Market Update – September 2021
As we move deep into the peak season with many in the supply chain feeling like the previous peak never ended, the crisis initially unleashed by the COVID-19 pandemic has translated into prolonged challenges that many shippers believe may leave a permanent scar on the logistics industry. Global port congestion, scarce ocean and equipment capacity, and sustained increases of ocean freight rates all continue to test shippers’ replenishment strategies for the rapidly approaching holiday season. Although some remain optimistic and believe these challenges may finally ease with some carriers pledging to freeze any further rate increases, many questions concerning ocean capacity outlook and freight rates remain unanswered.
In these volatile times, ensuring operational excellence for your supply chains remains Century’s first priority. This month, we will continue to present the market intelligence we have gathered from our global network and explain how Century can help as we navigate these uncharted waters together. As usual, we will start with a Century Spotlight to highlight what we see as keys to synchronized supply chain management.
It is not a surprise that the underlying root cause to the capacity constraints and equipment shortages has resulted in increased congestion at maritime terminals worldwide. When ports get over-congested, vessels will need to wait longer for a berthing window and severe downstream effects may follow when the congestion persists. Omissions of subsequent port calls and of equipment are just a few examples of how port congestion can easily paralyze global supply chains.
As the most heavily traveled US west coast ports of Los Angeles and Long Beach continue to see a record level of container throughput, the southern California shipping hub is dealing with congestion that is comparable to the early pandemic levels of last year. As of September 17th, the anchorage time average has hit 8.7 days at the Port of Log Angeles. As of September 19, there were currently 71 vessels waiting at anchor or at drift outside LA/LB. Because of these circumstances, some of our customers are remaining flexible and rerouting their cargo to alternate destination ports such as Tacoma/Seattle or the East Coast, where they then leverage transload solutions to move their goods via truck or rail to their final destination. Similarly, we are also seeing customers take advantage of the value-added services we offer at origin CFS, such as pick-and-pack, consolidation, palletization, and other -effective solutions that will allow their retail-ready cargo to bypass destination DC’s and reduce lead time for a more streamlined inbound delivery.
Against the backdrop of global supply chain bottlenecks, resilient retail demand and record U.S. imports are signaling a strong consumer appetite for holiday merchandise. Some marketing experts are anticipating a 7% growth with an estimated $800 billion in retail sales for November and December, and these expectations are echoed by several U.S. retail giants who have said they are planning to hire large numbers of seasonal workers to handle the anticipated surge in holiday orders. In anticipation of the coming holiday season, we highly encourage advance cargo planning and timely vendor bookings, and also flexibility in adopting diversified solutions so that you can take advantage of any opportunities that may arise.
- In early September, CMA CGM announced that the group will stop further spot rate increases on all services in order to strengthen their relationship with customers and provide support as the industry struggles with continued supply chain challenges. This measure will remain in effect from September 9th, 2021, through February 1st, 2022. Following the public announcement, the French container shipping giant was joined by another vessel operator, Hapag-Lloyd, who said they have also placed a cap on spot rates and does not intend to pursue any further rate increases. Although the gesture was generally well received by many throughout the industry, some remain skeptical of the carrier’s decision. As the rate cap only applies to base spot rates which have a validity of 30 days, some shippers believe seasonal surcharges and premiums may still be levied until a more desirable balance between space supply and demand returns.
- As international trade remains robust, ocean freight rates have continued to surge, breaking previous record levels. According to industry data, the latest transpacific container rates for exports from China to North America West Coast, excluding premiums, reached $20,309 as of September 17th, representing at least a 381% increase from $4,222 earlier this year.
- MSC is repositioning two vessels currently serving trans-Atlantic trade lanes to meet the traditionally strong trans-Pacific market demands. On October 3rd, MSC’s new Puma service will depart from DaChanBay in Shenzhen before it calls on Shekou and finally on Long Beach. In addition, MSC’s new Mustang service will sail on October 16th from Shanghai to Long Beach. The two newly added services will each add an additional capacity of 5,000 TEU from the southern and central China markets.
- The U.S. Federal Maritime Commission (FMC) has voted to move forward with two demurrage and detention related initiatives. The first initiative is to issue a policy statement on issues that affect the ability of shippers, truckers, and others to obtain reparations for conduct that violates the Shipping Act, including conduct related to demurrage and detention. The policy statement will provide guidance on the scope of the prohibition against carrier retaliation, when attorney fees may be imposed on a non-prevailing party, and who may file a complaint with the Commission alleging unreasonable conduct. The second initiative will issue an Advance Notice of Proposed Rulemaking (ANPRM), that will solicit public comments on two questions: first, whether the Commission should require ocean common carriers and marine terminal operators (MTOs) to include certain minimum information on or with demurrage and detention billings; and second, whether the Commission should require carriers and marine terminal operators to adhere to certain practices regarding the timing of demurrage and detention billings. The significance of these initiatives is that while the FMC does not have the authority to regulate freight rates, marketers believe the actions taken will create greater transparency and undoubtedly have an impact on equipment fluidity, as many shippers will now have incentives for the timely pick up and return of containers in order to avoid unnecessary surcharges and additional costs.
- The ports of Long Beach and Los Angeles recently announced new measures to improve freight movements and landside operations to help meet the unprecedented record volume moving through San Pedro Bay. Port authorities will expand the gate hours at nighttime and during the weekend to meet cargo demands, but actual hours extended have yet to be announced. The ports are also pleading with terminal operators to incentivize shippers to better utilize the gate windows in early-morning or late-night hours to alleviate pressures on daytime gate operations. According to the data from Harbor Trucking Association, the current average truck turn times across all LA/LB marine terminals are approximately 90 minutes.
- In Bangladesh, we have seen a significant improvement in the productivity level at Chittagong Port, with the average vessel waiting time at anchorage for berthing in August reduced to 2 days. The temporary permission that allowed all imported containers and commodities to be shifted directly from ports to private, off-dock inland container depots or CFS for delivery and storage ended on August 31st. Authorities are now following their usual policies which only allow 38 types of goods to be stored at privately owned off-docks, instead of container yards.
- The current yard density at Singapore Port has reached capacity, causing delays to vessel berthing of up to two days. The cargo logjam at this Southeast Asian transshipment hub has created a effect of congestion in its neighboring ports, including Manila and Laem Chabang.
- Due to congestion in prior transshipment ports, vessels departing Manila are experiencing delays up to one week. In some instances, some carriers will omit their Manila calls to restore the onward schedule integrity. Changes to vessel schedules have stagnated the timely turnaround of empty containers and subsequently resulted in a lower utilization level at container yards. Currently, the average yard density at Manila Port remains at 66%, considerably below the normal level.
- The yard density in South Korea’s Busan Port remains tight at 90% to 95% due to constraints in carrier space and vessel delays. Since July this year, the port has tightened CY gate-in to 3 days before estimated ocean berthing. This has caused freight costs to North America to climb further as rates are charged based on container gate-in date. We have been seeing a shortage of empty containers in South Korea due to unreliable vessel schedules. Some carriers have limited empty container pick-ups to no more than 7 to 10 days before vessel ETD, causing an overflowing cargo volume at CFS.
- In Thailand’s Port of Laem Chabang, we are seeing continued vessels delays of up to five days that have caused unshipped laden containers to pile up at container yards. The largest container terminal at Laem Chabang, Hutchison Terminal, has been prioritizing reefer/perishable cargo and outbound goods to ensure time-sensitive goods can be loaded onto vessels on a priority basis.
Please refer to the below illustration of Century’s assessment of the operating status at the major origin ports throughout Asia.
- The slow circulation of containers remains an industry-wide issue and continues to aggravate the equipment shortage globally. In Asian origins, we are seeing a continued shortage of 40’ HC and 40’ HQ containers, particularly in Sri Lanka, Bangladesh, Cambodia, Indonesia, Thailand, and Chennai, India, as well as Haiphong, Vietnam.
- India’s state-owned Container Corporation recently introduced a weekly train service to connect exports from Chennai to Nhava Sheva in Mumbai, with a transit time of three days. Some local exporters are leveraging this new solution that can transport 90 TEU and connect their ex-Chennai shipments to the direct Hapag-Llyod sailings out of Nhava Sheva to European and North American destinations.
- The ongoing shortage of HGV (Heavy Good Vehicles) drivers in the United Kingdom continues to put pressure on British retailers’ supply chains. The severe driver shortage, which is believed to have been largely caused by COVID-19 lockdowns and travel restrictions following Brexit, has resulted in empty shelves in supermarkets and compromised inland movements of containers. Some carriers, including Maersk, have announced adjustments to their haulage tariffs to reflect the increase in inland transportation cost. The British government has announced measures to ease the driver shortage which will take time to implement, and Century is constantly reviewing this situation with our local transportation suppliers and highly encourages timely vendor bookings in order to secure the required HGV’s to meet your . Advanced bookings are recommended to facilitate your trucking needs.
- A strike action at HMM, one of the largest container transportation and shipping container companies in South Korea, had been called off earlier this month after workers secured a salary increase. Labor and management agreed on a 7.9% wage increase, a bonus payment of up to 650% of the workers’ monthly salary, and welfare improvements averaging 2.7%. As a result, concerns about the export logistics crisis caused by the possible first strike in history have been resolved.
ASIA PACIFIC LOCAL UPDATE
- Most factories, warehouses, customs, and our offices in China will be closed from October 1st to October 7th as the country celebrates the Chinese National Holiday, which is also commonly known as the “Golden Week”. Following historical shipping trends, we anticipate that some carriers will be cancelling some vessels for trade lanes serving the Chinese market. While ports throughout China will maintain normal operations during the week-long holiday, skeleton staff from Century will also be available to handle any priority shipments or urgent inquiries.
- Following COVID-19 outbreaks in Yantian in May and Meishan in Ningbo in August, Fujian Province, the home of the port of Xiamen became the third major shipping origin to be affected by an outbreak in China since May. Government authorities reacted quickly when it was announced that cases of the highly contagious Delta variant were first detected in Putian City on September 11, locking down all neighborhoods suspected of possible cases or close contacts, limiting access to highways, and restricting truck access to medium and high-risk Depending on their location, some CFS are operating normally, while others with reduced staff are operating at reduced capacity and not receiving any inbound cargo. The ports are still operating normally, but some shipments may be impacted by truckers’ inability to pick up and deliver cargo along with road and district closures also causing further delays. Please continue to refer to Century’s regular COVID-19 updates for the latest news.
- The special customs regulations and traffic controls implemented during the Tokyo Olympics have been lifted as of September 5th. The ongoing state of emergency due to COVID-19 remains in effect, and our local teams report that the major ports in Japan including Tokyo, Hakata, and Sendai are maintaining normal operations at desirable productivity levels.
TRADE & ECONOMIC HIGHLIGHTS
- Following a 1.8% month-over-month decline in July, U.S. retail resales rebounded in August and were aided by return of the back-to-school shopping season. According to the U.S. Department of Commerce, spending at US retailers and restaurants rose to $618.7 billion, up 0.7% from the previous month and increasing 1% year over year.
- Despite the ongoing logistics challenges and concerns over the COVID-19 Delta variant, China’s trade with the rest of the world hit record levels last month. According to the statistics published by the Chinese General Administration of Customs, China’s exports in August rose to $294.3 billion, representing a 25.6% year-over-year increase. Similarly, the country’s imports also surged to a record level of $236 billion, which is 33.1% growth as compared to the same period last year. Strong exports continue to show the United States as China’s top export market, with a total of $51.7 billion of Chinese goods imported by the US in August.
- Manufacturing activities in China showed a softening in August. According to the official Purchasing Managers’ Index (PMI) released by China’s National Bureau of Statistics, the PMI declined from 50.4 in July to 50.1 in August, just above the halfway mark of 50 that separates manufacturing expansion from contraction. COVID-19, inclement weather throughout China, and increased costs in raw materials were among the factors cited that caused the country’s PMI to fall to an 18-month low, dating back to when the pandemic first began.
Besides our full suite of products in VMS® that power your supply chains every day, the following solutions we offer also provide you with alternatives to maximize the efficiency in your supply chain operations and mitigate the ongoing industry challenges.
- Century Express – 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 to 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 numbers of documents issued for multiples services transparent and at a minimum.
- Warehouse Storage – In addition to the normal CFS cargo flow through our warehouse network, we have the ability to supply longer term warehouse storage and can also negotiate extended storage for larger vendors. This can help to alleviate pressure at vendor facilities while also ensuring that your cargo will 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, 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 are able to 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.
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 logistics teams to navigate these unique shipping times through every step in the supply chain.
Disclaimer: The information contained in this newsletter was provided by our partners across Asia and referenced from online sources that were not specifically authorized for third-party usage. The aim of this publication is for informational purposes only. While Century endeavors to validate the authenticity of the stipulated information, Century is not responsible for its accuracy and completeness and does not accept liability or responsibility for any actions taken upon reliance.
- The Port of Los Angeles
- FMC to Issue Guidance on Complaint Proceedings and Seek Comments on Demurrage and Detention Billings
- Freightos Baltic Index
- LA-LB ports to expand gate hours to ease historic congestion
- August Retail Sales Rise Despite ‘Trifecta of Macroeconomic Headwinds’
- China Trade Surges to New Records on Strong U.S., EU Demand
- National Bureau of Statistics of China
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