Market Conditions – As Southern California’s average vessel berth dwell time approaches seven days, the Chinese New Year holiday is not expected to provide much relief to US ports in March. We are seeing only a limited number of officially announced blank sailings over the next several weeks. Port congestion continues to wreak havoc on vessel schedules and that is creating enough blank sailings on its own by default. The speed at which market volumes recover after the holiday break is becoming a little clearer as shipper forecasts look strong market wide through at least March. For a multitude of reasons many purchase orders simply did not get on the water prior to the holiday. As a result, we expect volumes to ramp up quickly in early March.
Market Rates – The majority of ocean carriers extended their February 1st rates through to the end of February. As rates remain at record levels why wouldn’t they? We expect market rates to remain steady into March as any movement in market rates will be determined by how quickly volumes bounce back after the Chinese New Year holiday. It is important to remember that volumes do not necessarily have to bounce back 100% for rates to remain at current levels as the port congestion continues to remove a significant amount of weekly capacity. We are hopeful that enough capacity is available to prompt the disappearance of the current market rate premiums – but only time will tell.
Ocean Carriers Look to Reduce Equipment Free-Time in 2021 – Equipment turn-times have been under the spotlight during the current import surge due to the shortage of empty containers in Asia since last fall. Many factors are behind this on-going container shortage and import container turn times are only one piece of the puzzle. Ocean carriers will have a significant amount of leverage during contract negotiations, so we expect downward pressure on equipment free time in the market.
Ocean carriers will likely push for lower equipment turn times by reducing the amount of container per-diem free time in long-term fixed rate contracts. We can assume that if ocean carriers are successful reducing the amount of free time within long-term fixed rate agreements then the rest of the market will likely see similar reductions to tariff free time down the road.
2021 Contract Negotiation Season Talks – The unofficial starting whistle for the annual long-term fixed rate contract season typically begins the week after TPM (Transpacific Maritime Conference), held every year in Southern California during the first week of March. We expect RFP’s to come in earlier than usual this year as importers seek to secure allocations that have been elusive at best for over the last ninety days. Early negotiations are primarily conducted between ocean carriers and importers and are commonly referred to as “BCO contracts”. Typically, the forwarder market lags by a couple of weeks. We should start to hear the chatter pick up in the coming days so let the rate rumors begin!
Extreme Winter Weather Impacts Last Mile Delivery Costs – Supply chain budgets are expected to take another hit as short-term last mile delivery cost will increase due to the extreme winter weather. The combination of record cold temperatures, ice and snow are causing many delivery delays in the Midwest, Southern Plains, Lower Mississippi Valley, and areas to the East. Dray carriers typically approve delivery orders two weeks in advance of container availability; however, the extreme weather conditions are causing sudden cancellations in the hardest hit areas right now.
Delivery delays will lead to increased rail demurrage and per-diem charges along with higher chassis costs. We recommend importers closely monitor yard turn times and review scheduled deliveries to uncover potential hidden costs in the making for the short-term. Spring can’t come soon enough!
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.