Market Letters

Transpacific Eastbound Market Update – Week 21, 2023

Market conditions – Expectations of a second half container volume recovery can now be filed under an official “kick the can down the road” situation. This is supported by many industry leaders, including Jeremy Nixon, CEO of ONE, who recently announced his view that volume recovery will be slower than expected and delayed into July. The lack of clear market signs, including raw material movement on the intra-Asia routes, is one key indicator that a short-term turnaround is now unlikely. Once we see raw material movement start to spike, the beginning of any volume recovery would proceed at earlies, 45-60 days later. As durable goods orders remain in question for the second half, the chances of a strong peak shipping season lie in doubt.

Market rates – The April 15th general rate increase successfully pushed onto the market by ocean carriers has effectively been erased over the last 30 days.  We expect downward pressure on short-term market rates through the remainder of the month.  An example of how supply and demand will dictate market rate direction is currently unfolding in the trade today, where most ocean carriers have announced a substantial general rate increase for June 1st.However this is possibly in jeopardy with the recent announcement by Maersk Lines, see below for more details.  

June 1st General Rate – Maersk Lines just threw a curve ball into the market wide announcement of a substantial rate increase pegged for June 1st.  The proposed rate increase, if pushed through on June 1st, would increase rates to the U.S. West Coast by nearly 60% and USEC and USIPI over 30%.   The potential general rate increase has nothing to do with a demand uptick and more about simply driving ocean freight rates back into the black. Its impact is now uncertain as Maersk announced it would extend current short-term market rates through June 14th.

The announcement by Maersk earlier this week will certainly draw the attention of other ocean carriers since Maersk’s market share on the TPEB trade is significant.  As of today, May 24th, no carrier outside of Maersk has extended current rates through Mid-June.  Do the other carriers follow the traditional trade leader or set a new path and hold firm on implementing their rate increases on June 1st?  Historically, when circumstances like this arise, ocean carriers will try to protect market share, especially within an alliance. We will find out in less than a week if the carriers fold or allow Maersk to go rogue in its attempt to increase market share.

TPEB Fixed Rate Contract Wrap Up – The fixed rate contract season is finally wrapping up with levels aligning with historical freight rate averages on most port pairs excluding some U.S. inland rail destinations. Allocation discussions are now underway with weekly fixed space commitments unfolding over the next couple of weeks. As many industry sources have reported, long-term contract rates are below the levels necessary for service sustainability. As a result, Ocean carriers will rely on any potential market volume upticks to implement peak season surcharges to increase yields. With no market indicators reflecting a surge of volume on the horizon, the reliance of ocean carriers on short-term market rates to bolster the bottom line seems more likely this shipping season.

ILWU and PMA Reach Tentative Agreement –An announcement was made On April 20th regarding a tentative agreement on certain key issues, one of the most important being the staffing of non-automated terminals. Both parties assured industry stakeholders that further disruptions are not anticipated while negotiations continue towards finalizing a long-term contract.

MSC Chassis Policy Change – A change in MSC policy took effect on March 21st that now requires the consignee on the MBL to request reimbursement of chassis fees when a non-MSC chassis is utilized for transportation. MSC’s fee of $110.00 for chassis utilization includes a provision for four working days’ free time with $25.00 per day thereafter - quite reasonable versus market costs which range from $35.00 to $45.00 per day.

Prior to the effective date, MSC accepted notification at time of booking regarding chassis utilization, for example, indicating use of MSC or shipper chassis. Now this practice has ended based on the recent tariff filing. The bottom line is additional administrative labor will be necessary to assure correct accessorial invoicing is being provided to importers or freight forwarders utilizing MSC services.

Port of Houston Stops Charging Demurrage During Closures –Effective May 1st, the port of Houston will no longer charge demurrage when the terminal is closed to further align with the anticipated June ruling by the Federal Maritime Commission based off the 2022 Ocean Shipping Reform Act. The port will not charge demurrage when the terminal is closed, however their tariff daily storage cost will increase by approximately 30% to incentivize container pick up to maintaining fluidity within the port.

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