Welcome to the Zencargo weekly freight market update – the latest news from our freight and procurement teams on the real experience of shippers.
This week: carriers flock to American air, ocean reliability hits a new low.
Equipment shortages from Asia will worsen over the second half of April into early May, according to carriers. This is largely the result of the carriers’ work on adjusting vessels schedules, making them turn around faster in Europe by skipping ports and focusing on loading only empties to return to Asia faster and with more available equipment to meet demand. As an example, HMM has announced the launch of an Asia-Europe extra loader service, with a 4,600TEU vessel to sail from Busan on 26 April to Rotterdam and Hamburg, with estimated arrivals on 27 May and 30 May.
While there are now positive signs around port congestion on the West Coast, there is still a long road to normalising equipment levels – one that may be prolonged by the ongoing congestion caused by the Suez blockage.
Asia → North America
|Rates||Rates remain high with no sign of a decrease in the face of sustained demand from sales and inventory rebalance. At the same time, carriers are carefully managing capacity to ensure there is always more demand than supply. According to JOC/PIERS, volume from Asia to US grew 90% in March 2021 compared to March 2020 and 57% compared to March 2019.|
|Capacity||The latest schedule reliability of services between Asia and North America West Coast indicate a low of only 11% of services in this trade being on time. Maersk for example has reported that “ each vessel rotation is taking up to two-three weeks longer than the standard service journey time” due to port congestion.|
|Equipment||There has been a marginal improvement in container build up in Los Angeles, as per Container xChange, where we can see the index has started to decrease. Values above 0.5 represent a surplus of equipment.|
|Ports||Los Angeles and Long Beach continue to slowly improve congestion, with 19 vessels waiting as of 22nd April. At the current pace we would expect the queues of vessels to disappear by end of June.|
Graph 1 – Equipment Availability in Los Angeles (Source Container XChange)
Asia → Europe (Far East Westbound)
|Rates||Rates announced for the first half of May have seen increases in the range of $700 to $1000 per 40’.|
|Capacity||The latest Sunday Spotlight report from Sea-Intelligence indicates capacity on Asia-Europe carrier networks will recover by the first week of June. It will have taken 9 weeks for the Suez Canal incident to be absorbed according to Sea-Intelligence CEO, Alan Murphy.|
|Equipment||Shortage of equipment has been reported across all major carriers. According to Maersk “The following week starting April 19 through to the beginning of May will see the largest impact when empty containers coming back to Asia are delayed, and import returns are lower,” Container availability should normalise from May 10, but Hapag-Lloyd CEO Rolf Habben Jansen said he expected containers availability to remain tight for another six to eight weeks.|
|Ports||Port of Felixstowe has reported “This week will be very busy as vessels delayed and diverted due to the recent Suez Canal blockage arrive at the same time as scheduled vessels, although no significant delays are expected. To help manage the extra volume, extended Sunday opening hours for collection & delivery of containers will be available up to, and including Sunday, 9th May.|
Graph 2 – Capacity impact due to Suez Canal incident (Source Sea-Intelligence)
Europe → USA (Transatlantic Westbound)
|Rates||Rates have not changed but remain high.|
|Capacity||All carriers are reported overbooked and vessels are full until mid May.|
|Ports||In spite of there being no major congestion in New York, the inland availability of services through truck and rail is being affected by the port congestion happening on the US West Coast. In the US East Coast the delay to get a truck service is 2 weeks.|
Much as is the case in the ocean market, where high rates go, carriers follow. In this case, higher yields to the US are attracting carriers to the routes. The result is that global capacity is being absorbed onto higher-rate American lanes. Demand has been heightened by the relaxation of lockdowns in some countries, as well as hi-tech volumes, such as the new iPhone 12 launch in October and rapid Covid test kits.
Air freight remains busy across all routes, with major express companies suffering huge parcel delays – often more than a week slower than usual. E-commerce volumes to the UK, which can no longer travel with EU shipments now require more complex arrangements.
One of the main challenges on the US side is airport congestion, epitomised by a recent report on Chicago O’Hare International Airport. f Cargo backlogs are forcing importers to wait several days to retrieve shipment, prompting logistics companies to migrate airfreight operations and airline-handling agents to rent warehouses in surrounding townships to hold the overflow. High volumes of shipments have met staffing shortages at airport warehouses, which are unable to quickly break down or consolidate shipments for transfer to other supply chain parties.
|US||Labor Holiday is from May 1st to May 5th so demand for space this week has increased. Air China has canceled its regular flight from PVG to JFK from 28th March which has put pressure on that route but should resume before the end of April. The market still has great demand for IT products and vaccine shipments which has made space this week also very limited.|
|EU||Labor Holiday is from May 1st to May 5th so demand for space this week has increased. The market still has great demand for IT products and vaccine shipments which has made space this week also very limited. Some spot rates are available for super dense cargo.|
|UK||Labor Holiday is from May 1st to May 5th so demand for space this week has increased. Transit services via AMS or FRA have remained normal this week but space directly to the UK is very limited. Spot rates are not available in the market and again capacity is very limited.
|US||The market is still very tight, with little capacity and high rates. Channel expectations expect air freight rates to remain elevated through 2021 primarily due to organic growth, ocean capacity scarcity/overflow and continued deficit of passenger flights.|
|Outbound||Rates are expected to remain high due to demand vs capacity imbalance. Freight rates were +68% higher in Apr 21 vs Apr 19 and +74% higher than Apr 20 baseline.|
|Availability||We are seeing availability drop on road for full trailers from Italy and Spain. We believe this is to do with Covid restrictions and drivers being less available. This has not affected groupage loadings.|
|Rates||Rates remain steady on most lanes, including ones with reduced availability for the time being.|
|Customs||Customs clearances are still the main bottleneck in road transportation booking, with clearances taking multiple days.|
The route ahead
With disruption ongoing, delays and increased rates will be an inevitable part of shipping for the next few months. Shippers will need to focus on tracking and measuring these impacts, even if current conditions making avoiding them impossible. With appropriate visibility, shippers can coordinate origin and destination operations to work with the disruption and minimise excess costs.
The information that is available in the Weekly Market Update comes from a variety of online sources. Click below to learn more about how Zencargo can help make your supply chain your competitive advantage.