MARKET UPDATE – JUNE 2023

Transpacific freight rates spiked upwards in early June before sharply sliding back down as the month went on. June ended with freight rates heading back down towards where they had seemingly plateaued over the course of March and April. At the end of June 2023, Asia-US West Coast rates dipped to $1,209, representing a 15% W/W decrease and an 84% Y/Y decrease. Meanwhile, Asia-US East Coast rates also dropped W/W to $2,298, a 7.6% decrease from the week prior and a 77% decrease Y/Y.

As carriers enter the traditional peak season for shipping, this year, they find themselves faced with a raft of potential economic, environmental, political, and social supply chain hindrances that will likely test their flexibility and reactionary capabilities far more frequently than ever before. The 2023 traditional peak season has arrived under a backdrop of weak consumer demand, volatile economic uncertainty, bloated retailer inventories, rampant labor market turmoil, and an influx of freak weather conditions. Traditionally, these such extreme, significant, and typically very rare occurrences are referred to as ‘Black Swan’ events; a term coined to encompass all unpredictable and disruptive occurrences that create a lasting impact. However, the consensus amongst supply chain operators in that, in the modern market, ‘Black Swan’ events are no longer a distant possibility but rather a constant presence in the industry bringing unforeseen challenges each time. Carriers from all transport modes across the industry are being tested on their ability to adapt to, and sufficiently overcome, increasingly common market extremities, and so as we look to enter into the second half of 2023, the flexibility of a service offering may become more integral to its perceived value than its price positioning.

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.

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CENTURY SPOTLIGHT

The outlook on the second half of 2023 has significantly dampened as Q2 draws to a conclusion, with previously optimistic outlooks on the year’s potential to facilitate a market rebound now being re-adjusted to reflect a more subdued set of expectations. This is further reflected in the extremely low tender rejection rates patterning across land transportation providers. The current tender rejection rates of land carriers measure how willing they are to accept customer shipping requests for loads at the previously agreed upon contract rate. Such a low rejection rate in Q1 of 2023 implies that most truckers have begun accepting loads without much negotiation, suggesting that there is perhaps a lack of confidence in contract rates to uphold their current values in the second half of 2023. Trucking in the United States has seen the rejection rate hit an all-time low in April of 2023, dipping below 3% for the first time since record collection began in early 2018.

Source: Freight Waves

The low tender rejection rates may be a reflection of modern supply chain operators’ acceptance that ‘Black Swan’ events, and their unforeseen, disruptive challenges, are seemingly here to stay. The modern market remains volatile, with potential consequences of increasingly frequent extreme weather conditions, international conflicts, and economic and labor crises constantly looming over global supply chains. The commonality of such events has brought uncertainty and fragility to even the most established logistics operations, and resultantly preparedness for even the seemingly most distant obstacles is rapidly becoming a necessity.

Freak, extreme weather conditions affecting end-to-end supply chain actors, such as increasingly common and intense storms, wildfires, and droughts are all modern obstacles to supply chains that were previously an afterthought for most operators. In just the last two months, the onset of El Niño, an extreme arid weather pattern which is instigating sustained, devastatingly dry conditions globally, is depleting water levels in crucial waterways across the globe in Germany’s River Rhine, China’s Yangtze River, Vietnam’s hydroelectric power sources, and the Panama Canal. The Panama Canal in particular, is suffering from record-low water levels and, as a result, has been increasing restrictions and operating costs for carriers and retailers alike who rely on the waterway to transport cargo.

Other ‘Black Swan’ events, such as the ripple effect of regional conflict or the fragility of global supply chains exposed by Covid-19, have resulted in unpredictable demand spikes and slumps to which logistics operators have struggled to efficiently respond. Labor turmoil, intrinsically linked to the economic downturn which has been heavily influenced by the aforementioned ‘Black Swan’ events, has put carriers’ flexibility at the forefront of their service offering as they circumnavigate port closures, rail shutdowns, and strike actions. In just the past month, port strikes on the US West Coast have demonstrated the knock-on impact that even a one-day terminal shutdown can have on multiple supply chain operators far beyond the ports themselves. This impact is likely to be felt again next month following the announcement of imminent port strikes at Canadian West Coast ports slated to commence on July 1st. Supply chains operating at the ports of Vancouver and Prince Rupert will have to demonstrate a high degree of flexibility to circumnavigate the upcoming strike action in Canada to minimize impact.

With the anticipated second half of 2023 rebound looking further unlikely to come to fruition, it may be carriers’ ability to demonstrate their capacity flexibly adapt to and effectively respond to future ‘Black Swan’ events resiliently that will best showcase their value to customers. Century’s global supply chain solutions are encapsulated by our flexibility to deal with such extreme, unexpected events effectively and efficiently to ensure that impacts to our customers are kept to a minimum. Our global network of local teams supported by our innovative supply chain technology and proprietary system, VIZIV, provide our customers with the transparency, visibility, and flexibility to make informative decisions based on real-time data to mitigate the operational and economical effects of ‘Black Swan’ events, and other obstacles, to keep your supply chain running smoothly at all times.

NEW AT CENTURY

Century’s ‘Country Spotlights’ series has continued throughout June, this time heading over to Southeast Asia, taking a deep dive into the local markets, infrastructure, trade performance, and Century network capabilities of Indonesia.

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.

Indonesia recently became the latest country to be part of our owned office expansion. Our newly converted Jakarta and Semarang offices will integrate seamlessly with our other offices in Southeast Asia, leveraging their local expertise combined with our leading-edge technology to provide our customers a diverse range of flexible services and solutions to keep them a step ahead of the competition.

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

Ocean Update: 

• OOCL added a mega 24,148 TEU container vessel to its fleet on June 5th, 2023, which was officially named as ‘OOCL Turkiye’ during a ceremony held at Nantong COSCO KHI Ship Engineering Co., Ltd. Shipyard. The OOCL Turkiye is the third 24,188 TEU vessel received by OOCL in a series of 12 and will serving their Asia-Europe LL3 service loop beside its sibling vessels OOCL Spain and OOCL Piraeus. The new vessel incorporates the latest designs in green technology and is equipped with advanced smart systems to further OOCL’s commitment to sustainability and environment.

• MSC reinstated its Swan Service which connects East Asia to Northern Europe via Singapore, Malaysia, and Saudi Arabia on June 9th, 2023. The newly reinstated, standalone MSC service provides one of the fastest transit times between the main ports of China and the main ports in Benelux and the Baltics. It becomes the first service offering direct calls to Poland and Lithuania from Asia. The port of Gdynia has replaced Gdansk as the Polish container gateway under the reinstatement. Full port rotation is as follows: Qingdao – Ningbo – Yantian – Tanjung Pelepas – Antwerp – Gdynia – Gdansk – Klaipeda – King Abdullah Port – Singapore – Qingdao.

• Hapag-Lloyd has updated its Middle East India Africa Express (MIAX) service to add the port of Hazira, India, into its rotation. The additional port call was implemented on June 14th, 2023, into the MIAX service which provides coverage between the UAE and Nigeria via India, Sri Lanka, South Africa, and Ghana. The updated port rotation is as follows: Jebel Ali – Mundra – Hazira – Nhava Sheva – Colombo – Durban – Tema – Tincan/Apapa – Durban – Jebel Ali.

• Maersk commenced its Al Maha service in June 2023 connecting markets in the Middle East and North Africa on a weekly basis with connections available for Europe and West Africa. The new service will call at the UAE, Qatar, Oman, Egypt, Morocco, and includes three ports of call in Saudi Arabia, namely Jeddah, Dammam, and Jubail, aimed at boosting connectivity for the kingdom’s industries. Maersk will deploy seven vessels for its Al Maha service providing a capacity of 8,500 TEUs. Port rotation is as follows: Tangier – Port Said – Jeddah – Salalah – Jebel Ali – Doha – Dammam – Jubail – Jebel Ali – Duqm – Salalah – Jeddah – Port Said – Port Tangiers.

• CMA CGM will launch its new TLX – Turkey Libya Express service on July 1st, 2023, which will offer a direct, competitive service between East Asia and the Eastern Mediterranean via Southeast Asia and Saudi Arabia. The service will include weekly sailings from Central and Southern China to Saudi Arabia through the port of Jeddah and include connections to the growing Red Sea market. A direct call at Iskenderun, Turkey, will provide a large offering of intermodal solutions from the Turkish hinterland. Full port rotation is as follows: Shanghai – Ningbo – Nansha – Singapore – Jeddah – Iskenderun – Malta – Misurata – Jeddah – Port Klang – Shanghai.

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: 

• Several container terminals at the major US West Coast ports of LA, Long Beach, Oakland, Tacoma, Seattle, and Hueneme were hit with strike actions at the beginning of June following a breakdown in contract negotiations between the Pacific Maritime Association (PMA) and the International Longshore and Warehouse Union (ILWU) regarding wages, safety, automation, and pension benefits. From June 2nd until June 14th, terminal operations were sporadically shut down, either fully or partially. The strike action has since ceased following both sides reaching of a tentative agreement on a new six-year contract covering all 29 ports on the US West Coast. Despite operations resuming under the backdrop of the subsequent lengthy ratification process, the severity of the strikes in early June, which included the complete closure of Long Beach’s larges Terminal, TTI, created a backlog of vessels and extended delays.

• All US West Coast ports affected by the ILWU strike action have recorded lengthy berth waiting times in the aftermath of the extensive labor turmoil in the first half of June. The Port of Oakland currently has an average berth waiting time of 10 days at OICT and 2 days at TraPac with average import deliveries taking up to 4 days. Seattle-Tacoma currently has a berth waiting time of 4 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 3.3 days, on-dock rail dwell of 3.5 days, and import units on street at 4 and 5.8 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 2.5 days depending on vessel size. Gate turn times are currently averaging 33 minutes for single transactions and 52 minutes for double transactions. Delays for deep draft vessels are being reported due to negative tides, however, conditions are expected to return to normal from early July.

• 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. Sunday gates continue to be by appointment only.

• At Canadian West Coast Ports, ILWU Canada members have yet to reach an agreement with the British Columbia Maritime Employers Association (BCMEA) on their contracts and have thus voted in favor of strike action at the ports of Vancouver and Prince Rupert from July 1st, 2023. The announcement to strike was made on June 29th in accordance with the ‘cooling off’ period agreement, mandated by the Federal Mediation and Conciliation Service, which obliges ILWU Canada to first provide a 72-hour advance notice before any strike action can occur.

• The Panama Canal Authority (PCA) has postponed the planned implementation of further draft restrictions for Neo-Panamax ships following the arrival of roughly 80 mm (3.15 inches) of precipitation. The rain, which ended a months-long drought in the region, has provided some respite for the canal’s depleted waterways which were set to have a new 13.11-meter (43-foot) draft restriction imposed in July in conjunction with reduced daily canal transits from 36 to 28 vessels. The PCA has been incrementally decreasing the maximum draft allowance throughout 2023, imposing a restriction of 13.41 meters (44 feet) in June in response to the exacerbation of the dry season via the onset of El Niño. Despite the rain, the 13.41-meter draft restrictions implemented in June will remain in place, meaning that there are still significant limits on vessel weight. Carrier surcharges will still impact virtually all cargo on lanes which traverse the waterway, including but not limited to China/East Asia to US East Coast, Europe/Middle East/Africa to US West Coast, and South American West Coast to US Gulf Coast. The PCA will continue to monitor the canal’s water levels with a view to announcing future draft adjustments accordingly.

• In Eastern China, the estimated vessel waiting time is between 1 and 2.5 days at the NBTCT terminal in Ningbo due to intermittent closures of the port in response to adverse recent weather conditions. In Qingdao, average berth waiting time is 1 to 1.5 days also as a consequence of adverse weather conditions, which led to subsequent port closures, and vessel bunching around the port. At Shanghai Port, the average berth waiting time is 0.5 to 1 days due to vessel bunching.

• At the Port of Kaohsiung, Evergreen has finally begun handling vessels at its new T7 container over four years after the originally envisioned launch date. The Taiwanese carrier cited significantly reduced cargo handling demand in conjunction with pandemic-related supply chain problems as the main reasoning for the heavily deferred launch date. The new terminal currently boasts 12 ultra-large STS container cranes and features a 1,200 meter (3,937 foot) long deep-water, which set to be upgraded to 2,415 meters (7,923 feet) in length once fully developed. The terminal’s current capacity is estimated at 2.7 million TEUs, however this will be upgraded to roughly double the capacity once development is fully completed, which will make it the largest container terminal in Kaohsiung.

• At the Port of Busan, the average berth waiting time at the Pusan Newport International Terminal (PNIT) is 0.5 to 1 days due to vessel bunching around the port which follows sustained adverse weather conditions in the previous weeks.

• The Port of Singapore is currently experiencing an average berth waiting time of 0.5 to 1.5 days as a result of a labor shortage at the port in conjunction with vessel bunching.

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

Landside Update:

• Trucking contract compliance has reached an all-time high in June of 2023, with the tender rejection rate dropping below 3%, indicating that truckers are struggling to find loads or negotiate on rates and thus have become willing to service their customers at contracted levels. The national Outbound Tender Reject Index (OTRI) has fallen below 3% for the first time since early 2020, making the early 2023 truckload market the softest sustained market since tender data history began in 2018. The OTRI is now a far cry from its 2021 levels, when record consumer demand overwhelmed supply chains and subsequently led to an OTRI average of nearly 23% as transportation network lacked the capacity sufficient enough to handle the increased loads. The low tender rejection rates suggest an increasingly loose market in which spot rates and volume rates are on the decline. Similarly, the Reefer Outbound Tender Reject Index is showing a rejection rate of around 4.7% from trucking fleets for refrigerated freight jobs, down from the roughly 8% rejection rate this time last year and even more so from the 34.9% reefer rejection rate recorded in 2021. While such low rejection rates look bleak for truck jobs, the current rate is actually 2.1% higher than it was in mid-May of this year where the Reefer OTRI slumped to around 2.6%. The improvement in rejection rates, while still very low, offers hope that trucking jobs may improve as the year goes on.

• The regulations previously imposed by the Vietnam General Department of Customs that prevented the consolidation of cargo trucked cross-border from Cambodia with Vietnamese cargo will be lifted on July 1st, 2023. The regulation, which impacted all warehouses within Binh Duong province close to Ho Chi Minh City, came into effect on June 20th, 2023. However, the Vietnam General Department of Customs announced on June 30th that the regulation will be lifted on July 1st and normal warehouse operations will resume.

Asia Pacific Local Update:

• Adverse weather conditions caused by extremely severe cyclonic storm, Cyclone Biparjoy, caused the complete suspension of operations at ports in the Northwest of India from June 11th to June 17th, 2023. The nearby ports in Southeastern Pakistan also suffered an operational slow down due to the extreme wind and rain conditions which caused persistent ocean swells. The Gujarati ports of Mundra and Pipavav were most severely affected, with ocean, road, and rail operations all shut down for several days. Cyclone Biparjoy weakened after making landfall in India on the evening of June 15th, before petering out across Rajasthan province over the following days. Operations at all previously affected ports have since resumed, however an initial backlog of vessel berthing, trucking congestion, and rail movement resulted in extended delays for impacted cargo.

• Numerous power plants in Bangladesh, including one of the country’s largest coal-fired power plants, Payra, shut down in early June 2023 due to a coal shortage caused by the failure to pay outstanding bills of $390 million to Indonesia for its coal supply. Resultant nationwide power disruptions and increased load shedding of about 1,700MW left residents without gas or electricity for up to eight hours a day. Public transport, communications, services, and import/export capabilities have been affected nationwide including in the capital city, Dhaka, and in the major port city of Chittagong. Bangladesh has since imported extra coal to address the power disruptions and subsequently resumed partial operations at the Payra power plant, however, the new coal imports are currently not sufficient to solve the fuel crisis. Efforts to promote energy conservation and develop alternative energy sources are being employed, however delays for shipments coming out of Bangladesh should be anticipated.

• Vietnam’s northern region has also been suffering from widespread blackouts and rampant power cuts since the beginning of June 2023, affecting the major cities of Hanoi and Haiphong. The issues have been attributed to an abnormal heatwave which has depleted water levels at the hydropower reservoirs that are typically accountable for 46% of the region’s power generation. The regional government has implemented a rotational power plan to conserve energy which includes scheduled blackouts. Several factories, businesses, industrial parks, multinationals, and top global manufacturers have reported either a complete or partial shutdown of operations as daily electricity outages last for several hours. Some units have been able to continue operations via the use of generators. Delays are anticipated in both production and export capabilities in North Vietnam, with trucking operations also affected. Currently, no impact to port or CFS operations has been reported.

Trade and Economic Highlights:

• The European Parliament has overwhelmingly voted in favor of including shipping in the EU Emissions Trading System (ETS) for the first time. Shipping would be gradually phased into the emissions scheme over a three-year period, with the first compliance year beginning on January 1st, 2024. The inclusion of shipping into the ETS means that shipping companies will be required to exponentially cede allowances of their verified emissions from next year, initially for 40% in 2024, then 70% in 2025, and finally 100% from 2026 onwards. The ETS scheme will apply to vessels carrying over 5,000 gross tons and to all vessels partaking in intra-EU voyages. Emissions from vessels that start or end in non-member states, for example voyages from Germany to Saudi Arabia and vice versa, will be included in the ETS and have to surrender 50% of their journey’s emissions allowances as well as all allowances for emissions produced whilst at berth in EU ports.

• The United Nations formally adopted the High Seas Treaty on June 20th, 2023, following decades of work to finalize it. The agreement takes into account the role of the International Maritime Organization (IMO) and is intended to cover gaps in ocean governance and to ensure that any emerging high seas industries will be well-regulated to the same extent that shipping is by the IMO. The treaty will focus on enhancing cooperation and coordination between UN agencies and other global regional regulators to foster a responsible and holistic approach to the protection and preservation of marine biodiversity and ecosystems in areas outside of the jurisdiction of any single state. Once ratified by 60 UN member states, the agreement will become legally binding and enforceable, on an international level, under the UN convention on the Law of the Sea and will focus on conservation and sustainable use of marine biological diversity of areas beyond national jurisdiction. The International Chamber of Shipping has welcomed the adoption of the historic treaty and will integrate it into maritime trade law once ratified.

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.