Market Conditions – Supply chain bottlenecks continue to escalate with little optimism that conditions will improve through the remainder of the year. Congestion at the Shenzhen port of Yantian has created a chaotic situation as ocean carriers had no choice but to wait out the berthing delays or bypass the port further impacting the lack of capacity. Port operations are now back near 100% yet, residual effects remain as evidenced by the 15 blank sailings announced for July.
The lack of capacity throughout the Asia Rim is expected to further worsen as holiday season shipments urgently need to get on the water. Warehouses in Asia are approaching maximum capacity hampering production and pressuring importers to find capacity at whatever cost.
Market Rates – The July 1st GRI will once again further increase rates. Inland destinations will be impacted significantly, taking another 4-digit hit in the range of $1,000 to $2,000 per 40’ container. Premium rates also continue to jump with West Coast and IPI destinations seeing the largest increases by percentage. By restricting intermodal capacity, ocean carriers are making it clear that, until the rail congestion at ocean and inland terminals ease, discretionary containers will pay the highest premiums. We expect another substantial rate increase on July 15th and August 1st as demand continues to exceed capacity by large margins on the Transpacific.
Chicago Chassis Shortage Continues – The lack of available chassis in the Chicago and Midwest markets has resulted in skyrocketing demurrage costs on thousands of containers. Rail carriers are mandating payment without mitigation before releasing freight adding to the frustration. The availability of chassis equipment is expected to only slowly increase as providers reposition equipment and ocean carriers restrict new bookings until the situation improves. This is an unprecedented level of congestion is causing importers to face even longer shipment delays while demurrage meters continuing to churn on.
On a positive note, the UP Railroad just sent out an announcement acknowledging the difficulty for both dray carriers and the railroad to efficiently manage the outbound movement of containers from stacked locations at their Global 4 terminal. Effective July 1, 2021, the Union Pacific will cap storage fees for international containers that are placed in a stack at Global 4 at $2,450. If a stacked container is subsequently mounted to a chassis and available for pickup, normal storage charges will continue to accrue until the container is outgated. The $2,450 maximum fee applies to all units currently stacked at Global 4.
Importers Hit Panic Button – Available capacity in July is scarce and ocean carriers are already booking out into mid-August forcing importers to look for alternatives. Except for the Gulf ports, which are probably the most difficult to secure in the marketplace, many importers are now reviewing all options for available capacity to West Coast and East Coast base ports entry ports where ocean carriers are more likely to accept their bookings.
Origins such as Malaysia, Thailand, Vietnam, and Taiwan are suffering from lack of equipment and available capacity due to various reasons. Origins that require transshipment are first on the ocean carriers’ cut list by as direct calling vessels have more than enough freight to fill the vessels. Blank sailings have also plagued origins such as Taiwan in June and early July creating a backlog of shipments expected to last for the next several weeks.
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.