Market Conditions – The long queue of vessels awaiting berth continues in Southern California just as fully laden vessels depart Asia prior to Chinese New Year. Bottom line - berthing congestion delays are far from over. The good news is that rail congestion and even local trucking in Southern California are both reflecting steady improvements. Container rail delays to major inland rail hubs are now on average under seven days from port discharge to rail departure.
As we move through the remainder of the 1st quarter, the speed at which market volumes bounce back after CNY is the big question. We expect volumes to steadily increase through March as many shippers delayed departures due to the combination of high pre-CNY premium market rates, current inventory levels well below historical averages and importers advancing orders to avoid the traditional retail peak season surge. The market is also bracing for potential west coast labor related disruptions. The current ILWU contract expires on June 30th and the union has rejected the request for a temporary extension. Another chaotic shipping year on the Transpacific is well underway!
Market Rates – Ocean carriers have extended pricing at current levels through February 14th, and we expect that rates will likely remain unchanged through February. Premium market rates rose sharply in January, however with the CNY rush over recent increases should start to fall off. Ocean carriers have announced March 1st GRI’s of $1,000 to $2,000 per 40’ which can be viewed as carrier expectations of a quick post-holiday rebound in freight volumes. Charter vessel rates post CNY should reflect lower costs then alliance carrier premiums however “buyer beware” as hidden costs lurk after departure from Asia depending on port of entry in North America.
Hidden Costs on Charter Carriers – Shippers and freight forwarders have been struggling to receive timely updates from charter carriers on terminal calls and more importantly an accurate schedule when the vessel will berth on the Southern California calls where many charter vessels were deployed in 2021. Many of the ocean carriers operating these new charters do not have the same priority access to the terminals as do long-term contracted ocean carriers. This has resulted in many charter vessels remaining in the berthing queue for extended periods of time.
Once a container is picked up from the terminals, dray carriers struggle with empty return appointments and where to return empty equipment causing additional costs such as yard storage, chassis, dry runs, and labor administration. As a result, some dray carriers are temporarily refusing delivery orders issued in the 4th quarter of 2021.
Communication is also a huge issue as the charter carrier destination agents are often so overwhelmed with inquires that the result is poor customer service. Importers are urged to take all factors into consideration before agreeing to loading on charter vessels. The benefits of gaining much needed capacity are apparent only if a complete understanding of the potential additional downstream costs is understood.
2022 Transpacific Carrier Services – Ocean carrier alliances and independents are starting to announce their service networks for the upcoming shipping season. As expected, the focus is on sub-trades such as the Pacific Northwest and East Coast when it comes to new services. Ocean Alliance, Wan Hai and MSC are all announcing new East Coast services scheduled to start in the spring. The additional capacity is welcome news as importers strategize on optimizing their supply chains in a such a challenging market.