Market Conditions – Ocean freight rates shatter records as premiums to secure capacity and equipment continue to rise and the Chinese New Year draws closer. Bottlenecks are also spreading with inland rail hubs facing chassis shortages in locations such as Chicago and Memphis. Congestion at the majority of East Coast, Gulf and Pacific Northwest ports remain reasonably manageable however, dray costs continue to rise as many dray carriers continue to pass on congestion related surcharges. Imports from Asia are expected to only take a brief pause during the Chinese New Year celebrations as shipper forecasts remain strong for the foreseeable future.
Market Rates – Ocean carriers officially extended contract market rates through the remainder of January. However, for departures through mid-February, securing capacity without paying a premium is becoming an increasingly difficult task. We see the highest premiums being implemented by ocean carriers for bookings to US East Coast and inland rail points. Origins, such as Tanjin, Quindao and Xiamen, which have less nominal capacity versus main haul ports are experiencing the highest level of premium surcharges.
We normally would expect ocean freight costs to start dropping following Chinese New Year however, this seems unlikely through the remainder of winter and possibly beyond. Vessel delays at US ports are effectively removing much needed capacity from the Transpacific Eastbound market as well as hampering the ocean carriers’ empty equipment repositioning efforts. Until we see roundtrip voyage transit times normalize, expectations for high transportation costs and poor ocean service reliability will remain.
Bottlenecks seemingly endless – Supply chains continue to struggle through increasing hurdles as delays, from production to delivery and everywhere in between, effect importers. The typical inventory buffer that importers usually account for within their supply chains are being challenged every step of the way as container rollovers will only increase as Chinese New Year approaches. Various industry reports show that container rollovers in Asia are well over 30% with countries such as Malaysia encountering rollovers up to 50% as reported by Ocean Insights. Nearly three dozen container vessels have been forced to drop anchor off Southern California due to terminal congestion. If your cargo is moving to inland points via Southern California you can add at minimum, another 7-to-10-day delay in most cases. It goes without saying that predictability in today’s market is extremely difficult. With the import surge continuing, the jury is out on when a sense of normalcy will return to the marketplace.
India equipment & capacity challenges continue – While the capacity in China is extremely tight, as long as cost is a secondary consideration, importers are securing equipment and finding their way onto a vessel. The challenges in India are unfortunately quite different, where equipment and market capacity are the underlying prohibiting factors rather than price. These challenges will continue for the short-term as long as priority on equipment repositioning and capacity deployment remain on the major head-haul markets. The importance of having a diversified sourcing strategy is front and center while reviewing the overall import market over the last few months. The India market is a perfect example on why diversification is essential within importers international supply chains.