MARKET UPDATE – JANUARY 2023

As the world unpacks a fresh calendar to begin the new year, businesses, and hence supply chain professionals, find themselves still burdened with the same pressures from the second half of the previous year. With the ongoing conflict between Russia and Ukraine, China’s exit from the ‘Zero-Covid’ policy, and fears of a global recession ever increasing, many carriers are entering 2023 expecting to take short-term rate hits but are buoyed by the anticipation of a post-Lunar New Year boom. In our January Market Update, we analyze the impact of stabilizing ocean freight rates and inflated inventory levels on the container freight industry and which practices are being adopted as their solution.  

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 analysis of ocean freight rates during the weeks presiding over the end of 2022 and the beginning of 2023 have shown signs that they are beginning to normalize around 50% above pre-pandemic levels. Only minor percentage increases and decreases in freight rates have been observed over the most recent few weeks, creating a line graph with a vastly reduced gradient in comparison to the six-week segments that could be arbitrarily isolated during any period since late June of 2022. The recent plateau suggests that freight rates may have now found their point of normalization and will begin to stabilize around their current prices.

January 2023 ended with freight rates from Asia-US West Coast declining to $1,323 and those from Asia-US East Coast declining to $2,626, representing a decrease of 3% and 7%, respectively from the week prior. However, despite rates decreasing perpetually since June 2022, current rates and projections remain above 2019 levels, suggesting ocean demand is in the process of normalization, and will stabilize above pre-pandemic levels.

The easing of congestion at ports, stemming from a drop in container traffic and the increase of blank sailings, is also a contributing factor in freight rates returning towards 2019 levels, and are likely responsible for the improvement of schedule reliability for carriers. Achieving a 56.6% reliability at the turn of the year, despite arriving on time still being virtually a coin toss, the reliability statistics are over 20% higher than this time last year and are currently the highest since August 2020. With carriers banking on a post-Lunar New Year demand boom, it will be interesting to see whether they can continue this uptick in schedule reliability, or whether it is simply a temporary by-product of a brief period of cooling demand.

The current slump in consumer demand, however, largely attributed to rising inflation and fears over a global recession, has seen an even greater ramp up in ‘blank sailings’ in the build-up to the Lunar New Year. Many retailers over-accelerated stock orders in the months leading up to the holiday period last year under the guise of avoiding a repeat of the inventory shortages experienced in 2021. Such supply chain disruptions never came, however, with significantly eased port congestion and lower consumer demand, and retailers have instead found themselves with a gross excess of inventory and reduced selling power. As a result, blank sailings are ramping up once again in an attempt to balance out the supply with the demand, with retailers now cancelling orders and slashing SKUs whilst some carriers have begun operating ghost ship loops upon mass fleet reduction.

New At Century: 

Century is pleased to introduce the latest addition to the VMS® Analytics (VMSA) dashboards, the Carrier Performance Peer Review Dashboard. If you are looking for a more personalized set of carrier reliability data than the chart above, you can use this new dashboard to analyze how specific carriers are performing on routes relevant to your supply chains, based on peer data. Optimizing routing and carrier allocation, this new dashboard provides valuable insight into the overall transit time performance of various carriers based on data aggregated by Century. Carrier performance is covered in four aspects: Transit time, Consistency, On-time Arrival, and Popularity. The data from the dashboard can be overviewed either by Lane, to look at a particular trade lane and see how carriers are performing in comparison to others, or by Carrier, to compare each carrier’s overall performance against the market average in that particular lane.

Here is a preview of this new dashboard. Speak to your Account Manager today to learn more!

Ocean Update: 

• MSC has announced the inclusion of Jubail Commercial Port in Saudi Arabia to their shipping service connecting the Indian Subcontinent to the East Mediterranean. The weekly service, which will include five vessels with an average capacity of 8,000 TEUs, will provide a shipping link between Turkey and India via Egypt, Saudi Arabia, Qatar, UAE and Pakistan. Port rotation is as follows: Tekirdag, Aliaga, Mersin, King Abdullah, Jebel Ali, Khalifa, Hamad, Jubail, Khalifa, Karachi, Mundra, Hazira, King Abdullah, Alexandria, Tekirdag.

• Hapag-Lloyd has updated their MSW service between Latin America and the Mediterranean to include Guayaquil in Ecuador and Civitavecchia in Italy into the port rotation schedule. The additional ports were implemented in early January 2023 to the service which connects Spain to Colombia via Italy, Morocco, Dominican Republic, Costa Rica, Ecuador, and Peru. The first vessel to include the rotation update arrived in Guayaquil on January 11th whereas the first inclusion of Civitavecchia is scheduled to berth on February 5th. The new port rotation is as follows: Buenaventura, Paita, Posorja, Guayaquil, Puerto Limon, Cartagena, Tangier, Malaga, Valencia, Civitavecchia, Livorno, Genoa, Barcelona, Caucedo, Cartagena, Buenaventura.

• CMA CGM has agreed to a cross-alliance slot charter with Hapag-Lloyd which will come into effect mid-way through next month. The deal between the two members of rival ocean alliances is designed to help cover their contract commitments, whilst coverage of their Asia networks become compromised due to an aggressive blank sailings strategy in light of the Lunar New Year demand slump. The slot charter is intended to enable Hapag-Lloyd to mitigate the impact of THE Alliance blank sailings whilst CMA CGM intends to improve its voyage results through additional bookings. The new service, dubbed the Far East Loop 9, will provide connections between Asia and Western Europe, with the first voyage due to depart from Qingdao, China, on February 14th.

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 0-3 days in Yantian, and 0-1 day 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 0.5-2 days.

• Port of Charleston waiting time is 0-2 days depending on vessel size. Average gate turn times are 34 minutes for single transactions and 50 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 6.5 days whilst the average Dwell for exports is 6.7 days.

• The Port of Charleston is operating without any berthing conflicts and there are currently no vessels waiting to enter. The average wait for berthing is currently at less than a day. Growth at port is expected to continue following the acquisition of a drayage and warehousing business serving the port by private equity firm, Harbor Logistics. The firm has touted the potential of the port after recoding a Y/Y 2.7% cargo activity growth to 2.57 million TEUs. The acquisition is set to triple Harbor Logistics’ intermodal revenue.

• Recent disruptions at US West Coast ports have led to carriers opting to divert to US East Coast ports as a less risky alternative. The ports located along the Eastern Seaboard and US Gulf have been benefitting from an influx of cargo from carriers trying to avoid disruptions, with the Port of NY-NJ becoming the busiest US port at the end of 2022, whilst West Coast ports, embroiled in labor disputes, began the new year virtually congestion-free. The recent surge in imports has led to investment into East Coast shipping sites by major companies, such as 3M, in an attempt to reduce shipping time and mitigate the effect of potential delays on their respective supply chains.

• Florida’s JAXPORT has been awarded with a USD $10 million grant from The Jacksonville City Council (JCC) towards their project to raise the powerlines near its Blount Island Marine Terminal. The grant comes alongside a $17.5 million loan from the JCC and on top of a $22.5 million grant from the Florida Department of Transportation bestowed last December. The project will increase the operational air draft clearance of the terminal from 175 feet to 205 feet, with construction expected to begin in 2024 and be completed in 2026. This is part of a wider effort to convert the port’s capabilities to accommodate for larger ships, such as post-Panamax, beginning with the deepening of the main ship channel which was completed in May of 2022.

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

Landside Update:

• Cross-border trucking between Hong Kong and Guangdong province in China has now effectively resumed operations as normal following the re-opening of the border between the Special Administrative Region and the Mainland on January 10th. Currently, truckers still need to provide a 48-hour negative Covid-19 test before crossing the border, however, at-border testing, along with all other forms of anti-pandemic procedures have been scrapped, streamlining the entire process.

• A rail bridge outage in Santa Rosa, New Mexico on January 25th, caused a major service disruption between Dalhart and El Paso, Texas. The rail provider suspended in-gate operations for various westbound services particularly from Chicago local, as well as westbound services, including those from the Ports of Los Angeles and Long Beach. The necessary repairs to the bridge took over 72 hours to be completed before rail connectivity was restored, helping to mitigate the outage from becoming a major disruption for international and domestic intermodal shipping.

Asia Pacific Local Update:

• The National Health Commission (NHC) of China announced that it is no longer releasing daily case numbers or classifying areas based on relevant risk levels following the end of China’s ‘Zero Covid’ policy. The recent turn towards normalization has seen the lifting of all entry/exit restrictions for trucking and warehouse personnel including the green health code system. Following the end of anti-epidemic measures, Covid-19 cases in China have begun to alleviate after a sustained surge throughout January, which continues to affect the labor force and impact factory, warehouse, and trucking industries. Temporary worker absenteeism, although now on the decline, in combination with the Lunar New Year holidays are likely to cause delays for upcoming shipments sourced from China.

• The 2023 Lunar New Year fell on January 22nd and brought public holidays across east and southeast Asia. Lengthy holidays occurred in China, Hong Kong, Taiwan, and Vietnam, whilst shorter holidays were also observed in Malaysia, South Korea, Indonesia, Singapore, and The Philippines. Despite skeleton staff remaining on-duty for urgent enquiries, customers should expect delays from supply chains operating out of eastern Asia considering production backlog intensified by the Lunar New Year holidays and Covid surges in China. For enquiries on how your shipments may have been affected, please refer to VMS® or contact your Century account manager.

Trade and Economic Highlights:

• Ecuador and China reached a new Free Trade Agreement at the beginning of January following ten months of negotiations. The deal is intended to boost the South American country’s economic growth through reduced tariffs and increased exports; especially in the agro-industrial sector for products such as shrimp, cocoa, coffee, roses, canned fruit, and bananas. The deal will give 99% of current Ecuadorian exports preferential access to China whilst local manufacturing firms will be able to acquire Chinese machinery at reduced rates.

• The US, Mexico and Canada have announced plans for tri-lateral collaboration based on five initiatives intended to strengthen the resilience of their supply chains. The announcement was made following the two-day North American Leaders Summit in Mexico City, from January 9th to 10th, where the respective presidents of the three countries met to commence discussions around environmental, social, and economic issues. A key focus of the agreement surrounded the future of semiconductor supply chains, including identifying unmet labor and manufacturing needs in the industry, and the mapping and collecting of data detailing the resources and minerals critical to semiconductor production.

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.