up from US$ 1 billion before the pandemic, with indirect productivity losses estimated at US$ 11.5 billion.
• The Federal Motor Carrier Safety Administration (FMCSA) is revisiting the issue and studying the impact of driver detention using data from electronic logging devices, with potential regulatory and legislative actions anticipated.
• The decrease in detention is partly attributed to a softer freight market, which has reduced congestion and improved logistics efficiency, though challenges remain as demand fluctuates.

Avocado Supply Shortages Drive Record Revenue for Distributors Amid Strong Consumer Demand

• High avocado prices have led to record revenue for major distributors like Mission Produce and Limoneira, despite steady sales volumes in the U.S.
• Supply constraints caused by drought and high temperatures in Mexico and Peru have led distributors to rely more on avocados from California, which saw a 40% increase in volume compared to expectations.
• The U.S. avocado market, heavily reliant on imports from Mexico, has faced supply shortages due to declining water supplies and inspection halts, driving up prices.
• Despite increased avocado prices, consumer demand remains strong, with avocado consumption in the U.S. tripling since 2001 and expected to continue growing.
• Limoneira plans to expand avocado production by 1,000 acres over the next three years, reflecting a strategic shift from citrus to avocados and efforts to increase yields.
• Supply in Peru is anticipated to improve after the end of El Ni?o, potentially leading to lower prices, but strong consumer demand is expected to maintain higher grocery store costs.

Sources:

Sea Intelligence

Xeneta

JOC

Freightos

JOC

Reuters

JOC

JOC

Supply Chain Brain

JOC

JOC

JOC

Supply Chain Dive