Market Update – December 2021
For many professionals in the global logistics sector, to say that 2021 has been a challenging year would be an understatement. Persistent port congestion, skyrocketing ocean freight rates, sustained capacity reductions, and cargo delays are just a few examples of the global supply chain disruptions many shippers have had to endure in the past year.
Although the strong consumer appetite for spending has resulted in record volume throughput that exposed the structural vulnerabilities in the supply chain, many remain hopeful that the relentless pressures on global shipping may finally ease during 2022. To help our customers build a more resilient supply chain that is adaptable to volatile market conditions, in our December Market Update, we discuss the escalating blank sailings and carrier capacity outlook.
Supply chain disruptions are without a doubt one of the most defining phrases for 2021. While those in the logistics space certainly found themselves in hot water, many shoppers whose favorite products have not been restocked in time have also heard of phrases “supply chain crisis” or “port congestion” by now. Following the world’s unexpectedly rapid recovery from COVID-19, the pandemic-driven volume growth has widened the imbalance between supply and demand and left many shippers perplexed with continued constraints on ocean carrier space leading into 2022.
Just as shippers and warehouse workers brace for the fast-approaching pre-Lunar New Year peak, the industry is witnessing an arrival of cancelled or blank sailings much earlier than expected. According to Sea-Intelligence, a maritime intelligence provider, about 28.4% of the total Asia-North America West Coast capacity is blanked in week 52. Amongst the carriers who have announced void voyages include Ocean Network Express (ONE), who has cancelled 29 transpacific westbound sailings for December and 9 for January 2022 respectively, as well as ZIM, who also removed six of its carriers scheduled to call on Los Angeles through late December because of the ongoing congestion in Los Angeles and Long Beach.
Generally, ocean carriers would start blank sailings around the Lunar New Year holidays when Chinese manufacturers shut down and production stops. However, because of the cargo logjam at major ports in North America such as Los Angeles/Long Beach and Savannah, the leading cause to the recent premature cancelled voyages is believed to be the result of operational issues rather than under capacity. Unlike the fierce blank sailings that we witnessed in spring 2020 where the world shut down because of the then-unknown risks of coronavirus, vessels are now failing to sail back to origins on time to carry goods across the globe again. Since these operational issues and cancelled voyages are unforeseeable, the percentage of reduced capacity in the coming weeks is expected and subject to further carrier announcements.
As part of our ongoing endeavors to increase supply chain visibility, we are working with ocean carriers, ports and terminals, and data providers worldwide to ensure we have optimal data sources to provide you with trusted shipment milestones and visibility. To help you better anticipate effective carrier capacity and manage allocations more effectively, click here to download a report of blank sailing forecast from December 2021 to March 2022!
As 2021 draws to a close, market analysts are expecting the global shipping sector to remain strong in the coming year. While container capacity has remained fairly consistent since 2020, the demand growth has surged to 7.4% in 2021. It is anticipated that volume growth will soften to 5.2% next year, surpassing the capacity growth by 1.8%. The disparity between available carrier space and overwhelming demands means there will be ongoing unfulfilled carrier space requests until new capacity is added to the global fleets from 2023.
With 2022 and the pre-Lunar New Year peak just around the corner, advance cargo planning continues to be the key for managing uncertainty around vessel schedule reliability. To ensure timely delivery for Spring next year, we would like to reiterate the importance of timely vendor bookings so that our team can reserve carrier space and equipment as early as possible to hit your target ETD. Flexibility in the choice of discharge ports can also minimize the risks of delays in terminals with excessive waiting time.
- Eastbound transpacific container freight rates remain largely stable after a dip due to the reduced factory outputs from China. On the spot market, we are seeing a consistent freight rate remaining at about $20,000+ per FEU. According to industry index which excludes premiums and surcharges, as of week 50, the transpacific container rates for exports from East Asia/China to North America West Coast remained at $14,924, 280% higher as compared to the same period last year. As for the China/Asia-North America East Coast freight rate, prices are at $16,865 per FEU. With the upcoming factory shutdowns during the Lunar New Year, there may be a rise in ex-China freight rates in the coming weeks as importers rush to ship out larger volumes before the long holidays. Ocean carriers have announced GRIs effective between December 15 to January 15 for cargo originating from Asia and India Sub-continent and destined for the United States and Canada.
- To meet the continued strong demand on transpacific trades, MSC has launched a new service ‘Santana’ connecting North Vietnam and US East Coast. The new rotation will be as follows: Haiphong – Shanghai – Ningbo – Houston – Charleston – New York – Haiphong. Some of the vessels deployed for the ‘Santana’ were shifted from the current Far East – USWC service which will be discontinued soon. The first vessel serving the new ‘Santana’ rotation is expected to arrive in Haiphong on December 31.
- In late November, OOCL launched a new Pacific China South Express (PCSX) service that offers additional expedited linkage between South China and USWC. The rotation will be as follows: Shanghai – Fuqing – Xiamen – Yantian – Long Beach – Shanghai. The first sailing was commenced on November 20.
- We have seen marginal improvement in global carrier schedule reliability following the historic low of 33.5% in August this year. According to the latest industry data, carrier schedule reliability has slightly improved to 34.4% in October, 0.4% up from the previous month. Transpacific carrier schedule reliability remains low at around 10% whereas the schedule reliability level for vessels serving the Asia-Europe routes was reported at 20.5% last year.
- The twin ports of Los Angeles and Long Beach announced that the assessment of the “Container Excess Dwell Fee” will be delayed again, further postponing the potential emergency surcharge that will take effect, if necessary, to December 27. In a recent joint official statement, the ports said they have seen “combined decline of 47% in aging cargo on the docks”, since the fee as first announced on October 25. As a contingency plan to accelerate cargo movements, the ports have had plans to charge ocean containers dwelling at the ports for 9 days or more and rail containers for 6 days or more for $100 per container, with a $100 increment per container for each day that follows.
- Due to the strict quarantine measures for shipping crews, several carriers including ONE and Hapag-Lloyd have temporarily suspended bookings that require the usage of coastal feeder and barge services in Southern China until after Lunar New Year. From December 2021 to mid-February 2022, feeder service between smaller ports in the Pearl River Delta (PRD) area and larger maritime terminals in Hong Kong and Shenzhen will be temporarily halted. Cargo moving directly to and from the major deep water ports in Southern China without the need for feeder service will not be impacted. We expect cargo movements between PRD and the main sea ports in Southern China will remain restricted until the feeder operators resume services. Click here to read our recent client advisory for more details.
- As of week 50, we are seeing delays of up to 8 days at the port of Savannah, where the yard density is at 75% with 13 vessels at anchor waiting for a berthing window. To improve port infrastructure and cargo fluidity, Georgia Ports Authority (GPA) initiated the Peak Capacity Project to add an infusion of 1.6 million TEU yard capacity in two phases and the first phase will be coming online shortly. By January 2022, GPA will commence 670,000 TEUs of new annual capacity at the Garden City Terminal, followed by an additional 155,000 TEU and 850,000 TEU terminal capacity expected to come online in March and June respectively.
- In view of rising labor and operation costs, ports in China have announced adjustments to increase container handling charges from the beginning of 2022. In Ningbo, international trading import and export containers will see a 10% price hike, whereas in Guangzhou, the port will increase the handling charges by 8% to 19% depending on the types of the container. Industry analysts expect that more ports in China will increase the container handling fess in 2022.
Please refer to the below illustration of Century’s assessment of the operating status at the major origin ports throughout Asia.
- Equipment stock level remains low and an ongoing issue in Asia. We are seeing a continuing deficit of 40’HC and 40’ HQ containers, which is particularly critical in Bangladesh, Sri Lanka, and Thailand. Equipment constraints with all types of containers with CMA CGM remain scarce. Because of the ongoing carrier space and equipment shortages, we are seeing an increase in CFS freight volume where customers and vendors are delivering factory loads to our warehouses for VAS and storage until carrier space becomes available.
- Due to the ongoing congestion and reliable vessel sailing schedules, more Indian exporters in Chennai and Kolkata are rerouting their cargo to JNPT (Nhava Sheva) or Mundra near the country’s economic capital Mumbai, instead of using feeders to regional hubs or intermediate ports like Colombo, Singapore, and Port Klang for transshipment. This trend is thanks to the recent instruction of block-train services by major carriers to connect eastern interior with the major gateways in western India. This trend expected to continue until supply chain issues ease.
ASIA PACIFIC LOCAL UPDATE
- Due to the recent heavy rainfalls and massive flooding in Malaysia, operations at the country’s major maritime terminals in Port Klang have been adversely affected. According to our local teams, many workers in the logistics sectors are unable to report to work due to travel difficulties. Please expect a delay in ex-Port Klang shipments until the situation improves and refer to our recent advisory for the detailed supply chain impacts.
- The uptick of COVID-19 cases in China’s Zhejiang Province has prompted further fear of supply chain disruption in Ningbo, where the world’s third-largest container port complex, Ningbo-Zhoushan Port is located. The local government has placed Zhenhai district and Shangyu district in the neighboring city of Shaoxing under a partial lockdown since December 13. Cargo movement to/from these areas will be restricted due to quarantine requirements. Additionally, China has detected two cases of the Omicron variant each in Tianjin and Guangzhou. We confirm there is currently no major supply chain disruption in China. Read our latest update on the coronavirus situation in China here. The government continues to closely watch all outbreaks with increased scrutiny with both the Beijing Winter Olympics starting on February 4th and the lunar new year lengthy holidays commencing on February 1st. Beijing has already suggested that the general population stay at home in yet another effort to maintain the zero policy for COVID-19 infections.
- On the other hand, in Southeast Asia, where the governments are less fixated with keeping cases at zero, we confirm there has been no major supply chain disruptions. However, concerns over the Omicron COVID-variant may slow down the border reopening of some countries. Please continue to refer to our fortnightly publication for a boarder update on the global COVID-19 situation.
TRADE & ECONOMIC HIGHLIGHTS
- According to the data released by China’s National Bureau of Statistics, the country’s manufacturing Purchasing Managers’ Index (PMI) increased to 50.1 in November from 49.2 in October, up 1.8%. This is the first time in two months China has reported a reading above 50, which indicates an expansion of activity rather than contraction. The growth in economic activities and factory outputs was attributed to the easing of power shortages following China’s increasing domestic coal supply.
- U.S. retail sales rose merely 0.3% (on a seasonally adjusted basis) from the previous month to $639.8 billion in November, for the four consecutive month. This is below the market expectation as analysts had forecast a 0.8% increase. The weakened consumer spending is believed to be the payback after the Thanksgiving and holiday shopping rush that started much earlier this year. Contributing to the softened retail sales is also the rising costs for products, as the country witnessed a surge in inflation of 6.8% to a 39-year high.
Besides our suite of tools in VMS® that power your supply chains every day, the following solutions we offer also provide you with alternatives to maximize the efficiency in your supply chain operations and mitigate the ongoing industry challenges.
- Century Express – 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, keeping the number of documents issued for multiples services transparent and at a minimum.
- 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, 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.
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.
- 20%-25% weekly capacity blanked on Asia-NAWC
- Fitch Ratings 2022 Outlook: Global Shipping
- Freightos Baltic Index
- Mediterranean Shipping Company
- Orient Overseas Container Line
- Schedule reliability continues to be under 40% in 2021
- Port of Los Angeles
- National Bureau of Statistics of China
- U.S. Retail Sales Slow With Holiday Shoppers Facing Inflation, Shortages
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