MARKET UPDATE – April 2022
As destination ports in North America and Europe recover from last year’s historic congestion and delays that are still fresh in the mind of many logistics professionals, the prolonged COVID lockdown in Shanghai and the Russia-Ukraine conflict are spelling more trouble for the already strained supply chain and raising fears of another cargo logjam in the upcoming peak season. In our April Market Update, we discuss the ripple effects of the Shanghai lockdown and the outlook for U.S. retail imports before we delve into global supply chain operations and Century’s solutions.
Home to the world’s largest container port and China’s financial hub, Shanghai has remained shuttered since late-March after the local government divided the city into two parts for phased lockdown. Under China’s strict “zero-tolerance” COVID-policy, what many had thought would be snap lockdowns became an extended standstill that is exacerbating fears of further global port congestion. According to industry AI intelligence, a fifth of the world’s container vessels are estimated to remain stagnated at various congested ports, a quarter of which are specifically stranded in Chinese waters. In mid-April, 506 vessels were waiting outside of ports in China, representing a month-on-month increase of 7.6% from March and further contributing to lower schedule reliability. While ocean terminals in Shanghai are operating with manpower shortage, the congestion has also inevitably spilled over to the nearby Ningbo-Zhoushan Port. As discussed in our March Market Update, reports of delays in Ningbo are on the rise as more shippers are using feeder or sea-rail services to re-route cargo from Shanghai to Ningbo in hopes of avoiding road closures and detours.
As China remains fixated on its zero-COVID strategy, the associated impacts on container shipping and product availability have sparked fears of the supply chain chaos we witnessed in South China last year, where ocean carriers fiercely cancelled planned voyages. However, latest industry data shows that excluding the seasonal blank sailings during the Lunar New Year, although the void sailing number right now is on par with the Yantian case in 2021, it cannot be concluded that the impact on the ocean market is the same. In 2021, the scrapped capacity in South China increased as a consequence of COVID-19 impacts, but the market believes the blank sailing reduction following Shanghai lockdown can be seen as merely a return to and a more justified capacity reduction. Unlike the closure in Yantian in May last year, ocean terminals in Shanghai have been maintaining normal operations with a reduced level of productivity and are still shipping out the backlog containers accumulated from China’s return from the Lunar New Year.
In the meantime, although ports in North America and North Europe have shown signs of improvement in cargo fluidity over the past few months thanks to fewer incoming ships, many are concerned the cargo surge following Shanghai’s anticipated production resumption could pose threats to the progress the ports have made. Handling over half of the imports flowing into the U.S., the twin ports of Los Angeles and Long Beach are bracing for the imminent cargo rush in the coming weeks once Shanghai emerges from the lockdown. Gene Seroka, Executive Director of the Port of Los Angeles, said in a recent press conference that while the vessel berthing activity is currently at a desirable level, the port is anticipating an earlier-than-usual seasonal peak because of the upcoming wave of summer merchandise imports and back-to-school shipments. The situation is expected to get more critical when the cargo backlog from Shanghai collides with the traditional summer peak.
Forecast data from the National Retail Federation (NRF), the world’s largest trade association, also echo the anticipatory spike in imports into the U.S. Importers are projecting a strong rebound beginning in June after a short-lived slowdown in May owing to Shanghai’s shutdown. According to NRF’s latest data, the U.S. retail imports for April and May are forecast at 2.13 and 2.21 million TEU, down 1.1% and 5.3% year-on-year respectively. The influx of vessels after Shanghai resumes operations is expected to boost the volume growth again in the following months, with forecast imports between June and August upwardly fluctuating between 2.26 to 2.35 million TEU with year-on-year growth up to 5.3%.
Century remains committed to your supply chain operations and ensuring your cargo flows as expected is of utmost importance to us. In preparation for the fast-approaching seasonal peak, advance cargo planning, and timely vendor bookings continue to be what we see as keys in keeping your supply chains moving, especially in times of heightened market volatility. Your Century Account Manager or Sales representative remain at your disposal to work with you to identity the optimal supply chain solutions for your every need.
- Eastbound transpacific freight rates remain consistently elevated. Industry index which excludes premiums and surcharges shows that as of week 17, East Asia/China to USWC freight rates are at $15,552 or 162% higher year-on-year. As for the China/Asia-USEC freight rate, prices are at $17,148 per FEU, which represents an 176% YoY increase. Ocean carriers will apply GRIs ($1,000 for 40’ standard containers) effective May 15 for cargo from Asia to the United States and Canada.
- Ever Forward, which ran aground in the Chesapeake Bay, finally refloated April 17 after being stuck in the ocean for 35 days. The Evergreen vessel was reportedly in good condition after inspection and returned to the Port of Baltimore to retrieve the 500 containers that had been removed from the vessel, before it continues its previously planned voyage to Norfolk, Virginia.
- German carrier Hapag-Lloyd has announced a new weekly service, Turkey East Coast Express (TEX), with the first voyage sailing in mid-May. This service will connect three Turkish ports with the U.S. East Coast, with a stopover in the Moroccan port of Tangier to enhance the connectivity in the Mediterranean area. Six vessels will be deployed to service the following port rotation: Mersin – Izmit – Aliaga – Tangier – New York – Norfolk – Savannah – Tangier – Mersin
- MSC has launched a new Bengal service to further strengthen its Intra-Asia trade network. Connecting South China and Bangladesh, this new service will provide a direct connection between South China and Chittagong, while enabling connectivity for Bangladesh imports and exports via strong transshipment hubs in Singapore and Tanjung Pelepas. The first voyage, MSC Kymea, has sailed from Hong Kong on April and is expected to arrive at Chittagong on May 11. The service rotation will be as follows: Hong Kong – Yantian – Shekou – Singapore – Tanjung Pelepas – Chittagong – Singapore – Tanjung Pelepas – Hong Kong
- Hapag-Lloyd has launched a brand-new seasonal AT3 service providing weekly direct connection between North Europe and northeastern U.S and eastern Canada. This service will operate seasonally from late May with rotation as follows: Hamburg – Antwerp – St. John (in New Brunswick, Canada) – Hamburg
CENTURY EXPRESS – YOUR TRUSTED NVOCC PARTNER
Century Express holds contracts with multiple ocean carriers and helps you realize schedule flexibility for your shipments. With Century Express as your NVOCC partner, you will have complete visibility to your shipments in VMS® as our NVOCC division leverages VMS® as the operating platform. We also consolidate NVOCC invoicing with your existing invoicing, the number of documents issued for multiples services transparent and at a minimum. We engage with each carrier alliance and other independent carriers to ensure that we can provide choices and back-up options to our customers. In addition, you can even leverage our LCL freight forwarding services to explore new sourcing opportunities in countries where you are not currently shipping to/from or have a contracted carrier at the moment. Contact your Century Representative today to learn more!
- Cargo fluidity in major European gateways has improved but ports are still operating with high yard density. In Rotterdam, the yard level at Europe Container Terminals (ECT) currently stands at 85% as sanctioned Russian cargo remains stranded. In Antwerp, yard utilization is currently at 88% due to labor shortage. Antwerp, along with ports in Europe, has banned Russian-operated ships from entering EU ports with an for agricultural and energy products and humanitarian aid.
- Maritime ports in China remain operational despite tightened precautionary COVID-measures. In South China, Shekou Port and Yantian Port are maintaining the acceptance of outbound laden containers four and seven days prior to vessel ETB respectively. A number of ad-hoc blank sailings were announced for scheduled port calls in South China.
- The aging cargo on the docks of the twin ports in southern California has seen a combined decline of 49% from October last year. The twin ports have once again postponed the assessment of emergency fees for idling containers until April and may further delay it again. As of week 15, there were 52 vessels at anchor in the San Pedro Bay.
Please refer to the below illustration of Century’s assessment of the operating status at the major origin ports throughout Asia.
- Cross-border trucking between Hong Kong and China remains a challenge due to increased quarantine measures imposed by the Shenzhen local government. Century has resumed our cross-border transportation services, but requests will be reviewed on a case-by-case basis.
- Equipment availability remains low throughout Asia due to the slow circulation of containers. Our local teams in APAC have reported a continuing deficit of 40’HC and 40’ HQ containers, which is particularly severe in Bangladesh, Sri Lanka, Vietnam, and Ningbo, China.
ASIA PACIFIC LOCAL UPDATE
- Chinese financial hub Shanghai and its nearby cities such as Suzhou, Kunshan, Wuxi remain under an extended full or partial lockdown. While seaports are still operational, halted warehouse operations, increased traffic control, trucker shortages, and depot closures have made container transportation a challenge. Century’s office in Shanghai remains closed as mandated by local authorities and our Shanghai teams are working remotely. On the other hand, China’s capital city Beijing has begun mass testing for over 20 million residents as lockdown fears grow. Click here to read our latest client advisory on the pandemic situation in China.
- The rising political tensions and economic crisis in Sri Lanka have led the island country to begin fuel rationing. As a result, tightened trucking capacity and equipment availability have contributed to higher yard density at the Colombo Port. Electricity supply continues to be restricted on a sporadic and rotating basis amongst different regions.
TRADE & ECONOMIC HIGHLIGHTS
- In early April, India and Australia signed the Economic Cooperation and Trade Agreement to enhance bilateral trade engagements between the two nations. India will remove tariffs on more than 85% of Australian goods entering the country, rising to almost 91% over 10 years, while 96% of Indian goods will enjoy duty-free entry into Australia.
Besides our suite of tools in VMS® that power your supply chains every day, the following solutions we offer provide you with alternatives to maximize the efficiency in your supply chain operations and mitigate the ongoing industry challenges.
- Warehouse Storage – Besides the normal CFS cargo flow through our warehouse network, we can also work with you to take on dedicated storage space to accept vendor deliveries based on their production schedules. This can help to alleviate pressure at vendor facilities while also ensuring that your cargo can be dispatched as soon as carrier space becomes available.
- Value-added Services – The wide range of value-added services we provide at origin CFS, such as pick and pack, consolidation, labeling, and palletization, gives you a one-stop solution for greater supply chain efficiency. Century can build direct store loads from our Asia CFS facilities to bypass transloads/DCs and streamline inbound delivery.
- Origin Trucking Solution – With support from your carriers, we are able to arrange trucking to alternate ports where carrier space is more readily available, allowing for greater flexibility in space planning to achieve forecasted departure dates.
- Destination Services – Our physical network in North America extends beyond the primary shipping hubs in California. Our coverage in the Pacific Northwest and the East Coast gives you alternative storage and transload options, as well as other destination services such as pick and pack and cross-dock services throughout the United States and Canada.
- Customs Clearance & Brokerage – Our team of licensed brokers and compliance experts will handle your documentation and clearance process directly with US Customs. As your trusted trade compliance partner, we help you avoid costly delays at the border and penalties for misfiling.
Talk to your Century Account Manager or contact a sales representative today to understand how we can develop a customized solution to meet your supply chain needs! We will continue to work together with your logistics teams to navigate these unique shipping times through every step in the supply chain.
Disclaimer: The information contained in this newsletter was provided by our partners across Asia and referenced from online sources that were not specifically authorized for third-party usage. The aim of this publication is for informational purposes only. While Century endeavors to validate the authenticity of the stipulated information, Century is not responsible for its accuracy and completeness and does not accept liability or responsibility for any actions taken upon reliance.
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