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Trans-Pacific Shipping Update

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Trans-Pacific Shipping Update

Market Update

Carriers have announced General Rate Increases (GRI) for cargo from Asia to the United States effective July 1st and July 15th. The rates will be $900/20’, $1000/40’, $1000/40’HQ and $20 per W/M for LCL cargo.

This week, the World Container Index shows the largest increase in Pacific rates as well as in the overall index since its inception in 2012.

Rates from Shanghai to Los Angeles increased 34% in the last week. Rates from Shanghai to New York increased 39% in the past week. On a year-on-year basis, Pacific rates are up 223% to the USWC and 249% to the USEC. Asia-Europe rates are up 578% (N. Eur) and 540% (Med.) on a year-on-year basis.

Backhaul rates from Los Angeles to Shanghai have mostly doubled since last year. Logistics visibility platform, project44, released an analysis of container line sailing cancellations indicating that the current under-capacity within many ocean freight markets “will remain a headache for the foreseeable future.”

The report says, “certain carriers like HMM [are] skipping ports more often than not, with an average rate of 67%” in the period from April 26th to June 13th. CMA CGM had an average blank sailing rate of 20% for the same period with Ocean Alliance achieving the best schedule reliability. The 2M alliance posted a weekly blank sailing average of 45%.

Equipment Shortages

Equipment shortages remain an industry wide challenge in China, Hong Kong, Taiwan, Korea, Japan, Vietnam, Cambodia, Malaysia, Singapore, Thailand, Philippines, and Indonesia. Carriers are lacking equipment at origin ports. Containers are still not guaranteed even with the additional SPG/premium charge applied.

In a recent article published by the Journal of Commerce, it details the shortage of chassis in the U.S. As per one chassis provider, normally 17-18% of chassis have more than 11 days of turn-time before the customer returns it. Currently, this is the case for 43% of the chassis. This severely affects the ability to move the containers to/from vessels and railheads.

Supply chains are complex and currently there are numerous bottlenecks coinciding at the same time that are out of the control of individual parties to fix quickly.

Panama Canal Issues

The Panama Canal Authority reduced the maximum allowable draft for vessels transiting the Neopanamax locks to 48.5 feet. For container ships, the 49 ft restriction limits fully laden Neopanamax ships from passing through the locks. Carriers are rejecting heavy cargo for ships steaming from North Asia to US East Coast route transiting through the Panama Canal. Certain carriers are only accepting shipments for cargo weighing less than 7.5-8 tons per TEU due to the draft issues.

Shippers may move cargo via the US West Coast, but risk long delays as the current dwell times before connecting to the rail ramp are over a month.

China Ports

Qingdao: Space is becoming increasingly tight. Carriers like ONE/CMA/HPL cannot release any additional space without NVO’s space protection (AP), given the CMA equipment issue ex Qingdao, even FAK+SPG cannot be guaranteed an equipment last week ex Qingdao. Most bookings are already placed through end of July.

Xingang: CMA has notified that they intend to stop the service or temporarily omit service of feeder vessels to connect to the Mother Vessel at Pusan. Unfortunately, these notifications are made at very short notice. There is an equipment shortage with all the carriers, and guaranteed space surcharges to do not guarantee equipment ex Xingang.

Ningbo: Similar to Xingang and Qingdao, even with the premium it is very difficult to get space. CMA is also facing the equipment shortage ex Ningbo and they are pushing for bookings 5-6 weeks prior to the ETD to ensure the space is confirmed.

Shanghai: Same situation as the other base ports. USEC and PNW space is tight, carriers have stopped releasing any premium bookings due to the allocation. Even with the premium surcharge, the space is not guaranteed.

Xiamen: Currently experiencing equipment shortages.

South China Ports

Yantian: Some good news from Yantian where the terminal continues on track for normal operations beginning June 24th. But it will still take time to clear the current backlog and congestion.

Detailed statistics are unknown, but per the official news over the past month the terminal operated at 30% of capacity. This means an estimated shortfall of 25,500 TEU/day. This has lasted for 30 days, which would equate to a shortfall of 765,000 TEU of handling.

The port handled a record load of 45,800 TEU/day in August 2020.At the record load they could clear the backlog in 17 days. That is before taking into account the normal cargo flow that also needs to be handled.

If we assume normal flow to be the average of 36,400 TEU/day, then there is an excess capacity of 9,400 TEU/day up to the record performance with which to chip away at the backlog. Which means it could take 82 days to clear the backlog. These are just estimated numbers and do not account for the available vessel capacity in Asia.

Currently, a number of carriers have announced they will continue to bypass Yantian, we believe the vessel schedule will not return to normal until mid-July at the earliest.

Nansha: Due to the facility and port limitation, the terminal is now placing mandatory restrictions on carriers with a number of heavy container re-positioning, each carrier is only permitted 100 TEU container returns for all trade lanes.

Shekou: Shekou congestion situation is now relatively better than Yantian and Nansha ports. However, they are still experiencing congestion issues, especially, when large vessels berth.

Across the globe, most ports are facing operational delays. Carriers continue to implement port swaps and port omissions to try to mitigate the impact and improve schedule reliability.

If you have any questions about your supply chain or real-time information about the market, please contact us today. We are available to discuss multiple carrier and service options to provide solutions for your supply chain. We proactively plan with our clients to navigate any challenges in the market today.