Market Letters

Transpacific Eastbound Market Update – 10/22/20

Market Conditions – Transpacific Eastbound trade conditions have picked up from where they left off before the Golden Week holiday. Ocean carriers and forwarders are reporting strong booking forecasts with scheduled vessels sailing through the first half of November at near capacity. Container volume rolled during the holiday period will only aggravate the situation. This has prompted action from several carriers who have announced extra loaders in an attempt to clear out the backlog. Transpacific ocean imports are expected to remain strong through the 2021 Chinese New Year. The continued import surge is pushing US port terminals towards exceeding the limits of full operating capacity. As vessels that sailed prior to Golden Week holiday arrive fully laden into West Coast ports congestion and associated costs will be steadily on the rise.

Market Rates – Fortunately for shippers, the Chinese Government’s influence on escalating freight rates has at least temporarily halted further GRI’s in the market. Rate levels have been flat since the last market wide increase back on September 1st. This is seen as a visible measure of the current market’s strength as it’s rare that the TPEB market experiences a lack of GRI’s and rate deterioration over a several week period. Ocean carriers have not confirmed if the November 1st GRI announced earlier will be applied or not. We expect that an extension of current rates is more likely with exception of the expedited ocean services offered by carriers such as Matson, Zim & CMA.

Loading Port Vessel Delays – Congestion at origin ports are delaying vessel departure dates which at first glance can easily be interpreted as a “rolled booking”, when in actuality it’s the same originally booked vessel. The Golden Week holiday is partially to blame as ocean carriers created container roll pools at transship ports. Shanghai is a major transship port due to the frequency of sailings on the Asia to North America trade and is being especially hard hit with vessel delays. A couple ocean carriers have extra-loaders with sail dates over the next couple of weeks to help ease terminal congestion and vessel delays in Asia.

Congestion Worsens in LGB/LAX Port Complex – As vessels continue to arrive at full capacity, terminal efficiency is quickly buckling under the heavy burden of keeping up with the import surge. Our last market update projected the situation to quickly worsen over the coming weeks and this has proven to be the case. With August and September imports up 22% vs. same months in 2019 it was inevitable that chassis supply would become an issue. Recent headlines report chassis turn-times more than doubling from 3.5 days to over 7 days.

Truck capacity shortages spark surcharges at LGB/LAX port complex – The port bottlenecks are adding time to the delivery of goods and driving costs higher as truckers apply peak season, wait time, dry run, chassis splits and other surcharges to keep freight moving. Importers looking to find additional providers to help with their increased container volume are experiencing significantly higher costs. In many cases the dray carriers are simply refusing to accept new delivery orders due to lack of drivers.

Inland Rail and East Coast Ports Currently Escape Severe Congestion – USWC rail delays are still within typical peak season averages, experiencing dwell times of approximately 7 days at most West Coast ports. Unlike LGB/LAX ports, inland points and East Coast ports are not yet experiencing the same severe congestion related issues. We expect this situation will deteriorate as we move into November.

Expedited Ocean Services Lack Availability – Ocean carriers offering expedited services are over-booked with some carriers cancelling or limiting existing booking volumes. Carriers such as Matson have temporarily suspended their expedited inland rail service to select destinations due to strong demand for local west coast port cargo. Despite rates that can be up to 20%-30% higher than standard market rates, shippers are finding value in utilizing these express services especially when considering the total potential destination costs waiting when your cargo arrives at a congested port. Congestion related costs could easily exceed the cost of an expedited ocean service along with the additional risk of delaying your delivery. Expedited ocean services are providing a much-needed alternative to standard ocean products, however finding available capacity on these services is becoming a major challenge in this market.

This is the year of relentless supply chain headaches with no immediate relief in sight. These supply chain challenges are only forecasted to worsen through the remainder of the 4th quarter and possibly into 2021.

For over 70 years, Laufer Group International Ltd. has been helping customers improve the way they handle their logistics. To see how we can help, or for any questions, contact Brian Martorano, National Director of Business Development, Ocean Import or contact your local sales representative.