MARKET UPDATE – November 2022

The downward trajectory of ocean freight rates, beginning in the third quarter of 2022, seemed like they would perpetually decline until finally settling back down to pre-pandemic levels. However, recent data suggest a minor stabilization of ocean freight rates, from weeks 43 to 48, prior to reaching pre-pandemic levels despite the continuing trend of economic uncertainty, low consumer demand, and surplus capacity. In our November Market Update, we analyze how successful carriers’ solutions to falling freight rates, including blank sailings, have been in combating the supply/demand imbalance.

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 increased use of blank sailings by international shipping lines over the past two months started to show signs of paying off, as spot container freight rates on the largest deep-sea trade routes saw a slight rebound in early November 2022. The rebound came despite the continuing weak demand, implying that the recent capacity cuts, spurred by the rampant increase in blank sailings following China’s Golden Week, were beginning to reverse the trend of pricing decline witnessed over the last few months. Transpacific freight rates had rebounded upwards from week 45 to week 46 (as shown in the graph below) with prices increasing for Asia-US West Coast and Asia-US East Coast by 11% and 2%, respectively.

However, the rebound appears to have been a false dawn, as transpacific ocean freight rates in week 47 and week 48 resumed the pattern of decline prevalent across the latter half of 2022, attributed to fears of a global recession, causing shrinking demand and a build-up of inventory at destination distribution centers (DC). Between weeks 43 and 48 of 2022, both USEC and USWC rates have only minimally fluctuated, in comparison with rates trends earlier in the year, suggesting that container rates may be stabilizing, however the decline in rates once again in week 48 may be a sign that this is not quite the case yet.

Despite the downwards trajectory, however, the week-on-week rate decreases are becoming minimal, signaling a stabilization of rates, which still remain well above their pre-pandemic levels, with global freight rates being almost 130% higher than the same period in 2019. Asia-US West Coast rates decreased by 3% week-on-week since the end of October, now at $2,563/FEU, 83% lower than the same time last year. Asia-US East Coast rates also decreased by 3% week-on-week, now at $5,435/FEU, 67% lower than the same time last year. There have so far been a recorded 34 additional blank sailings on Asia-USWC services and 16 on Asia-USEC services, however there are currently no announcements for further blank sailings following the holiday period in the build-up to the Lunar New Year. The absence of scheduled blank sailings for the end of 2022 reflects the uncertainty around the anticipated Pre-Lunar New Year rush, suggesting a more cautious approach is being taken to monitor for signs of a seasonal demand spike prior to scheduling blank sailings at this time.

The continued fall in freight rates is leading to some carriers agreeing to renegotiate their long-term contracts with shippers, which may now be far above current market levels, as well as reducing capacity in a bid to stabilize the current rate levels. Port congestion has almost returned to normal levels at Long Beach and Los Angeles ports as a result of the falling demand, with significant reductions in congestion also reported at New York and New Jersey ports. The lack of congestion is increasing available shipping capacity, which is pushing rates down and reducing transit times. Despite the seemingly positive impacts of lower port congestion for retailers in terms of costs and efficiencies, the uptick in shipments arriving ahead of schedule is beginning to cause issues with inventory build-ups at warehouses which are already dealing with tight capacity.

Century customers can benefit from our DC Bypass capabilities to mitigate the impacts of limited capacity at destination warehouses. Powered by VMS®, we can build containers loads directly from origin ports to stores. Our ‘Pick & Pack’ programs offer extensive Value-Added Services at origin, including picking, packing, labelling, printing and reworking etc., that can also reduce pressure at destination facilities. Century also offers premium storage space at origin at competitive rates throughout Asia that allow our customers to hold and release inventory as needed at a fraction of the cost of storing them at destination.

Ocean Update: 

• CMA CGM announced the launch of their new FEMEX service, which commenced its maiden voyage from Southampton, UK, on November 26th, 2022. The French ocean carrier’s new route will include Thessaloniki into its southbound rotation. They have indicated that they intend to use the Greek port city as a connection hub between Northern Europe and the Eastern Mediterranean and connect to Cyprus via their SSL MED Thessaloniki-Limassol service. The service will also connect to Serbia via their block train solution. The first FEMEX vessel, CMA CGM BARRACUDA, is scheduled to arrive at Thessaloniki on December 15th, 2022. Port rotation is as follows: Southampton – Antwerp – Hamburg – Rotterdam – Malta – Thessaloniki – Istanbul Ambarli – Gebze – Gemlik – Aliaga – Tanger Med – Southampton.

• Hapag-Lloyd commenced its “Cherry Express 2022 Service”, in mid-November, which will see a special five-week service between Chile and East Asia designed to deliver the freshest South American cherries during their peak harvest season between November and January. The service links Valparaiso, Chile, to Hong Kong in a 22-day rotation, and then onto China, Taiwan and South Korea via feeder networks. The service consists of a young fleet outfitted with reefer equipment, reefer technology and additional capacity with three Extra Loaders.

• Ocean carrier Yang Ming has announced that their business entity for the transpacific, transatlantic (excluding AL6), and North-South America services will change from Yang Ming Marine Transport Corp. to Yang Ming (Singapore) Pte. Ltd. It is understood that this will result in a gradual change in SCAC codes used for ISF filing from the current YMLU to the updated YMPR based on the schedule provided by Yang Ming for each service loop. These changes will take place from now until the end of the year. However, Yang Ming has indicated that they will continue to issue Master Bills of Lading (MBL) with the prefix YMLU. This deviates from the current standard process where the prefix on the MBL is the SCAC code to be used for ISF filing, requiring a change in the usual filing process. As shared in a recently published Century news update, Century has systems and operational processes in place to ensure the correct Yang Ming SCAC code is used for our customers’ shipments during this transition period.

• Evergreen Marine has purchased a 100% interest in the Colon Container Terminal (CCT) in Panama for USD $268 million. The Taiwanese shipping company acquired the terminal from its affiliates in early November with the intention of expanding their presence in the Americas. Evergreen has touted the CCT as crucial transportation hub for routes between Asia and the Americas which will boost their competitive edge in the region. The CCT handling facility has four berths across 74.3 hectares and has the capacity to service all vessel sizes including two neo-Panamax vessels concurrently. A 30-hectare logistics park is currently in development on CCT’s concession lands.

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 1-2 days in Yantian and 1-3 days in Shekou. In Shanghai, overall yard utilization is at 65% and 68% in Yangshan and Waigaoqiao, respectively. The average vessel berthing time at both Shanghai ports is 0-1 day.

• San Pedro Bay twin ports of Long Beach and Los Angeles will postpone the potential assessment of the “Container Dwell Fee’ for another four weeks until December 21st. Since the program was first introduced in October last year, the ports have seen a “combined decline of 46% in aging cargo on the docks” according to the California Association of Port Authorities.

• Port of Savannah waiting time is 0-2 days on Class 1 and 16 days on Class 2. There are currently 34 cargo vessels waiting at port. Berth capacity remains limited during the port’s major two-year reconstruction project, which is expected to be completed in June-2023. Terminal capacity utilization is currently at 65%. The average dwell for imports is 8.8 days whilst the average Dwell for exports is 7.6 days.

• Terminal utilization at the Port of Charleston is as follows: 51% at WWT, 56% NCT, and 29% at HLT. The port is operating at a desirable capacity and there are currently no vessels waiting to enter. The average wait for berthing is currently at less than a day.

• Strike action at the Port of Liverpool has come to an end following an increased pay deal being reached between Peel Ports Group (PPG) and Unite Union members. The tentative agreement, once ratified by both parties, will eliminate the threat of any further strikes at the port. There were three strikes in five weeks at the Port of Liverpool between September and November, 2022, which saw the participation of nearly 600 dockworkers. The deal also prevented a fourth strike from going ahead which was planned to commence on November 14th. Details of PPG’s offer are yet to be publicly released.

• Cargo moving through the Port of Montreal is still subject to the Low Water Surcharge that came into effect on November 1st, 2022, in response to the forecasts by the Canadian Coast Guard who predicted a perpetual drop in the water levels in the St. Lawrence River. The surcharge was implemented as part of a wider effort in the city to conserve water which has become commonplace in recent years. The surcharge is applicable to the St. Lawrence Container Service – Route 1 (AT1) and 2 (AT2) Westbound. The current charge is $150 USD per TEU. The port of Montreal reserves the right to adjust the surcharge at short notice if water levels drop beyond the current predictions.

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

Landside Update:

• The tentative agreement brokered by the White House, which seemingly averted the first US national rail strike in 30 years, is reaching the ratification process deadline. Of the 12 unions involved in deal tabled by President Joe Biden, eight have voted to ratify it whilst four have voted to reject it. The BMWED, the US’s third largest rail union representing 11,000 workers, became the first union to reject Biden’s agreement pertaining to the number of paid sick days. The two largest US rail unions, The Brotherhood of Locomotive Engineers and Trainmen and The Sheet Metal, Air, Rail and Transportation union, held their votes on November 21st, with the former accepting the deal but the latter voting to reject it. The rejection of the deal by the largest rail union in the US has heightened concerns of a potential strike over the holiday period despite the agreed ‘cooling off’ period for strike action being extended from November 19th to December 4th. Railroads in the US have already begun to cut service in preparation for potential strikes as the new deadline approaches early next month. The four unions who rejected the deal will re-enter negotiations with the White House in the meantime, but President Biden has since urged Congress to intervene under the Railway Labor Act to pass a bill that would avert a rail strike if necessary.

• Trucking into, and out of, Guangzhou is currently being heavily impacted by the new pandemic restrictions implemented by the local government in response to the outbreak of cases around the city’s factory districts. Guangzhou reported 1,645 new confirmed Covid-19 infections as of November 24th, 2022, which accounts for 92% of the case numbers in the entire Guangdong province. The majority of Guangdong’s designated ‘high-risk’ areas are located in the factory districts of Guangzhou. Trucking access to these areas is heavily restricted, with the majority of them being fully locked down with no entry or exit. Supply chains with links or origins to the affected districts should anticipate significant disruptions and delays to goods from Guangzhou as a result of the current situation.

Asia Pacific Local Update:

The National Health Commission of China reported 3,822 active Covid-19 cases with 33,129 areas designated as ‘high-risk’ as of the end of November 2022. Recent outbreaks in Beijing, Chongqing and Guangzhou have led to numerous lockdowns and travel restrictions around the cities. Trucking in and out of Guangzhou is especially restricted at the moment, impacting shipments to/from the region due to the increasing implementation of pandemic-curbing measures. A green Health Code and at least a 48-hour negative nucleic acid test is required to enter most warehouse facilities. Trucking related to designated ‘high-risk’ areas is prohibited. Chongqing hosts the highest number of ‘high-risk’ areas with 3,934, with Bejing being the next highest city with 2,508. Hebei and Shandong are the provinces with the highest number of ‘high-risk’ areas, both currently containing over 3,000 each.

The Central Government in China has taken steps to reduce quarantine requirements for both inbound passengers and individuals classified as COVID close contacts. The major policy changes are as follows:

• The quarantine policy for inbound travelers from abroad has changed from “7+3” to “5+3” (Centralized quarantine + home quarantine).
• Inbound travelers now require just one negative nucleic acid test certificate within 48 hours before boarding instead of the previous two.
• Close contacts quarantine policy has been adjusted from “7+3” to “5+3” (Centralized quarantine + home quarantine).
• Measures for identifying secondary close contacts have been discontinued.
• High-risk area personnel quarantine has been adjusted from “7-days centralized quarantine” to “7-days home quarantine”.
• The designated Covid-risk area categories have been adjusted from “high, medium, low” to just “high and low”.

For detailed information on the relaxing of COVID-19 quarantine and other new epidemic policies, visit the Century webpage here to see our weekly China Covid-19 update.

Trade and Economic Highlights:

• China’s exports fell 0.3% in October 2022, contrasting September’s 5.7% growth which out-performed the forecasted 4.3% gain. The drop is attributed to a softening of demand for Chinese goods in developed markets like Europe and the US in addition to Covid-related supply chain disruptions domestically. The October export figures represent the largest decline seen since May of 2020, with exports to the EU falling 9% from September and exports to the US dropping 12.6% when compared to the same period last year. Meanwhile, exports to Southeast Asian nations recorded a year-on-year increase of 20% in October. China’s imports shrank by 0.7% in October, the weakest reading since August of 2020.

• For enforcement of the Uyghur Forced Labor Protection Act (UFLPA), all imports from China into the United States will be validated to have a valid Chinese postal code included in the manufacturer and/or stuffing addresses for ISF filing. The postal code is a required field within VMS®, and we have existing validations in place via an external data source to ensure that your vendor-entered postal codes for manufacturer and/or stuffing locations are valid. Shipments without a valid postal code will result in a filing error, while those with a postal code in the Xinjiang Uyghur Autonomous Region will result in a warning message. The implementation of the UFLPA Region Alert was originally scheduled to go live in November but is currently postponed until further notice.

• The leaders of Australia, New Zealand and ASEAN met in Phnom Penh, Cambodia on November 13th, 2022, to commence negotiations surrounding the ASEAN-Australia-New Zealand Free Trade Area (AANZFTA), which concluded with the decision to upgrade the terms of the agreement. Trade between the three entities has remained robust throughout recent global events, including the COVID-19 pandemic. Australia-ASEAN trade totaled USD $81.6 billion in 2021, representing a year-on-year increase of 49%. ASEAN-New Zealand trade totaled USD $11 billion in 2021, representing a 22.5% year-on-year increase. The upgrade will benefit businesses within AANZFTA through improved transparency measures, cost reductions, increased import and export efficiency, digital technology cooperation, educational services, sustainable development, smoother flow of essential goods during crises, and enabling the participation of small- to medium-sized enterprises in economic activities.

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.