Market Conditions – As we inch closer to peak season and big box shippers prepare for the holiday season, the capacity shortage is only expected to worsen. The COVID outbreak at the Yantian YICT terminal added fuel to the fire, as the freight backlog at origin warehouses will only make matters worse once the container volume out of South China drastically increases during the summer months.
While port delays increase in China, we continue to see improvements to vessel berthing delays in Southern California - which is great news! For the first time in several months, only a few vessels are at anchor waiting to berth past their scheduled arrival dates. In preparation for peak season, the Los Angeles port director set a goal to minimize congestion within the port complex by June 1st and this goal seems to be fairly on track. However, rail congestion continues to be an issue with rail dwell times running significantly over the historical average. For a change, let’s be optimistic that we are on the road to some form of a recovery, at least before peak season volumes hit in September and October!
Market Rates – The June 15th GRI was implemented across the marketplace as expected, with ocean carrier’s significantly increasing inland rail destinations by over $1,000 per 40’. West Coast and East Coast base port increases varied considerably by carrier. The FAK rate increases can largely be considered insignificant since premium rates are the only ones moving the freight in today’s market.
Premium rates continue to increase across the board. Carriers such as MSC are increasing their Diamond service rates by $3,000 per 40’. Premium rates to West Coast ports have increased significantly over the last several weeks with $12,000-$13,000 per 40’ now common on co-load market from non-direct ports throughout Asia rim. East Coast & USIPI premium rates are also approaching stratospheric ranges with costs ranging anywhere from $15,000 to $19,000 depending on port pairs and rail inland destinations. Will we see premium rates break the $20,000 per 40’ barrier? Unfortunately, with peak season looming it is entirely possible.
Yantian Port Congestion –Vessel congestion outside the Yantian port complex is overwhelming with dozens of vessels at anchor waiting for the first available berthing window. Though the Yantian terminal operations are steadily improving, unfortunately the damage has been done. Shippers are scrambling to find capacity out of all South China ports as factory warehouses have run out of space. With the market desperate for capacity, this latest COVID outbreak could not have come at a worse time. Further proof of how any sort of disruption is amplified in today’s marketplace.
Peak Season Surcharges effective July 1st – Peak season surcharge is right around the corner and the latest update for July 1st reflects a $2,000-$2,500 peak season charge applied to fixed rates. After the seasonal surcharge is implemented on July 1st the gap between fixed and premium rates will still be several thousand dollars. Though it will help close the gap, does that translate into additional fixed rate capacity? We doubt it. In the short-term, without the surcharge, it’s likely shippers will see their fixed rate allocations disappear.
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.