MARKET UPDATE – FEBRUARY 2023

After a rather pessimistic entry into 2023, early signs from the new year have suggested that the global economic outlook may be a bit less dampened than previously anticipated. The IMF has stated that although the global economy is still poised to slow this year before a rebound in 2024, early attempts to fight against inflation have so far made a decent impact and put the economy in a much more positive position than it was in a couple of months ago. 2023’s economic growth is still expected to be subpar, however the IMF has already marginally increased its growth forecasts by 0.2% for the upcoming year. In our February Market Update, we explore the possibilities of a significant ocean carrier strategy shake-up and how carriers’ approach to the new year and its new challenges may change either by choice or by necessity.  

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 discontinuation of the 2M alliance has been announced for January 2025 following a mutual agreement from Maersk and MSC. The pursuit of different strategies and a change in the commercial environment have been cited as the key factors behind the decision. The agreement, which will now not be renewed once it reaches the ten-year expiry date, enabled the sharing of cargo capacity in the Asia-Europe, Transatlantic, and Transpacific trade lanes between the two carriers. The alliance will be phased out over a transition period in the next two years, but both Maersk and MSC have stated that there will be no immediate impact to their services.

The announcement has garnered speculation surrounding other similar ocean carrier alliances, such as the ‘THE Alliance’ and ‘Ocean Alliance’, and whether a wave of vessel-sharing agreement changes is incoming as other carriers begin to also rethink their alliances. The breakup will see Maersk become a much smaller player in the ocean freight industry, a biproduct of their shifted strategy towards becoming an end-to-end supply chain provider, whereas MSC has doubled down on ocean shipping. The 2M breakup is set to leave MSC in a much stronger position than Maersk in terms of competitiveness in the carrier market, however, in terms of direct competition with the other existing alliances, assuming they remain intact, MSC will still see a smaller capacity than ‘THE Alliance’ and will be dwarfed by ‘Ocean Alliance’ based on current market performance.

With the announcement of the 2M alliance breakup providing almost two years of advanced warning, the market now has ample opportunity to speculate what impacts it could have on the ocean carrier industry. The breakup is anticipated to spark increased competition amongst ocean carriers as shippers will soon have the choice between MSC, Maersk, and other carriers to transport their freight across the ocean. It is speculated that this new competition could lead to lower spot rates due to increased options for customers leading to shipping companies having to fight for their business. These hypothetically lower rates could also lead to a more volatile service amongst carriers through the increase of blank sailings as carriers try to deal with the increased market pressure. In the short term, spot rates in 2023 may end up being lower than they would have been without the 2M breakup announcement, which will only add to the existing pressure on carrier alliances and possibly lead to more breakups in the near future.

Transpacific freight rates closed out in February 2023 with Asia-US West Coast declining to $1,181, a 4% decrease week-on-week, whilst Asia-US East Coast rates plateaued at $2,630, dropping $3 from the week prior. The current rates and projections have remained relatively consistent throughout the first two months of 2023, with only minor dips and rises throughout weeks 1-8. Rates still remain above 2019 levels and appear to be in the process of settling around the current prices.

New At Century: 

Tired of paying extra for ocean freight as the spot market falls below your contracted rates? Managing the constantly changing ocean freight market can be a complicated process; spot rates can fluctuate significantly based on shipping lines’ capacity, seasonality, consumer demand, and regional market conditions. Aggregating your contract rates along with the latest spot rates, Century’s new Ocean Freight Cost Management Solution provides visibility to all your contracted carrier rates, NVO rates, and spot rates, systematically recommending the lowest cost option to ensure you always book the most competitive rate.

Key benefits of our Ocean Freight Cost Management solution include:

• Instant visibility and easy access to ocean freight rate changes on one centralized platform
• Reduced manual intervention via one entry-point for all VOCC’s and NVOCC’s ocean rate uploads to streamline the evaluation and enable better resource management.
• Significant cost savings and control through the optimization of ocean freight costs and the flexibility to analyze several rate variations.
• Reporting and analysis of data to generate deliverable actionable insights including weekly cost avoidance and average carrier rates across your different trade lanes.
• Ocean freight trend analysis by leveraging historical data to enable strategic predictions for the market rate forecast.

Contact your Century Account Managers and/or Sales Representative today for further discussions on how we can help you move freight smarter and more effectively!

Ocean Update: 

• CMA CGM has unveiled their new NC Levant service that will cover connections between Northern Europe and the Eastern Mediterranean. Following an investment into Egypt’s Trans Misr Terminal in the port city of Alexandria, the French carrier launched the new service on February 10th, 2023, with the first vessel set to call at Alexandria on March 5th. A northbound call in Malta has been added to the rotation to enable better connectivity from the West Mediterranean, North Africa, and Adriatic ports. The port schedule is as follows: Felixstowe – Rotterdam – Hamburg – Antwerp – Le Havre – Malta – Alexandria – Damietta – Beirut – Iskenderun – Mersin – Malta – Tangier – Felixstowe. The service will temporarily divert shipments away from Iskenderun due to the port’s lengthy closure as a result of damage caused by the recent earthquake in Turkey.

• Hapag Lloyd has announced the closure of its China-Germany Express service in February 2023, which offered a fast connection between China and Germany via Singapore and Belgium. The German carrier has cited decreased demand from China and low spot freight rates as key factors influencing the decision to terminate the standalone express service. As an alternative, Hapag-Lloyd will offer a new service, the ‘FE9’ loop, between East Asia and Northern Europe, which is actually a slot charter agreement on CMA CGM’s ‘FAL3’ service as part of the OCEAN Alliance portfolio.

• Maersk will introduce their new Transpacific East Coast service (TP28) in March 2023 that will connect Vietnam to the Eastern United States via China. The new service will consist primarily of vessels in the 4,500 TEUs segment and will be exclusively operated by Maersk as is consistent with their existing TP20 service. The TP28 launch coincides with modifications to the current rotation of Maersk’s TP20 service, which will now provide direct service to Jakarta, Indonesia, the first Maersk service to do so, instead of Vietnam. The new service will enable the existing TP20 service to gradually increase the size of vessels deployed from 4,500 TEUs to 6,500 TEUs. The new TP28 port rotation is as follows: Vung Tau – Yantian – Ningbo – Shanghai – Houston – Norfolk.

• MSC has announced a new expansion to their Sentosa service with the intention to provide greater access to, and open up, the North Indian market. Under the new expansion, MSC offer a direct connection between India and Sri Lanka’s key west coast ports to California via the main ports of China. The first sailing under the expanded service will depart westbound from Long Beach, CA, on March 5th, 2023, and is scheduled to arrive in Nhava Sheva, India, on April 17th. Port rotation is as follows: Long Beach – Oakland – Busan – Qingdao – Shanghai – Ningbo – Kaohsiung – Shekou – Singapore – Nhava Sheva – Mundra – Colombo – Port Klang – Singapore – Tanjung Pelepas – Laem Chabang – Vung Tau – Da Chan Bay – Shekou – Long Beach.

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 0-12 hours in Yantian, and 0-12 hours in Shekou with average yard utilization at 81%. In the Shanghai ports of Yangshan and Waigaoqiao, the average vessel berthing time at both ports is at 0-1 day.

• Port of Savannah waiting time is 0-3 days depending on vessel size. Average gate turn times are 35 minutes for single transactions and 55 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. The terminal capacity situation remains fluid. The average dwell for imports is 16 days whilst the average Dwell for exports is 6.3 days.

• At the Port of Charleston, the average wait for berthing is currently up to two days. Sunday gates have been discontinued. 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 Y/Y 2.7% cargo activity growth to 2.57 million TEUs. The acquisition is set to triple ATS Logistics’ intermodal revenue.

• The Georgia Ports Authority (GPA) has begun discontinuing pop-up yards at the Port of Savannah due to the recent decline in volume. Evening truck gate hours were instituted at the Port of Savannah in 2021 in response to the surge of imports, partially due to disruptions on US west coast ports, that led to over 30 vessels being anchored outside its Garden City terminal. Following the recent subsiding of the two-year import surge, the GPA has deemed the Savannah pop-up yards and late-night truck hours surplus to requirements.

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

Landside Update:

• On February 6th, 2023, a magnitude 7.8 earthquake, and then later a second earthquake of 7.5 magnitude, struck the central south region of Turkey. This was the strongest earthquake experienced in Turkey in over a century, causing severe structural and environmental damage which led to numerous casualties in both Turkey and neighboring Syria. The epicenter was located around 50km east of Turkey’s largest seaport, Mersin, which endured only minimal damage. The port of Iskenderun suffered severe structural damage, including destroyed roads and a large container fire, leading to the halting of all operations indefinitely. Currently, no resumption date for the port can be given, however mid-March is touted as the earliest re-opening date. Shipments to and from the Iskenderun are being diverted to transshipment hubs with operational feasibility. No further damage to supply chain facilities has been reported following the second set of earthquakes on February 20th, which measured at 6.4 and 5.8 magnitude.

• There were many US rail incidents in February 2023, with five trains derailing in the span of just over two weeks. The first occurred on February 3rd, when a 150-car Norfolk Southern train derailed just outside of East Palestine, OH, resulting in the releasing and burning of toxic chemicals into the air to avoid a possible explosion. Another derailment, in Michigan, resulted in the derailing of 28 of 134 cars. A derailment in Delphos, OH, occurred near a grain elevator in the city center. On February 13th, a train carrying hazardous materials through Montgomery County, TX, derailed following a fatal collision with an 18-wheeler truck, however no chemical leaks have been reported. Later the same day another train derailed in Enoree, SC. Investigations into the cause of the five derailments remain ongoing.

Asia Pacific Local Update:

• Pertamina International Shipping (PIS) has announced the receipt of a USD $185 million syndicated loan to invest in its fleet and infrastructure. The Bandung-based company, which is a unit of Indonesia’s state-owned energy firm, will use the funding to expand its shipping fleet and upgrade its liquified petroleum gas terminal. Following the funding, PIS unveiled plans to add two small LPG carriers, holding 3,500 CBM of capacity, later this year to transport LPG, chemical cargo, and ammonia on a domestic and international level. The majority of funding has been secured from a combination of Domestic and Japanese lenders including Sumitomo Mitsui Banking Corporation, Mizuho Bank Ltd, Mitsubishi UFJ Financial Group Inc., Bank Mandiri and BNI, and BTPN and Indonesian state banks.

• COVID-19 outbreaks across China appear to have already peaked in most of its major cities earlier than expected following the re-opening of the country. The newly increased mobility and resumption of economic activity has begun to put China back on the path towards GDP growth. The potential for a consumer-led economic rebound following the re-opening, despite consumer confidence remaining low, is beginning to gain traction. Pandemic-induced household saving increases, in combination with new government policies focusing on encouraging economic growth, are anticipated to help the Chinese economy achieve a GDP growth of up to 5% in 2023, bucking the recent trend of an economic slowdown in the country.

Trade and Economic Highlights:

• US Customs and Border Protection (CBP) has confirmed that the Uyghur Forced Labor Prevention Act (UFLPA) Region Alert enhancement will be deployed to the Automated Commercial Environment (ACE) on March 18th, 2023. With this enhancement to the ACE, all imports from China into the United States must provide a valid Chinese postal code included in the manufacturer and/or stuffing addresses filing in order to be validated for entry into the US. Shipments without a valid postal code will result in a filing error, whilst those with a postal code from the Xinjiang Uyghur Autonomous Region will result in a warning message. Further information can be found on the USCBP website.

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.

• 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.