Market Letters

Transpacific Eastbound Market Update – Week 49, 2020

Market Conditions – As we are near the close of 2020, vessels are reporting booked at near 100% capacity through December. Vessel delays continue to mount and equipment shortages are becoming increasingly common and burdensome. Congestion issues continue at port terminals in Southern California and at all major inland rail gateways. Delivery accessorial charges are spiking and in order to secure bookings and equipment on non-expedited services, ocean carriers are imposing emergency surcharges on shippers and importers alike.  Expectations are for current conditions to continue through to the start of Chinese New Year in February with no clear indication that US imports will slow following the holiday. US landside issues will easily linger through the 1st quarter of 2021.

Market Rates –Like several rate increases announced since October, the December 1st GRI didn’t get pushed through the market as ocean carriers preferred not to further aggravate multiple international regulators around the globe.  Unfortunately, this is not translating into stable flat rate costs per container as several carriers are charging emergency congestion and equipment related surcharges in lieu of a GRI. These surcharges can add anywhere from 10%-15% to the total container freight cost.  Additional accessorial costs associated with deliveries are also mounting as truckers implement terminal congestion surcharges such as pre-pulls and wait time charges.

Equipment Shortages – Equipment scarcity, especially 40’HC is at severe levels at many origins throughout Asia. In some cases, ocean carriers are restricting booking acceptance by container size and requesting shippers to be flexible to accepting any equipment size that can be made available during the booking process.  Space is so difficult to secure that shippers who cancel a booking due to a lack of specific container cube size will ultimately experience further delays with no guarantee that the preferred equipment size will be available in the short-term.  For the most part shippers understand the dire situation and are demonstrating some flexibility. What is becoming worrisome, however, is that ocean carriers are simply rolling bookings due to “no equipment available” even after the shipping order (S/O) was already released to the factory or supplier’s agent.  The result is additional costs, delays and aggravation to everyone as the S/O provides the location on where to pick up the equipment and other booking details which under normal circumstances provides a form of guarantee that, at minimum, you can load and return container to the port of origin.  This is a developing issue so stay tuned…

Rail Congestion Dwell Times – Average port dwell times remain approximately 7 days after vessel discharge to most major inland rail hubs. This is unfortunately the average and in some instances containers in Southern California are experiencing even longer delays before departure.  The longer than average dwells are usually for containers moving off-terminal via Intermodal Container Transfer Facilities (ICTF) to destinations where ocean terminals don’t have the ability to build out full rail cars without lengthy delays.  We do see some exceptions where containers to major inland hubs, where on-dock rail service is common place, are also experiencing long dwells. These include destinations such as Memphis, Kansas City and Chicago.  The most common reason for delays is where containers are placed in a on terminal container stack and due to a lack of terminal capacity are subsequently buried by the next vessel off-load.   Typically, these should move off terminal in a “first in, first out” sequence, however with terminals at capacity it’s just not a realistic expectation for the short-term.

Transit Time Reliability New Lows – Container vessels to US ports are averaging below 50% on time performance to many US ports with the majority of reasons outside of ocean carrier’s control.  Terminal congestion around the globe is causing a domino effect of bottleneck delays resulting in even further delays.  During such chaotic times it’s easy to review a booking and see an updated transit time reflecting a 7-day delay and believe your shipment was rolled when in fact it’s the same vessel that is simply running behind schedule.  This is now common place and we can only expect these conditions to continue if not worsen in January.

December Extra Loader Vessels – Ocean carriers announced as many as 20 extra loader vessels in December with 80% scheduled to call Southern California ports.  The remaining 20% sailings will cover US east cost ports including one sailing into the gulf coast.  The extra-loaders will help provide shippers with needed capacity at China ports such as Xiamen, Yantian and Shanghai.

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.