Market Update – January 2022
As we usher in the new year, unresolved global port congestion, labor shortages, and capacity restraints have dampened the hopes of many for a brighter supply chain outlook in 2022. While there is no indication whether these disruptions will finally ease as governments discuss varying exit strategies for the pandemic, building a supply chain that is adaptable to market volatility continues to be key in keeping your cargo moving under any circumstances. In the first Century Market Update in 2022, we highlight the record-level imports and reduced ocean capacity before we discuss the current challenges and Century’s solutions.
In the second COVID disrupted year, the pandemic-driven surge in consumer goods continues to bring an extraordinarily strong import volumes surpassing what our existing infrastructure is used to handling. According to the most recent publication of the Global Port Tracker report, released by the National Retail Federation (NRF), while the import volumes into the U.S. last year grew at a record-setting pace, industry experts forecast that the numbers will likely return to normalcy while still remaining elevated. In 2021, imports surged to a historic high at 25.9 million TEU, up 17.9% from 2020’s 22 million TEU against the backdrop of a global pandemic. Although the strong global trade has certainly exposed the infrastructure deficiencies, the number of imported containers is expected to moderate with double digit month-on-month growth becoming more uncommon. According to NRF, imports into the U.S. are forecast to increase 9% YoY in January, 7.3% in February, and then decline 3.3% in March before growing 2.2% in April.
As market sentiments continue to remain strong, bottlenecks across ports and inland hubs have been causing upstream impacts to vessel schedule reliability, further leading to escalating blank sailings. According to industry data, between week 4 and week 7 in mid-February, 69 out of a total of 553 scheduled sailings across the major trade lanes including transpacific, transatlantic, and Asia-Europe, have already been cancelled. This represents a 12% cancellation rate, with over 40% of the cancelled vessels from The Alliance’s fleets. Further, transpacific capacity is expected to remain limited at this time, since 68% of the void sailings have been announced for vessels serving the Asia-North America lanes, mostly destined for the U.S. West Coast.
As China and most parts of Southeast Asia begin to enter an operational slowdown as we move into the upcoming Lunar New Year, congested destination ports may finally start to trim cargo backlogs and gain greater efficiencies. However, until the current market conditions ease, advance cargo planning, timely vendor bookings, as well as flexibility in the choice of discharge ports and equipment continue to be key in mitigating the ongoing challenges. Advance cargo planning will not only allow our origin teams to secure carrier space as early as possible, but also gives you extra time to better plan destination resources.
- Eastbound transpacific container freight rates remain largely consistent yet elevated. On the spot market, in January, rates jumped to $23,000 to the West Coast and $25-27,000 to the East Coast. The cause of the price hike is primarily driven by the pre-Lunar New Year peak as factories and importers rush to ship out products before the holidays. According to industry index which excludes premiums and surcharges, as of week 4, the transpacific container rates for exports from East Asia/China to North America West Coast remained at $15,485 or 255% higher as compared to the same period last year. As for the China/Asia-North America East Coast freight rate, prices are at $16,781 per FEU, which represents an 191% YoY increase. There may be an uptick in ex-China freight rates in the coming weeks after China returns from the holidays and resumes factory output. Ocean carriers have announced GRIs ($1,000 to $1,500 for 40’ standard containers) effective between January 15 to February 15 for cargo originating from Asia and India Sub-continent and destined for the United States and Canada.
- According to industry reports, Mediterranean Shipping Company (MSC) has unseated Maersk as the world’s largest ocean carrier in terms of container vessel capacity. As of January 6, the Swiss-Italian shipping line is deploying a total fleet of 4,284,728 TEUs, slightly surpassing that of Maersk by 1,888 TEU. Currently, both shipping giants each hold about a 17% share of the global market by vessel capacity.
- The congestion in the Port of Charleston has been further aggravated due to the reduced number of cranes in operations and also from overstaying cargo at yards. As of January 21, there are 15 vessels waiting at anchor with a vessel berthing waiting time of up to 5 days. Currently, there are more than 7,000 unclaimed imported containers dwelling at the terminal for over two weeks, which is a 40% increase since January 1. The congestion at Charleston became more severe after several carriers replaced the usual Savannah port call with Charleston or Jacksonville for multiple TAEB service strings. South Carolina Ports Authority said the port will rent a commercial barge to move the dwelling containers to other underutilized terminals.
- The twin ports of Los Angeles and Long Beach announced that the assessment of the “Container Excess Dwell Fee” will further delayed until January 28. Since the fee was first announced on October 25, 2021, the ports said they have seen a “combined decline of 62% in aging cargo on the docks”. As a contingency plan to accelerate cargo movements, the ports plan 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. As of week 4, in the port of Long Beach, the current vessel waiting time ranges from 38 to 45 days due to overflowing import volume and labor shortages, with the yard utilization at TTI having exceeded over 90%. On the other hand, vessel waiting time in Los Angeles is about 2 to 4 weeks and the APM yard utilization is at 84% capacity.
- Shenzhen’s Yantian International Container Terminal (YICT) has tightened the cut-off time for acceptance of outbound containers in view of worsening port congestion that is affecting vessel schedule reliability. YICT recently said in a statement that ahead of the Lunar New Year peak, the on-time performance of vessels calling YICT has slid down to below 20% with berthing delays of up to 7 days. To prevent container boxes from piling up at yards, from January 21, YICT will only accept outbound containers 4 days prior to estimated vessel berthing (ETB-4).
- Congestion at major European gateways remains an issue. Terminals in Rotterdam, Antwerp, and Hamburg are operating with reduced productivity due to COVID-related labor shortages. We continue to see high yard density of up to over 85% in Europe. The situation is the most critical at Felixstowe, where yard density is at 96% and with vessel delays of up to one week.
Please refer to the below illustration of Century’s assessment of the operating status at the major origin ports throughout Asia.
- Trucker availability in China remains limited due to local quarantine measures. Our local team has seen an increase in trucking prices, and currently, truck orders need to be made 5 days in advance before cargo pick-up date. Due to the COVID-19 situation in Tianjin, cargo movement from Tianjin to Beijing is temporarily restricted. With sporadic outbreaks of COVID continuing as people return home for the Lunar New Year and the Beijing Olympics set to begin on February 4, the government is maintaining the strict zero-COVD policies in effect, and trucking has been further impacted by the inability of drivers to circumvent certain areas on their planned routes which have been locked down or designated as medium or high-risk areas and may be subject to local restrictions.
- Equipment stock level remains low throughout Asia due to the ongoing congestion at destination ports that slows down the circulation of containers. Our local teams in APAC have reported a continuing deficit of 40’HC and 40’ HQ containers, which is particularly critical in Bangladesh, Cambodia, Sri Lanka, Indonesia, and Thailand. Equipment constraints with all types of containers with CMA CGM were reported in multiple Asian origins. We have seen an increasing number in CFS freight volume in the past few months due to escalating carrier blank sailings. Many customers and their vendors are sending their CY freights to our CFS for storage until carrier space becomes available.
ASIA PACIFIC LOCAL UPDATE
- The Winter Olympics will take place from February 4 to 20 in China’s capital city Beijing and northern Hebei this year. During this period, authorities may announce the traffic control and closures for heavy industrial factories located around the vicinity of Beijing and Hebei. Additionally, there may be delays in import customs clearance as customs may impose stricter inspections for goods entering the capital city and for DG cargo. We will keep you posted if more information becomes available.
- This year, the Lunar New Year falls on February 1 (Tuesday) and our offices, warehouses, as well as local customs offices in China, Hong Kong, Taiwan, and some SE Asia will be closed for the holidays. While some of our local offices will be closed, skeleton staff will be available to handle any priority shipments or urgent inquiries. Click here to view the details of Century office closures and adjusted business hours during the Lunar New Year.
- As most countries open up, China is maintaining its “zero-tolerance approach” to battle the new Omicron variant. The “zero-Covid” strategy relies on mass testing, strict border controls, extensive contact tracing, and snap lockdowns. As of January 24th, there are 18 high-risk areas, including 12 in Tianjin, 3 in Yuzhou city of Henan province, 2 in Tangyin District in Anyang City of Henan province, as well as 1 in Beijing. Cargo movement to/from these areas will be restricted due to quarantine requirements. Please refer to our latest China COVID-19 Update for more information on port and warehouse operating statues.
TRADE & ECONOMIC HIGHLIGHTS
- In 2021, China saw the fastest GDP growth in 10 years with an 8.1% increase, which is in line with what economists had anticipated and surpassed the government’s annual target for a 6% growth rate. According to the National Bureau of Statistics (NBS), the country recorded a total GDP of 114.37 trillion yuan ($18 trillion) last year. However, despite the strong annual GDP growth, the real estate crisis and supply chain disruptions in China slowed the country’s GDP growth in the closing months of 2021. In Q4 last year, China reported a 4% GDP increase, which is the weakest since the second half of 2020.
- Following the Federal Reserve’s two-day meeting, Chairman Jerome Powell signaled hints that the Federal Reserve will likely hike interest rates from March for the first time in three years to combat turbulent markets and surging inflation. The Central Bank said in a statement “With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate.
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.
- NRF: Retail Import Growth Levels Out But Volume Remains High
- Freightos Baltic Index (FBX)
- MSC has overtaken Maersk as the world’s largest container carrier
- Charleston port congestion could take six weeks to clear
- The Port of Los Angeles
- China’s GDP grows 8.1% in 2021, fastest in 10 years, spurring confidence despite challenges ahead
- Powell Backs March Liftoff, Won’t Rule Out Hike Every Meeting
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