MARKET UPDATE – APRIL 2023

The end of April 2023 saw transpacific freight rates take a dramatic shift against what has been the norm for almost 10 months now, sharply increasing following a month-long period of rather stable but still partially declining rates. Asia-US West Coast spiked upwards to $1,725, representing a 71% week-on-week increase, whilst Asia-US East Coast rates also rose to $2,510, representing a 16% increase from the week prior and the highest since February.  

The uptick in rates came as contracts for the year are being negotiated, reviewed, and renewed. The rise correlates with the overall carrier consensus that spot rates would rise in the second half of this year due to reduced capacity and recovering consumer demand, however the rate increase so early in the year has come somewhat unexpectedly. This sudden surge may result in a competitive disadvantage for carriers who already secured annual contracts at lower rates earlier this year as they become unable to compete financially with carriers who may secure higher-paying contracts later in the year.

Our updates are always published with the objective of helping you navigate the ongoing industry challenges and move freight at the right time and cost. We gather market intelligence from our global offices and provide you with a selection of the most relevant news related to ports, ocean freight, world trade and other information that may impact your supply chain operations.

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CENTURY SPOTLIGHT

The Drewry’s World Container Index (WCI), Shanghai Containerized Freight Index (SCFI), and the Freightos Baltic Index (FBX) all reported significant rises in Asia to US freight rates in the latter half of April, in stark contrast to the downward pattern prevalent in freight rate indices since mid-2022. Exports from China also rose for the first time in five months, with a 15% YoY increase in March, potentially signaling the near recovery of the Chinese production industry following the exit from the ‘Zero-Covid’ policy. The WCI expects the upwards trend of trans-Pacific freight rates to continue their rise for the next few weeks, however no explanation for the sudden spike in freight rates can so far be agreed upon.

The SCFI rose marginally by 3.42 points to 1037.07 points, while Drewry’s WCI composite index went up by 4% to $1,774 per FEU in the first week of April. Rates for China export trades saw a recovery, with Transpacific freight rates for Shanghai-New York gaining 12% and rates for Shanghai-Los Angeles up by 11%. Drewry expects East-West spot rates to continue rising in the coming weeks, except for the Transatlantic trade, which has maintained a downward trajectory much longer than other trades.

According to HSBC’s Global Freight Monitor, the SCFI has seen a surprise 8% week-on-week increase and is up 14% from its recent trough, marking a possible turnaround from a year-long plunge in container spot rates. While the SCFI is still down 7% from the start of 2023, the report suggests that market spot rates may stabilize at current levels in the coming months and gain support from an improvement in volumes in the second half of the year. The report also highlights the recovery of the Clarksons Time Charter Index for containerships as a sign of a likely recovery in spot rates. However, HSBC sees potential downside risks in 2024 with the dissolution of the 2M Alliance, which could result in intensifying competition in the run-up.

Ocean Update: 

• Hapag-Lloyd has announced that it will launch its new fortnightly WA1 – West Africa service which is intended to establish and help grow new markets in Liberia, Guinea, and Sierra Leone. The service will provide a direct connection from the three West African countries via Mauritania to Tanger Med port in Morocco where connections to European, Asian, and North American markets can be made. The WA1 will be launched on May 15th and comes alongside the expansion of the WAX service which will now include rotations in Senegal in addition to the Ivory Coast and Ghana. WA1 port rotation will be as follows: Tanger Med – Nouakchott – Freetown – Conakry – Monrovia – Tanger Med.

• MSC has expanded its ScanBaltic to USA service, which connects US markets with North and Northwest Europe, to newly include fortnightly calls at JAXPORT, Florida. The updated rotation will offer enhanced support to food, beverage, forestry, and automotive industries across the two continents. The ScanBaltic service will provide direct connections between Lithuania, Poland, Sweden, Germany, the UK, Belgium, and France to the US. The maiden voyage arrived in Jacksonville, FL on April 25th. Port rotation is as follows: Klaipeda – Gdynia – Goteborg – Bremerhaven – Felixstowe – Antwerp – Le Havre – New York – Philadelphia – Norfolk – Jacksonville – Klaipeda.

• CMA CGM will launch its new intermodal service through Lekki Port, Nigeria, in May of 2023. The service will provide efficient cargo transport solutions between inland Nigerian destinations, like Lagos and Kano, and destinations across Asia including Sri Lanka, Indonesia, and China. Port rotation will be as follows: Lekki – Colombo – Singapore – Shanghai – Ningbo – Yantian – Shekou – Tanjung Palepas – Lekki.

• Hamburg Süd will expand its South Atlantic Express service to provide direct coverage from Central America to the US with the addition of port of calls in Costa Rica. The new coverage, which commences on May 2nd, is set to provide the fastest connection from Panama, Guatemala, Honduras, and now Costa Rica, to the United States. A direct call to Port Everglades has also been introduced during the expansion with six days of transit time. Port rotation will be as follows: Manzanillo – Puerto Moin – Puerto Cortes – Puerto Barrios – Port Everglades – Wilmington – Norfolk – Philadelphia – Wilmington – Savannah – Port Everglades – Santo Tomas De Castilla – Puerto Cortes – Manzanillo – Puerto Moin.

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 of your shipments in VMS® as our NVOCC division leverages VMS® as the operating platform. We also consolidate NVOCC invoicing with your existing invoicing, keeping the number of documents issued for multiple services transparent and at a minimum. We engage with each carrier alliance and other independent carriers to ensure that we can provide choices and backup 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. Contact your Century Representative today to learn more!

Port Update: 

• In South China, the estimated vessel waiting time is up to 1 day in Yantian and 0-12 hours in Shekou with average yard utilization at 82%. In the Shanghai ports of Yangshan and Waigaoqiao, the average vessel berthing time at both ports remains at 0-1 day.

• Port of Savannah waiting time is up to 3 days depending on vessel size. Gate turn times are currently averaging 38 minutes for single transactions and 58 minutes for double transactions. Berth capacity remains limited during the port’s major two-year reconstruction project, which is expected to be completed in June 2023. Additional delays are to be expected at berth CB2 and CB3 for class 1 vessels over the next couple of weeks due to maintenance dredging operations.

• At the Port of Charleston, the average wait for berthing is currently just 1 day. Sunday gates have been revived but are by appointment only. Growth at this port is expected to continue following the acquisition of the drayage and warehousing business serving the port, ATS Logistics, by middle-market private equity firm NOVA Infrastructure. The firm has touted the potential of the port after recording a YoY 2.7% cargo activity growth to 2.57 million TEUs. The acquisition is set to triple ATS Logistics’ intermodal revenue.

• The San Pedro Bay ports have announced the receipt of $110 million USD in funding from the state of California to create a training facility for the twin ports within the San Pedro Bay complex. The investment is intended to enhance the supply chain workforce through extensive training to upskill and reskill in accordance with the rapidly changing needs of the logistics industry. The training facility, named The Goods Movement Training Campus, will also serve to attract, recruit, and retain prospective workers in the logistics industry in addition to training the current workforce. Labor from dockworkers to truck drivers, to warehouse employees and other essential logistics staff will be provided with the opportunity to acquire skills pertaining to the latest advancements in environmentally conscious industry equipment that will contribute towards San Pedro Bay port’s goal of reaching zero emissions by 2035. The 20-acre training facility is set to open by 2029.

• The Georgia Ports Authority (GPA) has seen record growth in Q1 of 2023, experiencing its second busiest February ever, and emerging as one of the major beneficiaries of the widespread shift away from US West Coast ports. Amidst labor contract negotiations and constant berthing delays at West Coast Ports in the latter half of 2022 which resulted in a 43% YoY drop in volumes at the Port of Los Angeles, the Port of Savannah handled a record cargo volume of 3.8 million TEUs from July to February of this year. The recent rapid growth at the US East Coast ports has enabled the Port of Savannah to leverage new infrastructure investments to increase its operational capacity. The construction of a 300,000 SQF transload is set to open in summer 2023 in addition to the conversion of its Ocean Terminal from breakbulk cargo to container-only operations, which will increase the port’s capacity from 6 million TEUs to 7.5 million TEUs. Whether the move away from US West Coast ports is a permanent shift or whether it will begin to reverse once the issues have been resolved is still up for debate, but the GPA has fully utilized the current circumstances and US East Coast shipping, and the state of Georgia, especially, are reaping the benefits.

Please refer to the below illustration of Century’s assessment of the operating status at the major origin ports throughout Asia.

Landside Update:

• Following the US federal regulator’s approval of Canadian Pacific (CP)’s USD $31 billion acquisition of Kansas City Southern (KCS) last month, Canadian Pacific Kansas City (CPKC) officially began operations on April 14th, 2023. This marked the culmination of a two-year journey that began when CP first publicly declared its interest in merging with KCS in March 2021. The new company will offer a unique single-line rail network that stretches from both coasts of Canada, through the US Midwest, and into Mexico, including the Port of Lázaro Cárdenas on Mexico’s Pacific coast. The network covers approximately 20,000 miles of rail and is expected to take over three years to fully integrate. CP also plans to spend more than $275 million to improve rail safety and capacity on the core north-south CPKC main line between the US Upper Midwest and Louisiana. CPKC’s headquarters will be in Calgary, Alberta, with however CP have stated that it will still maintain key KCS offices in the US. The company expects to divert approximately 64,000 long-haul truck shipments annually to its intermodal services. CPKC is anticipated to boosting the US freight system’s service capabilities, streamline rail routes, increase terminal efficiencies, and reduce overall travel time of goods and passengers. The Surface Transit Board will now establish a seven-year oversight period for data collection and reporting requirements.

Asia Pacific Local Update:

• The State-owned Sri Lanka Ports Authority (SLPA) has announced an agreement with China Merchants Port Holdings (CMPort) to jointly construct Asia’s largest logistics complex at Colombo Port at a cost of USD $392 million. The complex, known as the South Asia Commercial and Logistics Hub (SACL) is formally a 50-year Build-Operate Transfer with CMPort holding a 70% stake in the project whilst the SLPA holds 15%. Construction of the SACL is set to commence in the second half of 2023 with target completion by 2025. The 5 million SQF SACL complex will be located in the center of Colombo Port and contain 530,000 CBM of storage capacity through its eight floors. The project will also benefit from the Port of Colombo’s recent designation as a free port by the Sri Lankan Government, which will provide the SACL with advantages including no customs clearance for transshipments and Multi-Country Cargo, which will result in reduced costs and paperwork. The project is intended to promote Colombo as a competitive hub in the region, modernizing its infrastructure, and fully utilizing the country’s prime location as a major maritime trade connection hub.

• Hong Kong is investing USD $2.5 million in establishing a task force to develop an “action plan” for further promoting and expanding the city’s international maritime hub status. The Transport and Logistics Bureau announced the Task Force on Maritime and Port Development Strategy on April 19th, 2023, which will focus on developing business sectors such as ship finance, maritime arbitration, marine insurance, and ship management with the intention of enabling the Special Administrative Region to become a global leader in the high-end maritime services market. Additionally, the unit will support zero-emissions transformations, smart initiatives, and digitization in the industry, as well as promote exchanges and collaboration among maritime industries in the Greater Bay Area and globally. The task force aims to announce the action plan by the end of 2023.

Trade and Economic Highlights:

• The United Kingdom has joined the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) which consists of a trading block between 11 other countries who agree to remove tariffs on most goods and provide cooperation on standards and regulations. The agreement will become a significant trade link for the UK as it looks to deepen its trade ties in the Trans-Pacific region following its departure from the European Union. Membership is set to supplement existing bilateral free trade agreements between the UK and CPTPP members and will provide businesses with an extra option in the terms they can trade under. The CPTPP countries of Canada, Japan, Australia, New Zealand, Chile, Mexico, Peru, Vietnam, Malaysia, Singapore, and Brunei together generate 14% of the world’s income, and the UK’s joining is anticipated to increase its own GDP by 0.8% over the next 10 years.

Century Solutions:

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 can arrange trucking to alternate ports where carrier space may be 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. As needed, we can leverage the capabilities of our sister companies within the Sun Capital portfolio to offer customers an increasingly flexible and expansive destination network. Sun’s recent acquisition of TTSI, a leader in port and rail drayage in North America, has significantly boosted our resource capabilities close to all major East Coast ports and Texas, offering asset-based drayage, transload capabilities, dedicated fleet and final mile deliveries, pooled distribution, cross-docking and value-added warehousing services from which our customers can now benefit.

• 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 teams to navigate these unique shipping times through every step in the supply chain.