Market Conditions – The Transpacific Eastbound trade continues to hum along with import demand remaining very strong. Ocean carriers report bookings on most lanes over 100% for 2nd half of November and new bookings are being pushed out until December. Availability of empty equipment in Asia is an escalating issue with several origin ports in China, Vietnam and other key South Asian sourcing locations lacking 40’ and 40HC equipment.
We expect the import surge to continue as inventory replenishment shows few signs of slowing in the short-term. Speculation on when the import surge bubble will break is certainly a conversation piece right now and rightfully so. It’s inevitable that a slow-down will occur over the next few months, though right now best guess is not until after the 2021 Chinese New Year which falls on February 12th.
Market Rates – The November 1st general rate increase lost early momentum and the majority of carriers extended current market rates through November 14th. India is an exception where a significant increase went into effect on Nov. 1st as the combined lack of equipment and limited vessel capacity pushed rates higher. Ocean carriers that are offering expedited ocean services, also known as “speed to market services”, are increasing rates in November. Some carriers did take limited rate action out of China and other South Asian sourcing hot spots.For example COSCO increased 45’HC rates by $300 due to strong demand and lack of supply while others increased rates slightly in mostly South Asia locations with similar rational. Expectations are for ocean freight rates to remain fairly flat for the remainder of November which continue to remain at historically high levels into North America.
Vessel Schedule Reliability Drops Below 50% – September on-time vessel reliability dipped below 50% according to Sea-Intelligence. A vessel is considered on-time if arrival is within 24 hours of the originally scheduled ETA and a below 50% average is quite dreadful. Many contributing factors are currently outside of ocean carrier and alliances control such as severe weather, pandemic related labor issues and terminal congestion on both sides of the pond. Shippers are now paying historically high freight rates for service that is well below averages in terms of service reliability. Many shippers are turning to air on urgent shipments as ocean service reliability is simply not in the market right now on standard ocean services. We say “standard” as now several carriers are offering express services that are performing quite well in today’s challenging market. Expectation is that ocean service reliability will not begin to improve through at least November and quite possibly get worse.
India Ocean Delay Woes Continue – For many of the same reasons highlighted above, equipment shortages and tight capacity are a major problem for India imports. Rollovers at transship ports continue to be quite unpredictable as, unlike other areas in Asia such as China, almost all of India’s container freight moving through US & Canada West Coast ports require a minimum of at least one transshipment at another port.
A high percentage of containers that require transshipment are being rolled over due to the vessel delays. If your cargo arrives at the transshipment port on-time, containers that arrived a week earlier may have missed the connection and will load first delaying your shipment by up to a week. Most ocean carriers operate under this SOP to minimize overall delay on shipper’s cargo on a global basis.
Short-Term Fixed Rate Agreements Negotiations Remain Frozen – Recently many shippers have expressed interest in establishing short-term fixed rate contract agreements with validity into 2021. Realistically it’s a tough task in today’s market. Historically ocean carriers will entertain short-term contract agreements in a modest ocean market environment if a fair agreement can be reached with forwarders and shippers alike.
This year is by no means a modest year with spot market rates are at historic highs and forecasts remaining strong through the end of the year. In today’s market, ccean carriers are reluctant to agree to carry freight at a discount through short-term agreements in exchange for a volume guarantee.
For shippers the risk might also outweigh the reward as any new fixed agreement with ocean carriers would only provide minimal savings off current market rate levels while limiting shipper’s ability to enjoy potentially lower market rates if they fall off in the 1st quarter after Chinese New Year. We will continue to closely monitor the situation, stay tuned…
Extra Loaders to Provide Capacity & Equipment Repositioning Relief – A total of 14 extra sailings in November will help ease a lack of capacity in China while also clearing out the mountains of empty equipment at US ports desperately needed throughout Asia. Nearly 80% of the vessels will call the Southern California port complex of Los Angeles & Long Beach with remaining calling USEC ports. Reports are circulating that ocean carriers are restricting laden US export container volumes as emphasis is placed on having empty equipment available in Asia upon arrival.
Please check out laufer.com for more market insights and contact your local sales representative for additional information on available service options during these challenging times on the Transpacific.