Freight Market Update - November 2, 2022

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Highlights for US

• Lockdowns and Blank sailings hit Chinese container port volumes in early October. 
• Railroad workers may go on strike in mid-November.
• The Port of Houston plans to implement a container dwell fee.
• Diesel fuel prices increased on most of the markets. 
• Contract negotiations between the ILWU and the Pacific Maritime Association were suspended this week over a labor jurisdictional issue in Seattle.

Ocean Freight Market Update

Asia → North America

U.S / CA 

• Export container volume declined 9.4% while the domestic volume also dropped 0.9%. Over 20% services between Asia and North America had been suspended during September and October as container lines attempted to stem the steep fall in spot container freight rates, as well as manage capacity during China’s Golden Week Holiday at the start of October.
• Pacific rates continued down at rate of 3% to both East and West Coast. West Coast rates are now down -81% compared to the highest rates over the past year whereas East Coast are “only” down -63%.
• Carriers have reported 67 blanks sailings for the Transpacific East Bound trade lane.
• Impacted by blank sailings as lines try to hold up freight rates, container volume at eight major Chinese ports declined 7.3% year-on-year in early October.
• If you have high volume cargo, or receive some special requirements from customers, it can be negotiable with carrier. Declining in the spot rates of East Coast is proceeding, but slowly. Due to the continuous falling down in demands, there can be small adjustments in the rates during November. Demand side still have bargaining power in USEC & Gulf. Carriers are hoping the early Chinese New Year in 2023 will boost demand in December, but there is no certain signals. Since the decreasing in overall demand is faster than carriers service & capacity arrangements; rate adjustments can be expected and the shippers and receivers would be suffering about scheduling due to the recent blank sailings.

Rates: Evergreen announced GRI from far east to USA effective from 12/01

Space: Overall, Asia Pacific to North America space is available.

Recommendation: Keep in mind the blank sailings for the bookings, book at least 2 weeks prior to cargo ready date.

Turkey → North America

Capacity is increasing for Mediterranean loops with additional ships entering the market. MSC continues to promote Tekirdag port as an alternative to Istanbul port and rates are competitive in comparison with other players.

Its good time to check CMA -  new Turkish Express Service rates to get competitive US rates.

• Space is available. Capacity still increasing by carriers with new services for the route. 
• Congestion in the West Coast shifting to the East coast due to labor issues at west coast. 
• Hapag stop bookings from Turkey to New Orleans until their next announcement.

Rates: Rate expected to remain same until mid of November. 

Space/Capacity/Equipment: As expected, Hapag vessels are still full. There is no serious equipment problem. 

North America → Turkey

• Congestion at the US West Coast ports is softening, while congestion at the East Coast and Gulf ports has been increasing. This congestion is due to shippers diverting their routes to the East Coast due to the labor and contract negotiations happening over the past few months.
• Canadian forwarders and customs brokers are seeking immediate federal government intervention to clear ongoing congestion at inland hubs.
• Inland rail hubs, especially in Toronto and Montreal, are congested with laden inbound containers, and cargo interests face mounting detention and demurrage fees that forwarders say have resulted inadvertently from efforts to relieve congestion at the ports of Vancouver and Prince Rupert.
• Maersk offers rates under market level for dried nuts and fruits commodity from West Coast to Turkey.
• All carriers continue their booking stop for shipments to Ukraine, Russia, and Belarus.

 Rates: Showing stability at their current market

Capacity/Equipment: There is no capacity problem but there are chassis and equipment shortage at USEC ports. 

 Terminal Updates

• Contract negotiations between the ILWU and the Pacific Maritime Association were suspended this week over a labor jurisdictional issue in Seattle. As negotiations continue to drag on, possibly into next year, retailers are likely to continue shifting as much of their discretionary cargo as possible away from the West Coast in case labor disruptions occur. This means that even though year over year US imports are forecasted to decline in the coming months.
• The Port of Houston plans to implement a container dwell fee starting Dec. 1 as it aims to minimize container dwell time. Port staff amended two tariffs during an Oct. 27 meeting: a sustained and an excessive dwell fee. A sustained import dwell fee will apply to all loaded imports beginning on the eighth day after expiration of free time. This fee does not replace any demurrage charges and would address “chronic” long-term dwell. The port is also adding an excessive dwell fee, which will take effect following a 30-day public comment period and remain in effect for at least 60 days, according to a port spokesperson. The fee will only apply in more “acute” circumstances and no sustained dwell fee will apply while this excessive dwell fee is in effect. Both fees will apply at the Barbours Cut and Bayport Container Terminal and would require that the amount of these new fees be paid before a relevant container is released from the terminal.
• The Port of Los Angeles reported its worst September for imports since 2009. Volumes at this port have been affected by falling consumer demand and the transfer of port calls from the US West Coast to the East Coast to avoid potential industrial action on the West Coast.
• The Port of Oakland also recorded a 7.9% loss on total loaded container volume in September.
• Houston earlier this year began a project to widen and deepen its ship channel to allow post-Panamax ships to call there. Guenther said the port is looking to speed up the initial timeline for the project by three years, with a target completion date of 2025.

Intermodal

• A broad coalition of more than 300 US industry groups, including retailers, farmers, and chemical exporters, on Thursday urged President Joe Biden to directly engage again with Class I railroads and unions after a second union rejected the tentative contract agreement agreed to in September, stoking fears of a mid-November national strike.
• The Port of New York and New Jersey’s two largest marine terminal operators are teaming with the port’s governing body to help fund additional planning for a project that would speed intermodal rail service, which is showing its first sign of growth in 2022 as the spread between freight rates starts to favor rail over trucking.

US Domestic Trucking Market Trends

• Diesel fuel prices have increased again in most markets and it will probably bring increases on fuel surcharges for pick up and deliveries.
• Rates will continue to be important data to monitor as we begin the fourth quarter. Over the past week, the impact of Hurricane Ian was not enough to meaningfully improve spot market rates. The spread between contract and spot market rates remains wide at 83 cents, forcing carriers to prioritize contracted loads and solicit for ad hoc project freight before attempting to book on the spot market. For carrier pricing managers, another challenge will be attempting to secure more contracted freight opportunities, as many shippers are seeking high-single-digit rate reductions for incumbents. Even with rate reductions, contracted freight rates will be favorable over spot market losses. This competition will continue to pit both carriers and brokers against each other, with rate reductions, tender compliance levels and service scores being the ammunition. During times of market transition, shippers market will not only cause disruptions to carrier load volumes but increased attention to service levels. The risk for carriers is shippers tendering to other carriers further down the routing guide if their rate or performance failed to live up to par.