Market Letters

Transpacific Eastbound Market Update – Week 22, 2021

Market Conditions – The shipping chaos continues with little optimism for improvement over the next several weeks.  Ocean carriers have announced a significant number of blank sailings for the month of June. This is primarily impacting cargo destined for US West Coast ports, as vessels are simply unable to complete the roundtrip voyage fast enough to stabilize sailing schedules.  On a more positive note, the average vessel anchor dwell time has improved with vessel idle time down to less than four days in Southern California.

Shippers with distribution centers in the US heartland continue to experience multiple supply chain hurdles. Freight costs are extremely high, inland capacity is limited as ocean carriers prioritize coastal port cargo, chassis shortages continue, dray capacity is limited and now two major railroads have announced a reduction in demurrage free time. More information can be found below regarding the reduction in rail free time.  The punches just keep coming!

Market Rates – Ocean freight spot market rates jumped significantly on June 1st, with rates varying in amounts depending on the destination and ocean carrier.  The most glaring takeaway is the rate hikes for US inland rail destinations. Some ocean carriers have increased intermodal rates anywhere from $1,000 to $2,500 per 40’. This is a clear indicator that ocean carriers are continuing to shy away from discretionary cargo due to the long equipment turn times.

Market rates are at all-time highs, however most shippers would welcome the opportunity to move their freight on the spot market if market rate capacity was more accessible at origin.  The current reality is, to secure capacity and equipment, most of the cargo outside of fixed rate contracts require moving on premium rates. Premium rates can vary by sailing, especially on the extra-loaders that are being implemented on an ad-hoc basis into the marketplace.  Premium costs are also at all time highs with market rates now to West Coast ports between $11k-$13k per 40’ and USIPI rates around $15k-$16k.  East Coast rates vary depending on port of discharge. Destinations that have fewer direct calls face the highest premiums between ranging anywhere from $13k-$17k per 40’.

Rail Demurrage Free Time Squeeze – On May 15th, the Norfolk Southern Railroad reduced its rail demurrage free time allowance from 48 hours to 24 hours, and more recently, the BNSF announced a reduction in demurrage free-time eliminating the “5pm cut off rule” effective on June 7th.  The 5pm cut off rule provided an additional day to retrieve a laden container if the availability notification went out after 5pm local time.  The 5pm cut off will now be removed from the BNSF tariff and shippers will have 48 hours to pick up containers.  The timing is far from ideal as shortages on capacity and chassis are widespread at intermodal rail points.

Peak Season Surcharges effective July 1st Ocean carriers will implement substantial peak season surcharges on fixed rate agreements effective July 1st. Increases are expected to be well over $1,000/40’ as the gap between fixed versus FAK/premium rates increase on a bi-weekly basis.  We would not be surprised if additional increases to peak season surcharges are implemented as we move further through the summer months.

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.