Century Weekly Market Update Oct 2 - Oct 8

Welcome to the Century Weekly Market Update! We’re excited to bring you the latest news and insights from the supply chain and logistics industry over the past week.

Our weekly market update features a dedicated section on emerging industry trends and a report specifically focused on the frequency and impact of port omissions during blank sailings. These updates provide valuable insights to help supply chain decision makers navigate potential disruptions, optimize their supply chains, and stay informed about the latest industry developments.

Last week, Trans-Pacific freight rates declined for a sixth straight week. The Panama Canal Authority announced further restrictions to be implemented next month. In addition, MSC extended it contract at the Port of Bremerhaven by 25 years, whilst the Port of Savannah began addressing a month-long vessel backlog. Also, Typhoon Koinu impacted port operations in Southern China and Taiwan.

At Century, we're committed to helping our customers stay a step ahead in this rapidly changing industry. Our team of experts is dedicated to providing comprehensive and timely insights to help you make informed decisions and stay competitive.

Emerging Industry Trends

On-Time Performance of Final-Mile Carriers Recovers to Pre-Pandemic levels

• Last-mile parcel carriers recorded an 85.1% on-time delivery rate in August 2023, which represented their best performance since just before the onset of the pandemic in 2020.
• The on-time performance rate is based on the initial ETA of the shipment and marks a more than 4% improvement in reliability from July.
• Such an improvement suggests that delivery providers are in a healthy position and set to enter their peak shipping season in ideal conditions.
• Whilst last-mile carriers do anticipate service levels to drop-off during the highly demanding peak season, packages being delivered in time for the holidays is not currently a concern for the market.
• On-time performance of last-mile carriers typically declines during the December peak season as demand for deliveries surges and less favorable weather encroaches on operational capabilities, however, this year the carriers seem to be better placed to handle these challenges compared to the previous three years.
• A strong on-time performance will likely be a key metric for carriers in the 2023 peak season as they compete to attract and retain greater volume in a market tilted in shippers’ favor.

• Carrier Schedule Reliability Sees no Improvement in August
• Carrier schedule reliability failed to improve in August, actually registering a 0.9% M/M decline from July to 62.3%.
• The August 2023 schedule reliability figures represent a 17% improvement Y/Y.
• The lack of improvement may be an extension from the two-month-long labor turmoil at North American West Coast ports that first ended the upwards reliability streak.
• MSC ranked as the most reliable carrier for a third consecutive month, scoring 70.9%, which is actually a 0.6% decline in reliability M/M.
• Maersk and Hamburg Süd were close behind, both scoring 70%, equating to a 0.2% improvement M/M in reliability, respectively.
• Just three of the top 14 carriers achieved a M/M increase between July and August 2023, with the largest increase being recorded by OOCL, improving reliability by 2.8% M/M.
• In contrast, HMM and Yang Ming continued to rank as the least reliable carriers, becoming the only carriers with reliability below 50%, with the latter recording a 3.5% drop M/M to just 47.8%, the lowest of the top 14 carriers.

Weak Demand Responsible for Rising Trucking Costs in the US for 2024

• Rising operating expenses for US trucking, stemming from increased labor, real estate, and insurance costs coupled with rising fuel prices, have led to industry experts warning of a potential upward pressure on domestic trucking rates across 2024.
• Although capacity has significantly loosened in the wake of the pandemic, rising labor costs for drivers and warehouse staff coupled with elevated diesel prices and a scarcity of cross-docks throughout major cities are inflating expenses of domestic transportation networks.
• Early indications for the US trucking industry in 2024 do not look promising either, with a freight rebound not expected until later on in the year, which will put pressure on transportation networks and their customers to jointly squeeze out costs.
• Average US diesel prices had surged more than US$0.87 per gallon from August to September 2023 before finally reducing by 4.7% W/W at the end of September to US$ 4.63 per gallon.
• The recent collapse of LTL giant, Yellow, has resulted in an intensified scramble to acquire cross-dock space as its vacant terminals become repurposed thus reducing availability.
• Industrial construction costs are also on the rise, increasing by up to 5% in 2023.

Weekly Blank Sailings Report

Century’s Blank Sailings Report for the week of October 2nd – October 8th. Discover the latest insights on the current trend of blank sailings through the most up-to-date carrier data direct from Century.

• Last week saw a total of 677 port omissions during blank sailings, a 15% increase compared to the week prior.
• Ningbo recorded the highest amount of port omissions last week with 84, closely followed by Shanghai with 83.
• Other ports with notably high omissions last week were Busan with 43, Singapore with 41, and Hong Kong with 26 omissions.
• The Port of Ningbo recorded the highest W/W increase in port omissions jumping 82.6%
• Looking towards the coming weeks, Century’s data shows a 10% decrease in blank sailings currently scheduled for week 42, with a significant decrease in blank sailings preliminarily scheduled for weeks 43 and 44, respectively, which is likely a symptom of carrier scheduling post-China’s Golden Week.
• Next week’s preliminary data shows notable declines in port omissions to be expected at ports in Ningbo, Shanghai, Busan, Manila, Lazaro Cardenas, Manzanillo, Hamburg, Rotterdam, Antwerp, and London Gateway.

Port omissions data for the most frequently omitted ports during week 41 can be found in the table below:

Our full Blank Sailings Report for the week of October 2nd – October 8th below provides a full list of every current scheduled port omission from Week 41 to Week 51 as of October 9th, 2023. The second tab breaks down this data into an easy-to-read table which shows port omissions by each location per week so you can see which locations are being omitted the most and which locations are experiencing the sharpest increase in port omissions.

Click here to DOWNLOAD the full Week 41 Blank Sailings Report

Week in review

Trans-Pacific Freight Rates Record Six Straight Weeks of Decline

• The decline in transpacific freight rates have declined for six consecutive weeks in the build up to, and during, China’s Golden Week.
• Rates from China/East Asia to the US West Coast decreased 11% W/W to US$ 1,499.
• Rates from China/East Asia to the US East Coast dropped by 8% W/W to US$ 2,245.
• Freight rates from China/East Asia to Northern Europe have restarted their decline following a small recovery last week, dropping 10% W/W to US$ 917.
• Rates from China/East Asia to Southern Europe have consistently declined for the last five weeks, now falling 6% W/W to US$ 1,490.

Lack of Standardization for Incoming European ETS has Potential to Create Major Surcharge Discrepancies Between Carriers

• The European Emissions Trading Scheme (ETS), which will obligate carriers to purchase allowances for 100% of emissions from intra-EU voyages and 50% of emissions from voyages with a EU port as either the arrival or departure destination, will come into effect on January 1st, 2024.
• With carriers prevented, by law, from concurring on a common surcharge formula for the ETS, it creates the risk of huge discrepancies between them on how the surcharges will be implemented and at what price range.
• Calculating the cost of ETS per container is proving to be methodologically challenging, stemming from how EU regulators are defining ETS charges and how it can be allocated at a per TEU level.
• Only two carriers have announced indications of ETS surcharges so far, Maersk and Hapag-Lloyd, however the large discrepancy between the two’s charges, estimating 70€ and 12€ per FEU on Asia-North Europe, respectively.
• The large discrepancy in the preliminary charges is hardly surprising as the emissions charges to carriers for 2024 need to be accounted and paid for in September 2025. But to cover this cost in September 2025, carriers will need to pre-emptively charge a premium despite having no knowledge over what the actual cost will be.
• With the ETS just three months away, we are likely to see other carriers release their intended surcharges throughout Q4 of 2023, with major misalignments to be expected.

Unexpected Number of Anchored Vessels Causes Backlog at Port of Savannah

• A backlog of 16 vessels at the Port of Savannah has formed unexpectedly over recent weeks amidst a string of operational closures.
• The vessels have been stacking up over many weeks now and although no significant impacts have been reported, the backlog may not be fully cleared until mid-way through November.
• The backlog is being traced back to initial delays in August 2023 when Savannah’s Garden City Terminal acquired four ship-to-shore cranes which temporarily shut down two berths.
• Arrival of the new cranes caused the closures of Berths 1 and 9 at GCT in order to discharge the equipment from the specialized vessel that transported them.
• A second closure came a week later when Hurricane Idalia caused the closure of East Coast shipping channels for two days at the behest of US Coast Guard. Despite no damages, the enforced closures came just days before the Labor Day when all port activity is closed.
• Savannah’s increased queue has subsequently caused increased delays for vessels sailing from Asia to the US East Coast, with late arrivals averaging 7.5 days in September 2023, a 3.2-day M/M increase from August.
• Despite the backlog, shippers have so far only experienced minor delays and no significant disruptions to their supply chain, partly due to not needing their inventory urgently as a result of sustained soft import demand.

Further Transit Reductions on the Panama Canal Impacts Largest Vessels

• The Panama Canal Authority (PCA) Authority is further reducing daily transits for large vessels and adjusting the reservation system to address the effects of the record drought.
• From November 1st, 2023, maximum daily transits are being reduced to just 31 per day, primarily affecting larger Neopanamax locks used by container and gas carriers.
• Panamax plus vessels will have to comply with a 39.5-foot draft restriction and transit the Panamax locks instead of the Neopanamax locks.
• The reservation system will be adjusted to a maximum of 30 booking slots per day, with one slot held open for vessels without reservations.
• To address the current backlog of 93 vessels, reservations for October are limited to just 14.
• The canal may experience increased traffic due to rising LNG shipments and container volumes on major trade routes. Cruise ships, which typically use the canal from October to the winter months in North America, are also expected to return.
• The PCA has acknowledged the potential revenue decline of up to US$ 200 million for the current fiscal year, however, emphasize the importance of long-term water management efforts to address climate change's impact and ensure continued operations.

ILA’s Claims of Price Fixing at US Southeast Ports Dismissed by FMC

• The Federal Maritime Commission (FMC) has dismissed claims of price fixing at the Port of Savannah and Port of Charleston by the International Longshoremen’s Association (ILA).
• An FMC administrative law judge ruled last week that stevedores at the two ports did not engage in price fixing and are not marine terminal operators with full control over setting container handling fees and rates.
• The ILA’s complaint, alleging that Ceres Marine Terminals, SSA Marine, and Ports America coordinated on rates for landing freight at the two ports, was initially made in April 2022.
• The three companies are owners of the Gateway Terminals joint venture which handle stevedoring at two Savannah terminals and three Charleston terminals.
• The ILA has claimed that the joint ownership of stevedores at both Charleston and Savannah has reduced competition between the ports which is in violation of the US Shipping Act.
• The FMC judge’s ruling states that as the stevedores are not marine terminal operators, they are subsequently not subject to the US Shipping Act.

Union Pacific Cuts Cross Border Intermodal Service by More Than 24 Hours

• Union Pacific has reduced the transit time on part of its recently launched cross-border intermodal service by over 24 hours.
• The intermodal service, announced on September 12th, operates alongside fellow railroad operators Canadian National and Ferromex owner Grupo México Transportes and connects markets in Mexico and the US Southeast, the first route of its kind.
• Operational improvements from the Eagle Pass, Texas, to Chicago are being cited for the increased efficiency of the service.
• Faster service can be expected by shippers for the Eagle, Falcon Premium and Eagle Premium services, which connect Canada, the US, and Mexico.
• Union Pacific can now offer transport between Monterrey, Mexico, and Brampton, Canada, within just 5.1 days, exactly three days quicker than when the service initially launched in May of this year.

Typhoon Koinu Impact Port Operations in Kaohsiung, Shenzhen, and Hong Kong

• Typhoon Koinu caused a suspension in operations at the ports of Kaohsiung, Shenzhen, and Hong Kong from last week as it brought windspeeds of 185km, equivalent to those of a Category 3 hurricane.
• The Port of Kaohsiung was first to be impacted, suspending all operations on October 4th, 2023, remaining closed for X days until October Xth.
• Koinu then veered westwards across the northern tip of the South China Sea towards Southern China where it impacted port operations in Shenzhen and Hong Kong.
• Shenzhen ports’ typhoon blue alarm was triggered on October 6th, thus causing Shekou and Yantian to suspend empty container pick-up until the afternoon of October 9th.
• Hong Kong ports suspended terminal gate operations at 7am on October 8th as the local observatory raised the Typhoon Signal No.8. Operations resumed at 4pm the following day after the Typhoon Signal No.3 was raised and the rain alert was reduced to Amber.

MSC Agrees Bremerhaven Terminal Contract Extension of 25 Years

• MSC has extended its contract at the Port of Bremerhaven with Eurogate by 25 years.
• The joint operation of the MSC Gate Bremerhaven between the carrier and the German terminal operator will now continue to run until 2048.
• The extension has been made via MSC’s Terminal Investment Limited (TIL) with the intention of cementing the carrier’s presence at ports in Northern Germany.
• Plans to invest in the Bremerhaven terminal’s infrastructure are underway with the view to further digitalize, and gradually automate, the handling of operations.
• In the first half of 2023, MSC Gate handled 470,000 TEUs, a 29% decline Y/Y, with MSC calls at Bremerhaven primarily consisting of with vessels carrying 1,000 to 15,000 TEUs.
• The extension comes just two weeks after MSC’s bid for a half share in the Port of Hamburg’s main terminal operator, HHLA, which MSC has pledged that, if successful, will see the carrier move its regional HQ from Geneva to Hamburg.

The Ports of Halifax and St. John to Undergo Expansion Plans Which Will Underpin Port of Montreal

• As the Contrecoeur mega-terminal project at the Port of Montreal appears to have stalled with no concessionaire announced and construction yet to begin, rival Canadian East Coast ports are sensing an opportunity to gain market share.
• Both the Port of Halifax and Port of St. John are now moving forward with their respective expansion plans intended to strengthen intermodal growth for Canada’s two Class 1 railroads thus extending the ports’ reach into the Canadian East Coast and US Midwest.
• Halifax is set to add two further post-Panamax cranes to its current fleet of five cranes already installed at the ports largest two container terminals.
• Additionally, Halifax has begun infilling between two finger piers adjacent to the Atlantic Hub which, when finished by 2030, will add an extra eight acres of container storage to the current 76 acres and increase the annual TEU capacity from 1.2 million to 1.4 million.
• St. John doubled its post-Panamax crane count in June to four, enabling the port to now berth two container ships simultaneously. St. John is also infilling between two finger piers to expand berthing and container yard space as well as growth through railway investment from Canadian Pacific and federal grants to bring annual capacity to 800,000 TEUs.
• Meanwhile, the Port of Montreal’s proposed 1.15 million TEU container terminal outside of Contreceour, Quebec, is still yet to select a consortium to finance the US$ 725.5 million project as well as experiencing an exodus of top executives from its port association.

Flexport Preparing to Cut Another 30% of its Workforce

• After already laying off a fifth of its workforce earlier in 2023, Flexport has announced its intentions to reduce its workforce by a further 30% by the end of October.
• Flexport’s decision comes as it deals with the effects of a macroeconomic downturn.
• The layoffs are coming swiftly after the resignation of Dave Clark from his position as CEO at the California-based freight forwarder.
• Flexport has stated that areas such as customer service, account management, and operations will be least affected by the layoffs.

Sources:

Journal of Commerce

Journal of Commerce

Journal of Commerce

Journal of Commerce

Journal of Commerce

Journal of Commerce

Journal of Commerce

Maritime Executive

South China Morning Post

Sea Intelligence

Sea Intelligence

Supply Chain Dive

Supply Chain Dive

Supply Chain Dive