Freight market update - 11 October 2023

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• The most recent Global Liner Performance report from Sea Intelligence reveals a 0.9% month-on-month decline in global schedule reliability, which now stands at 63.2%.

• The China market has become busier following the Golden Week holiday.

• Many small shippers in the US experienced issues with misapplied Demurrage and Detention (D&D) charges during the Covid-19 pandemic.

• European carbon tax surcharges are set to take effect on January 1, 2024, but the exact surcharge amounts for shippers remain undetermined.

• The International Air Transport Association (IATA) has reported that global air cargo demand increased year-on-year in August 2023, marking the first growth in 19 months.

Read on for more in-depth updates.

Asia → North America

US/CA

Transpacific Trends and Market Updates

• The most recent Global Liner Performance report from Sea Intelligence reveals a 0.9% month-on-month decline in global schedule reliability, which now stands at 63.2%.
• Since March 2023, schedule reliability has remained within a 2% range, except for a notable increase in May.
• In comparison to August 2022, schedule reliability was 17% higher on a year-on-year basis.
• Vessel arrivals experienced an average delay increase of 0.07 days month-on-month, resulting in a 4.67-day average delay.
• However, late vessel arrivals had an improvement of 1.23 days compared to August 2022.
• When examining carrier schedule reliability, all of the top 14 carriers saw double-digit improvements on a year-on-year level, with MSC achieving the largest improvement of 26.8%.

Central China to USA and Europe:

• Rates from SHA to Europe and the US have risen this week.
• The market has become busier following the Golden Week holiday.
• More bookings are available from SHA to the US, especially for destinations like ORD, JFK, and LAX after the Golden Week.
• Rates from NGB to Europe and the US have remained unchanged.
• The final rate is determined on a case-by-case basis.

North China to USA and Europe:

• Rates from TSN to Europe and the US have increased for Korean Airlines serving both destinations.
• Similarly, rates for Asiana flights have also seen an increase on these routes.
• From PEK to Europe and the US, hot weather conditions are currently causing loading issues.

IATA Report:

• The International Air Transport Association (IATA) has reported that global air cargo demand increased year-on-year in August 2023, marking the first growth in 19 months.
• Global demand, measured in cargo tonne-kilometers (CTKs), saw a 1.5% year-over-year (y/y) increase.
• Capacity, measured in available cargo tonne-kilometers (ACTKs), also increased by 12.2% y/y, with a notable 30% y/y increase in belly capacity during the peak northern summer travel season.
• IATA's director general, Willie Walsh, welcomed this growth but emphasized that it is coming from a relatively low base in 2022, and market signals are mixed.
• The Purchasing Managers Index (PMI) for manufacturing output and new export orders slightly improved from the previous month but remained below the 50-mark threshold, indicating a slow decline in global manufacturing production and exports.
• Global cross-border trade contracted for the fourth consecutive month in July, showing a decrease of -3.2% year-on-year, which reflects cooling demand and broader macroeconomic conditions.
• In terms of inflation, there was a mixed picture in August. U.S. consumer prices increased for the second consecutive month, while in Europe and Japan, both consumer and producer prices fell.
• In China, where deflationary pressures are being addressed, consumer prices rose.
• The Intra-Asian trade market, encompassing regions like India and the Middle East, has shown resilience in terms of volume growth, unlike the container markets in Europe and the U.S.
• Some specific trades within the Intra-Asian market have witnessed an increase in activity of up to ten percent when compared to 2019, as stated by ONE’s Region Head South Asia, Colin de Souza.
• However, there is a potential risk of overcapacity in this region. The global orderbook currently represents 30% of the existing fleet, according to Alphaliner.
• Typically, new mega-vessels are introduced on key trade routes. To maintain supply balance, carriers may reduce existing tonnage or redirect it to smaller trade routes.
• But as mega-vessels approach the 25,000 TEU mark, even vessels cascaded to other trades are growing in size. For instance, the India to Middle East trade route is experiencing an increase in the use of larger vessels, ranging from 8,000 to 10,000 TEU.
• Colin de Souza explains that on a regional level, more ships are expected to enter the Intra-Asian trade due to the slowdown in demand on long-haul routes, while Intra-Asia trade remains relatively strong.
• He notes that the vessels being ordered are closely linked to carriers' plans for decarbonization.
• However, if low demand persists in long-haul trades, there could be a temptation for carriers to shift tonnage into what they perceive as a stable trade, potentially disrupting the balance. De Souza warns that cascading ships in this manner might not be financially advantageous and could harm a carrier's profitability.

Conclusions

Rates - The rates will remain soft on most origin-destination combinations.

Space - Space open, no issues with equipment.

Recommendations - We recommend blank sailings to continue. Book at least two weeks before the date your vessel gets ready to depart.

Turkey → North America

• Many small shippers in the US experienced issues with misapplied Demurrage and Detention (D&D) charges during the Covid-19 pandemic.
• The Federal Maritime Commission (FMC) is unable to provide assistance if these charges were imposed prior to the implementation of the Ocean Shipping Reform Act (OSRA) in June 2022.
• Before OSRA came into effect, the process of filing a complaint was expensive and could take more than a year to produce results, leaving small shippers with limited recourse.
• Even relatively minor charges from multiple shipping lines could accumulate into significant financial burdens for shippers.
• FMC commissioner Rebecca Dye's investigation led to the introduction of a more efficient dispute resolution system, but it only applies to cases after the enactment of OSRA in 2022.
• The decision not to allow retroactive filing of charge complaints before OSRA 2022 has left shippers feeling frustrated, as reported by news sources.

Conclusions

Rates - The rates will remain soft on most origin-destination combinations.

Space for capacity - No capacity issues or issues with space.

Space for equipment - No issues with equipment.

North America → Turkey

• European carbon tax surcharges are set to take effect on January 1, 2024, but the exact surcharge amounts for shippers remain undetermined.
• Carriers are currently estimating these surcharge levels using what has been described as "guesswork," as reported by Sea-Intelligence Maritime.
• Among carriers, Maersk and Hapag-Lloyd are the only ones that have provided a projected Emissions Trading System (ETS) surcharge per container. Notably, there's a significant variance in surcharge amounts between these two carriers (see Table 1).
• Alan Murphy, the CEO of Sea-Intelligence, explained that these numbers are intended to offer shippers an idea of the potential costs, but the precise figures are still unknown. Shippers should prepare for a "major misalignment" between carriers.
• Carriers are required to monitor and report their emissions and surrender EU Allowances (EUAs) for each ton of CO2 emitted, covering all voyages within the European Economic Area and 50% of voyages beginning or ending in European ports. However, emissions made in 2024 will only need to be paid for in September 2025.
• Despite the obligation to implement surcharges starting in 2024, it's noted that a clear idea of EUA prices to cover those emissions will only become apparent in September 2025.
• The retrospective nature of the ETS poses a challenge for carriers. They will need to estimate costs based on a potentially volatile EUA market. This complexity makes it difficult to allocate emissions at a per-TEU level, considering factors such as headhaul, backhaul, empty slots, and transshipment cargo.

Conclusions

Rates - Stable rates over the last week.

Space for capacity - No major capacity or space issue.

Space for equipment - Equipment issues have started owing to low levels of import.

Terminal Updates

●   Vessels heading to North America via the North Atlantic Sea are expected to have a change in schedule due to severe weather conditions.

New York:

●   No waiting time is expected for a berth at Maher Terminals LLC and APM Terminals.

●   Up to 5 days waiting time is expected at Global Container Terminals Bayonne.

●   The scheduled maintenance for Crane 6, originally set to start on October 1, 2023, has been postponed indefinitely to reduce congestion.

●   Average gate turn times: 51 minutes for single transactions, and 78 minutes for double transactions.

Norfolk:

●   Currently, most vessels berth on arrival, however, the bigger vessels wait approx. 2 days for a berth.

●   Average gate turn times are 36 / 50 minutes for single and double transactions respectively.

●      All cranes operating as per schedule.

Charleston Terminal:

●   No waiting time for vessel berthing at Wando Welch and North Charleston Terminals.

●   Average truck turn times: 21 minutes at Wando Welch Terminal, and 20 minutes at North Charleston Terminal.

Savannah:

●   Waiting time for vessel berth at the terminal is up to 4 days, depending on the size of the vessel.

●   Average gate turn times are 39 / 55 minutes for single and double transactions respectively.

●   Two new cranes are currently being commissioned on berth 2. Four of the oldest cranes on the same berth are being demolished. Berth 2's capacity to handle vessels will be limited for several months.

Houston:

●   Barbours Cut Terminal has up to 1 day waiting time for vessel berthing.

●   Due to vessel bunching the yard is facing congestion impacting the discharge productivity and extending port stays.

●   The average gate turn time is 52 minutes.

●   Loaded import dwell is at 3.3 days.

Oakland:

●   Average wait time of up to 3 days at Oakland Int’l Container Terminal (OICT) and TraPac.

●   Average import deliveries can take up to 4 days at TraPac and 4 days at OICT.

●   Average gate turn times are 55 / 66 minutes for OICT and TraPac respectively.

Seattle-Tacoma:

●   Wait time of up to 4 days at Tacoma and Seattle.

●   Import deliveries are 7.5 days at HUSKY – due to EB/WB railcar imbalance, 3-7 days at Washington United Terminal, and 1-3 days at T18.

●   Rail car availability is a significant concern at present, primarily because there is a low volume of rail cars heading Westbound to balance the high volume going Eastbound. This issue is exacerbated by omissions in Vancouver.

●        The railroads are actively working with all stakeholders to improve the availability of rail cars. However, if more Westbound cargo or empty cars are not made available, this problem will continue.

●       As an alternative to rail transport, inland cargo transportation via truck is also an option to consider.

●   Average gate turn times are 29 / 42 / 44 minutes for T18, Washington United Terminal, and HUSKY respectively.

●   T18 will be closed on Fridays through October.

●   WUT has received 2 new Post Panamax Cranes.

●   WUT has commenced commissioning both, operational by the mid/end of September.

Los Angeles/Long Beach:

●   All terminal gates are running as published and in line with the Pier Pass program.

●   Port of Los Angeles dwell time for local import cargo is 3.3 days, on-dock rail dwell is 4.7 days, and import units on the street are averaging at 4.2 /6.2 days for 20 ft and 40+ ft containers respectively.

●   Port of Long Beach dwell times for local imports are stable, and the average terminal gate turn time is between 20-78 minutes, depending on the terminal.

●   Chassis Pools: All pools are operating as normal except:

1. Minneapolis / St. Paul – Deficit on 40’ and 45’ chassis.

2. Chicago – Deficit on 20’ and 40’ chassis.

●   Intermodal Operations: Truck power can be secured within 1-3 days for the majority of locations, including marine terminals, rail ramps, and depots.

Port Status

Final Thoughts

In light of the latest updates and trends, it is evident that the market is currently in the course of demonstrating robust performance and is equipped with ample capacity and resources.

Individuals and businesses involved in import/export activities must stay well-informed about market dynamics and strategies to make informed decisions. To ensure a smooth and hassle-free experience with your import/export operations, it is recommended to seek guidance from industry experts.

Conduct thorough research on ports that offer available space and suitable equipment despite the ongoing conditions. By doing so, you can minimize complications, facilitate shipments, and maximize efficiency.

Taking proactive measures and staying proactive in your approach will help you navigate the market effectively. We greatly appreciate your continued readership and encourage you to subscribe to our weekly market updates to stay abreast of the latest developments and insights.