MARKET UPDATE – MARCH 2023

The end of March 2023 saw transpacific freight rates falling yet again, with Asia-US East Coast rates decreasing to $2,123 per FEU, a 3% decrease week-on-week, whilst Asia-US West Coast rates have experienced a bit of a slow-down this month, dropping by just 1% week-on-week to $1,016. After a brief period of stability in January and February where rates appeared to be in the process of normalization, the third month of the year has proved to be a rather sobering one as rates resumed a downward trend which has been ever-present since the latter half of 2022. Carriers are being faced with a dilemma for the upcoming annual contract negotiation season as they grapple with falling spot rates and high customer inventory levels to fathom as much negotiating power as possible before entering into new contract talks for the upcoming 12-month period.  

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

As the new trans-Pacific container shipping contract negotiation season approaches, carriers are being faced with an interesting predicament that could shape their profitability for the next few years. With the previous round of contracts being negotiated during a period where spot rates were at their historical peak, and the upcoming round of negotiations set to take place against a backdrop of continually declining spot rates and bloated inventory levels, carrier profitability is seemingly at the mercy of where contract prices settle over the next few weeks.

The biggest challenge for carriers comes in the form of obtaining contract business sufficient enough to cover costs amidst the dampened consumer demand and falling spot rates which have led to speculation over how carriers will respond to the anticipated drastically reduced contract sizes in the upcoming 2023 contract RFP season. Current spot rates are 70% lower than this time last year and are unsustainable for carriers who now have much higher costs than the pre-pandemic era due to higher bunker costs and charter rates. Liners may be forced to take drastic measures to ensure profitability, such as significant capacity cuts reminiscent of 2020.

The current consensus amongst carriers is that spot rates will rise in the latter half of 2023 as a result of the reduced capacity and recovering consumer demand. This has the potential to create a scenario where shippers who signed cheaper annual contracts earlier in the year may find their cargo being bumped by carriers for higher-paying spot containers or those from contracts signed later in the year at higher rates, similar to the situation witnessed in 2020. At current spot levels, it does not make financial sense for carriers to sign annual commitments. ZIM has stated that they will simply stop sailing if they cannot secure contracts with rates that are financially sustainable, whilst others have said that they are prepared to take the risk of future spot rate increases seeing as they have benefitted during the first half of 2023 from the high margins of their now well above market rate contracts signed almost a year ago. With most fixed contracts needing to be finalized by the first week of April, it will be interesting to see which response carriers take in their bid to remain financially and operationally sustainable.

New At Century: 

Century is thrilled to present our groundbreaking new supply chain optimization and real-time transportation visibility platform designed to optimize your supply chain ecosystem: VIZIV. We unveiled our newly upgraded proprietary system at TPM23 in late February of this year. Our newly enhanced flagship web offering empowers our customers with vetted milestone data so they have confidence in knowing where their freight is and when it will arrive, anywhere in the world. The VIZIV interface is a refined adaptive and intuitive design combining aesthetics and performance. The interactive dashboards empower you with the visualization of your entire supply chain layered with useful third-party information such as port statistics and other big data.

VIZIV Leverages AI and Machine Learning to help validate critical supply chain data to ensure Century’s customers only see reliable information empowering their decision-making via our centralized, cloud-based platform. VIZIV provides our customers with complete end-to-end visibility of their supply chains and offers a transparent overview of their entire PO logistics process with real-time data and unrivaled flexibility to keep them a step ahead of their competition.

Ocean Update: 

• CMA CGM has launched its new BIGEX service which connects South Asia with the Arabian Gulf on a weekly basis. This becomes the only service to provide a speedy, direct service between Bangladesh, Sri Lanka, and India to the Gulf states. BIGEX offers connection opportunities in the Indian Subcontinent for services calling in Europe, Africa, and the Americas. The service intends to nurture sea trade development between the two regions and support CMA CGM customers in the Bangladesh-India-Sri Lanka-Gulf corridor. The first sailing will depart from Bangladesh on April 5th, 2023. Port rotation is as follows: Chittagong – Colombo – Mangalore – Nhava Sheva – Mundra – Jebel Ali – Abu Dhabi – Chittagong.

• MSC has reintroduced its DRAGON service, with additional port calls, which connects East Asia to the Mediterranean via Singapore and Saudi Arabia. The reintroduction comes as MSC looks to offer the fastest and most flexible services to help meet its customers’ market demands. The DRAGON service has also become the first service to offer a direct call into Naples, a port call which will enable shippers to get the greatest coverage of the South Italian market. The new inclusion of a call at Ashdod Hadarom, together with a direct Haifa call on its Phoenix service, has allowed MSC to offer its customers full coverage of Asia into the Israeli market with great flexibility. Port rotation is as follows: Shanghai – Ningbo – Yantian – Singapore – Ashdod (HCT) – Naples – La Spezia – Genoa – Fos sur Mer – Gioia Tauro – King Abdullah – Singapore – Shanghai.

• Hapag Lloyd has announced the addition of its new Vietnam Indonesia Straits (VIS) service that will replace the current VNF and SPL services from April 6th, 2023. The VIS service will provide flexible port coverage between Vietnam, Singapore, Malaysia, and Indonesia to improve the direct connections between their intra-Asian network. Port rotation is as follows: Cat Lai (Ho Chi Minh) – Singapore – Port Kelang – Belawan – Penang – Port Kelang – Singapore – Cat Lai.

• MSC has unveiled a new upgrade to its KIWI Service to offer a direct, weekly connection between Australasia and Southeast Asia within 27 days, as well as improved transshipment options to Thailand. The introduction of the new service has made MSC the only carrier currently to provide a direct connection between Thailand’s biggest maritime port, Laem Chabang, and New Zealand. The KIWI service is set to benefit shippers from various industries including electronic goods, automotive parts, and food produce. The first northbound sailing departed from Brisbane on March 18th, 2023, whilst the first southbound sailing departed Laem Chabang on March 28th, 2023. Port rotation is as follows: Laem Chabang – Singapore – Jakarta – Brisbane – Sydney – Auckland – Nelson – Wellington – Lyttelton – Port Chalmers – Brisbane – Tanjung Pelepas – Singapore – Laem Chabang.

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 0-24 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 0-2 days depending on vessel size. Average gate turn times are 34 minutes for single transactions and 52 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 South Carolina Ports Authority has now implemented chassis pools at all their terminal locations.

• At the Port of Charleston, the average wait for berthing is currently up to one day. 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 Port of Los Angeles dwell time for local import cargo is currently ay 3 days whilst on-dock rail dwell and import units in street is currently averaging 3.4 days and 8.5 days, respectively. The Port of Long Beach is currently reporting stable dwell times for local imports and an average terminal gate turn time of 30-66 minutes.

• Concerns over further disruptions at the Port of Los Angeles and Long Beach have increased in prominence following a new lunch break dispute between the workers and the employers at the US’s two biggest West Coast shipping ports. The Port of LA has already recorded a 43% Y/Y decline in cargo volumes last month, with labor-related disruptions touted as a key factor behind the decline. The dispute has arisen surrounding the ports’ workers all taking a simultaneous lunch break and thus limiting the terminals’ ability to operate continuously. The dispute is currently limited to the local union chapter of the ILWU Local 13 rather than the greater union, however there is still the possibility that the localized dispute may have impact on a broader scale if not resolved properly. The Pacific Maritime Association has stated that worker refused to accept staggered shifts has hurt both ports’ ability to continue operating through lunch hours. The dispute remains localized for now, however Century will provide any updates of escalations or resolutions as and when required.

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

Landside Update:

• A series of national strikes in France over the increasing of the retirement age by two years has led to significant disruptions to logistics operations across the country. The national strikes began on March 6th, 2023 and have continued throughout the entire month. Both ocean and inland cargo movements have been heavily impacted by the strikes, with port, train and trucking-related strikes causing large disruptions to the energy sector in particular. All four of France’s Liquified Natural Gas terminals, with a nominal LNG import capacity of almost 26 million mt/year (36 Bcm/year), have been affected by the strikes, with Dunkerque, Montoir-de-Bretagne, Fod Cavaou, and Fos Tonkin experiencing extended strike action throughout March. No cargo unload, tank filling, or gas distribution has occurred since the strikes began, causing concerns of an imminent energy shortage. Delivery capacity has been reduced to “minimum delivery” as both jetty and truck loading bays remain unavailable. Cargo is being redirected where possible to minimize impact to customer operations. Please contact your Century Account Manage to see how we can mitigate the affects to your supply chains.

• Canadian Pacific’s $31 billion USD acquisition of Kansas City Southern has been approved by federal regulators following two years of bidding. The deal, and subsequent approval from the Surface Transportation Board (STB), paves the way for a combined railroad system which will link Canada, the US, and Mexico. The merger, known as Canadian Pacific Kansas City (CPKC), will be the first single-line railroad between the three North American nations. The CPKC, which could begin functioning as early as mid-April 2023, is intended to provide a unique railroad network which will enhance competition, offer a reliable rail service, improve rail safety, and reduce the number of cargo trucks on the road. Regulators expect the deal to grow the freight rail system in all three countries by boosting service capabilities, streamlining rail routes, increasing terminal efficiencies, and reducing overall travel time of goods and passengers. Following the acquisition, the STB will establish a seven-year oversight period for data collection and reporting requirements.

Asia Pacific Local Update:

• The 2023 Ramadan fasting period, observed in the Islamic faith, began on March 23rd following the sighting of the crescent moon over Mecca. The 2023 fasting period will end on April 20th, at which point the Eid-ul-Fitr celebrations will begin. These celebrations are observed in many Century origin nations, including Bangladesh, Pakistan, and India. As shared in a previous Century News Update, all Century CFS operations in Bangladesh will be closed from Friday 21st to Sunday 23rd of April in accordance with the holiday and will resume on April 24th. Prior to this, a one-day holiday for Shab-e-Qadr will be observed on Wednesday 19th. Century’s local team will work with your vendors to arrange goods handover at Chittagong CFS on or before 5:00 pm Thursday, April 13th, 2023, for shipments planned on vessels expected to depart before/during Eid-ul-Fitr holidays. Any cargo arriving in the CFS after 5:00 pm on Thursday, April 13th, 2023, will be subject to cargo receiving delays, longer waiting times for truck unloading and stuffing, as well as the potential risk of cargo being rolled to the next available vessel.

Trade and Economic Highlights:

• Thailand has signed a mini-Free Trade Agreement (mini-FTA) with the Chinese mega-city of Shenzhen. The mini-FTA, which was signed on March 1st, 2023, will build upon the pre-existing tariff cuts implemented under the Regional Comprehensive Economic Partnership (RCEP) at the beginning of 2022. Thailand and Shenzhen have set a focus on increasing business opportunities under the mini-FTA by bolstering information exchange, promoting business links, and appointing trade representatives. The agreement is a key boost for imports of electronic devices and medical appliances from Shenzhen to Thailand and for jewelry and agricultural products being exported in the opposite direction. This is the latest of seven mini-FTAs now signed between Thailand and the provinces/cities of its key trade partners in China, Japan, South Korea, and India, with the Southeast Asian nation currently in talks with China’s Yunnan province and five states in India regarding further agreements.

• Vietnam is striving to lure Japanese investments into its digital transformation and green growth projects as part of the Vietnam-Japan Joint Initiative (VJI) following the conclusion of phase VIII of the initiative in March of 2023. Under the previous phase, 497 of 597 initiative items were completed. Looking towards the next phase of the initiative, the Vietnamese Ministry of Planning and Investment (VMPI) are proposing the building of a co-operation program between the small and medium-sized enterprises (SMEs) of the two countries. The VMPI intends to leverage both Japanese SMEs’ experience, capacity, and high-tech capabilities with Vietnamese SMEs’ abundant human resources to spur development. Vietnam plans to encourage Japanese investment into infrastructure, agriculture, IT, innovation, and smart urban development during the next phase of the VJI.

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. 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 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.