MARKET UPDATE – JULY 2023

Transpacific freight rates recovered slightly throughout July as they began to bounce back from the lows of late June. July closed out with freight rates noticeably above that of a month ago, with Asia-US West Coast rates rising 13% M/M to $1,366, but still 81% lower Y/Y. Meanwhile, Asia-US East Coast rates also rose to $2,519, a 9.6% increase M/M, but still representing a 76% decrease Y/Y.

July is typically the month that sparks the peak season for the shipping industry, but time has come and gone for the arrival of this traditionally annual occurrence. A raft of volatile economic, environmental, political, and social turmoil that has brought events previously considered extremely rare now to the forefront of contemporary shipping challenges along with the issue of ever-increasing capacity issues lurking in the background. Whilst environmental challenges like the onset of El Niño, record heatwaves, and increasingly frequent storms have arguably been the most prominent challenges to supply chains earlier this year, the looming threat of a global economic crisis has taken to the forefront over the past two months, exacerbated by the recent North American West Coast port strikes.

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.

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.

Be sure to subscribe to stay up-to-date with the latest market and global supply chain information direct from Century!

CENTURY SPOTLIGHT

The traditional peak season was supposed to be a period of demand recovery which would finally enable the deflation of inventories and balancing of supply. However, as the months of June and July have played out with little sign of this happening, carriers have begun reverting to the method of blank sailings. Whilst carriers have been ramping up the use of blank sailings this year to deal with the building concern of bloated inventory and imbalanced capacity levels, labor turmoil at US and Canadian West Coast ports caused a temporary but significant backlog throughout June and July, which led to numerous vessels being stuck waiting for weeks in the North Pacific unable to be unloaded. Although the ports have now mostly recovered from this vessel backlog, there is still port congestion on the Canadian West Coast with waiting times of up to 14 days as of the end of July. Berth congestion continues as the terminals recover from previous strike action, adding to the delays and backlog of cargo.

With the strikes causing lengthy port closures and billions of dollars of trade therefore being withheld from their final destination during a period of ramped up blank sailings, carriers’ on-time delivery capabilities and recent upwards trend in schedule reliability, which had been improving throughout the year until this point, are likely to be jeopardized. Following the positive progress of schedule reliability in the first half of 2023, a sharp dip in this trend should be expected in response to the extensive labor turmoil over the past two months.

Source: Sea Intelligence

The impact of the North American West Coast labor turmoil to the region’s supply chains was significantly increased due to the US and then Canadian West Coast port strikes not being isolated from one another. During the Canada port strikes, dockworkers at most US ports refused to service vessels diverted away from Canadian West Coast ports, meaning cargo was left stranded in the North Pacific with little viable alternatives. Some Canadian cargo was successfully diverted to US West Coast ports through being unloaded one port of call early on routes scheduled to call at the US ports prior to Canadian ports. The confidentiality of final-destination information meant that cargo being unloaded early could not be identified.

The impact of the port strikes also extended to the North American railways, with three of Canada’s largest networks who service the ports of Vancouver and Prince Rupert experiencing severe delays for cargo loading. Resultantly, intermodal Canadian rail fell 46% Y/Y in July, affecting top sectors such as lumber, oil, petroleum, glass, and chemical goods amongst many others. Typically, $572 million in container trade arrives daily into the US from Canada, however the delays of loading and transfer to railways from Canadian port terminals led to a nearly 50% drop in rail cargo movement this past month. Canada’s largest railway, CN, has stated that they anticipate a full recovery from the strike action to take at least two months.

Following the announcement of the second tentative agreement between Canadian workers’ unions and port associations on July 21st, strike action quickly ceased and Canadian Ports have since resumed operations as normal. Despite the labor turmoil at both ports now being tentatively resolved, the Freight Management Association (FMA) of Canada has stated that they still anticipate some form of impact from the port strikes to have an effect on supply chains until October, with vessel bunching still prominent outside Canadian West Coast ports. The FMA have also expressed concern over future reputation for reliability at Canadian West Coast ports as a consequence of the extensively halted imports and exports, which may lead to shippers snubbing the region in future in favor of alternative ports which are perceived to be more reliable.

During the period of labor turmoil, Century was able to leverage its flexible destination network to offer customers numerous contingencies to mitigate the impact to their supply chains, including diverting cargo to the Port of Halifax on the Canadian East Coast, rerouting of Canadian cargo to US ports prior to departure, transloading at Seattle/Tacoma to then utilize our existing land transport capabilities to reach final destinations in Canada, and offering low-cost storage options at origins. With the events at the North American West Coast ports over the past two months demonstrating the instability of supply chains, and a capacity crisis potentially looming, retailers face the challenge of storing excessive amounts of inventory at distribution centers in their destination countries which can quickly become a costly economic burden and lead to spatial scarcity for incoming cargo. At Century, we offer expansive, low-cost space for origin storage at competitive rates throughout Asia, including at premium locations in Shanghai and Shenzhen. Century customers can leverage this service to hold their inventories at origin during times of supply chain turmoil, such as with the situation caused by the North American West Coast port strikes, to avoid delays, save on alternative planning headaches, and keep costs to a minimum.

NEW AT CENTURY

Century’s ‘Country Spotlights’ series continues in July with the country boasting the fastest growing economy is Southeast Asia, taking a deep dive into the local markets, infrastructure, trade performance, and Century network capabilities of The Philippines.

The series shares Century’s detailed insight into each country’s specific capabilities with the most up-to-date figures, statistical breakdowns, contemporary supply chain information and more presented in a convenient, digestible format.

Perched on the western edge of the Pacific Ocean, the 7,641-island nation with an Exclusive Economic Zone of over 2 million km2, The Philippine’s ranked as the sub-region’s fastest-growing economy in 2022 according to the IMF. Its ports sector recorded a 3.86 million TEUs throughput increase between 2011 and 2019, and the Port of Manila alone recorded a 10% TEUs throughput increase from 2021 to 2022. With its exponential recent economic growth, prime location between European, Asian, and American markets, and expanding investment opportunities, The Philippines is transforming into an attractive prospect for a significant role in the future of global maritime trade.

Make sure you don’t miss a new country spotlight by using the link HERE.

Ocean Update: 

• Hapag-Lloyd has begun its fortnightly West Africa Service (WA1) with the first port of call in the Liberian port of Monrovia. The new service connects the markets in Guinea, Mauritania, Sierra Leone, and Liberia to Morocco. Hapag-Lloyd stated that the WA1 service is intended to further boost economic opportunities for imports and exports in West Africa. The port of call at Liberia comes after the recent enlargement of the port’s channels through dredging activities to accommodate larger vessels. Roughly one million cubic meters of sediment has been removed and resultantly increased the draft capabilities from 9.5 to 12.5 meters. WA1 port rotation is as follows: Tanger Med – Nouakchott – Freetown – Conakry – Monrovia – Tanger Med.

• OOCL has announced that it will launch a new Europe – South American East Coast Express (EEX) service from September 2023, which will offer a direct connection between markets on the two continents. The announcement, made on July 11th, stated that the EEX service is designed to meet the refrigerated container demand from East South America, as well as to further enhance OOCL’s network coverage in the Latin American region. EEX will offer a competitive transit time of just 16 days from Rotterdam to Rio de Janeiro. Nations included in the service are Germany, The UK, Belgium, The Netherlands, Portugal, Spain, Brazil, Argentina, and Uruguay. Port rotation will be as follows: Rotterdam – London Gateway – Hamburg – Antwerp – Lisbon – Algeciras – Santos – Paranagua – Montevideo – Buenos Aires – Itapoa – Paranagua – Santos – Rio De Janeiro – Algeciras – Rotterdam.

• CMA CGM has launched its new TURAF Express service on July 17th, 2023, connecting four ports in Turkey to Algeria via Malta within a transit time of between 7.5 and 10 days. Three container ships with a capacity of 900-1,100 TEUs each have been deployed by the French ocean carrier for the new service. The TURAF Express intends to provide the ports in Northern Turkey with additional weekly connections to worldwide destinations via the Maltese hub and implement a sustainable maritime bridge across the Mediterranean between the transcontinental nation and Algeria. Port rotation is as follows: Aliaga – Gemlik – Izmit – Istanbul – Malta – Alger – Aliaga.

• Evergreen is poised to overtake Hapag-Lloyd to become the world’s 5th largest liner operator following the finalization of a US $4.32 to $5.04 billion deal to order 24 new methanol dual-fueled ships capable of carrying 16,000 TEUs each. The Taiwanese liner operator stated that its Singapore-based subsidiary has placed an order for 16 new ships from Samsung Heavy Industries in South Korea whilst the remaining eight ships will be built by Japan’s Nihon Shipyard. Under the current value of the contract, each new vessel will cost between US $180 to $210 million to build and completion is anticipated for between 2025 and 2026. The new order comes in addition to Evergreen’s current construction of 48 ships with a combined carrier capacity of 456,650 TEUs. The new orders equate to an extra 840,650 TEUs on top of their current in-service fleet of 1.67 million TEUs, which will allow Evergreen to overtake Hapag-Lloyd’s current fleet which totals 1.86 million TEUs with only a further 312,304 TEUs worth of vessels under construction.

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 VIZIV as our NVOCC division leverages VIZIV 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: 

• As mentioned in our Century Spotlight, 30 ports on the Canadian West Coast were severely affected by labor turmoil throughout July 2023 following the decision by the International Longshore and Warehouse Union (ILWU) Canada to undergo strike action in response to a breakdown in contract negotiations with the British Columbia Maritime Employers Association (BCMEA). An estimated US $7.5 billion worth of trade across 63,000 containers were stuck on vessels in the Northeast Pacific Ocean waiting to be serviced at the height of the strikes. The country’s two largest West Coast ports of Vancouver and Prince Rupert experienced total labor shutdowns for 13 days until a tentative agreement on a 4-year deal was reached on July 13th and ILWU members subsequently returned to work. The tentative agreement was initially accepted by the BCMEA but rejected by ILWU Canada which then led to a resumption of strike action on July 18th. The Canada Industrial Relations Board (CIRB), a Canadian federal watchdog, then ruled a day later that this did not comply with the required 72-hour notice period mandated Federal Mediation and Conciliation Service, and thus, ordered the ILWU to cease and desist the resumed strike action after less than 24 hours. Following this, the ILWU Canada gave the required 72-hour notice period of strike action on July 19th before revoking the notice a few hours later. The revoking of the strike notice preceded the ILWU’s announcement of a second tentative agreement on July 21st, which was approved by its leadership caucus and is currently in the process of being ratified by ILWU members.

• At the Canadian West Coast Ports of Vancouver and Prince Rupert, there is still a significant amount of vessel backlog yet to be fully cleared despite the resumption of port operations. Berth waiting times for vessels is currently up to 14 days.

• At US West Coast ports, the Port of Oakland currently has an average berth waiting time of up to 6 days at OICT and 7 days at TraPac with average import deliveries taking up to 7.3 days. Seattle-Tacoma currently has a berth waiting time of 7 days and an import delivery time of up to 3 days. The Port of Los Angeles is reporting average dwell times for local import cargo of 3.8 days, on-dock rail dwell of 3.6 days, and import units on street at 4.1 and 6.5 days for TEUs and FEUs, respectively. The Port of Long Beach is reporting stable dwell times for local imports and gate turn times.

• Port of Savannah waiting time is up to 5 days depending on vessel size. Gate turn times are currently averaging 38 minutes for single transactions and 57 minutes for double transactions. The US $250 million expansion of the port’s Garden City terminal, the largest marine terminal in North America, has been completed on schedule in July 2023. The two-year project has increased the Port of Savannah’s annual handling capacity by 25% to 7.5 million TEUs and improved its berth capabilities enabling it to service two 10,000-14,000 TEUs capacity vessels simultaneously, or one 20,000 TEU capacity vessel.

• At the Port of Charleston, the average wait for berthing at Wando Welch Terminal is currently 1 day whilst no waiting time is expected at the North Charleston Terminal. The Georgia Ports Authority has discontinued Sunday gates from July 9th, 2023.

• In Eastern China, the estimated vessel waiting time is between 0.5 to 2 days at the NBTCT terminal in Ningbo due to vessel bunching. In Qingdao, average berth waiting time is 1 to 1.5 days due to port closures due to adverse weather conditions and subsequently causing vessel bunching. No waiting time for berths at Shanghai ports has been reported.

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

Landside Update:

• As mentioned in our Century Spotlight, Canadian rail trade has plummeted nearly 50% in the last few weeks due to the country’s West Coast ports strikes. The Association of American Railroads has reported a 46% decline in rail traffic from Canada to the US. With cargo bound for Canadian ports, such as Prince Rupert and Vancouver, being blocked from unloading for nearly the first three weeks of July due to the ILWU Canada strikes, cargo bound for transportation on the railroads serving the ports, namely CN, Canadian Pacific, and Berkshire Hathaway, was left idle on the water for days and impacting the railroads’ ability to operate. Now that the strike action has ended, the backlog of cargo will affect carriers of all transport modes as they try and catch up with the delivery of delayed cargo. Logistics companies in North America have already begun moving out containers ahead of the anticipated surge of the West Coast backlog, with trucking capacity being moved to the railroads in preparation. Resultantly, the North American railroads are anticipating weeks of delays for cargo as it looks to transport the previously stranded cargo.

• Canadian Pacific Kansas City (CPKC) and CSX have reached an agreement with Genesee & Wyoming to create a rail corridor connecting Texas and the Southeastern United States to Mexico. The three railroads made the announcement, and subsequent plans for a direct interchange rail connection in Alabama, at the end of June 2023. The agreement sees CPKC and CSX acquire and operate parts of Genesee & Wyoming’s Meridian & Bigbee Railroad, which runs between Mississippi and Alabama, with a view to increasing the number of shipping options to customers by providing an efficient corridor which connects the expanding markets in Mexico, Texas, and the Southeastern US. This agreement is the latest in a string of recent partnerships formed in the North American railroad industry following Canadian Pacific’s acquisition of Kansas City Southern in March 2023, with the subsequently formed CPKC making continuous advancements towards boosting the cross-border intermodal capabilities across Canada, The US, and Mexico.

Asia Pacific Local Update:

• The Yantian International Container Terminal (YICT) has announced suspension of the collection of Port Security / Management Charge at the Shenzhen port terminals of Yantian, Shekou, and Da Chan Bay from July 10th, 2023, until further notice. YICT indicated that this suspension is intended to support and enhance the development of the local logistics center and further solidify Shenzhen’s roles as an international logistics hub and long-haul transportation hub.

• Rural Bangladesh is still suffering from frequent power cuts as the country’s energy crisis persisted throughout July. The crisis began in late May of 2023 following Bangladesh’s failure to pay Indonesia an outstanding bill of US $390 million for its coal supply that was being used to run the country’s coal-fired power plants. Resultantly, nationwide power disruptions pursued, affecting domestic activities, public transport, communications, and import / export services. These issues were somewhat eased following the import of the extra coal necessary to power their largest power plant, Payra, however it has not been enough to address the power outages for the entire nation. In rural Bangladesh, the electricity demand-supply deficit is currently above 1,4000MW per day with daily power cuts lasting 11-12 hours. The government introduced scheduled load shedding in July to help mitigate the looming energy crisis, but the energy austerity measures are anticipated to last until at least September 2023.

• The northern regions of India have been hit by unprecedented levels of rainfall over late July 2023 which has led to serious flooding and severe impacts on the country and its people. Whilst there have been no impacts on cargo movements, vendor operations, or CFS facilities reported thus far, the severity of the flooding has heavily impacted public transport, infrastructure, and services. The India Meteorological Department (IMD) issued Red Alerts for the hardest hit states of Himachal Pradesh, Gujarat, Uttarakhand, and Maharashtra. Other nearby states, including the capital city of New Delhi and the most populated state, Uttar Pradesh, also suffered extended periods heavy rain and severe flooding from local rovers. Flooding in Mumbai has impacted local train movements, however, no impacts to its port or CFS operations have been reported.

Trade and Economic Highlights:

• The EU and New Zealand have officially signed a Free Trade Agreement (FTA) between the two entities on July 9th, 2023, after over a decade of negotiations. The FTA is touted to come into effect in the first half of 2024, once both parties have completed the ratification process, and will immediately eliminate over 91% of tariffs. Eventually, 97% of current exports from New Zealand to the EU will become duty-free. Agricultural products, such as fruits, honey, wine, fish, seafood, and other horticultural products will have all tariffs immediately eliminated. The FTA will also enable an eight-fold increase in eligible beef exports to the EU, with duty-free access for sheep meat, red meat, and dairy all anticipated to culminate in over US $600 million of new annual export revenue within the next seven years. The FTA is expected to grow bilateral trade by 30% through cutting roughly US $157 million a year in duties for EU companies with business in New Zealand, growing annual imports from the EU by US $5 billion and increasing EU investment into the country by 80%. The FTA also includes unprecedented sustainability commitments which feature respecting the Paris Climate Agreement, core labor rights, sustainable food systems, fossil fuel subsidies reforms, and the liberalizing environmental goods and services.

Century Solutions:

Besides our suite of tools in VIZIV 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 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.