Sea Freight market update and Q3 Rates

We are in a new world of shipping. There have been spikes in demand and freight rates before, but never for such a long time and never on such a continuously upward trajectory.

The challenges we face are unique. Even with demand levels increasing on the most popular trades, equipment availability continues to be an issue and the lines still void sailings. And the real effects of those blank sailings may take up to three months to work through, contributing to the ever declining schedule reliability.

The government has added freight workers to the essential workers allowed to use the daily workplace test scheme to avoid needing to self-isolate for 10 days if pinged by the NHS app.

Logistics and warehouse workers have yet to be included to the ‘exempt’ list and despite the inclusion of drivers on the list, massive disruption is being caused to supply chains due to self-isolating workers at ports, airports, haulage contractors, rail operators, in our offices and at customers premises.

Nearly a million people have already been pinged by the app in recent weeks, which is contributing to the delays being experienced outside of the usual day to day impact on movements, and in particular the desperate state of the first/ last mile haulage, especially with late bookings.

Situation summary

Capacity is expected to remain tight on most trades as we move further into the peak season and likely to remain so, for the rest of the year.

Vietnam’s Ho Chi Minh City has been in lockdown for over two weeks and most of its terminals are severely congested, with many ships lying at anchor off Vung Tau, an important feeder and transhipment hub, waiting for berth space to open up.

Schedule reliability on the Asia-North Europe trade was at 23.8% in May compared to 86.2% in 2019. The late arrival of deep-sea vessels, combined with more container exchanges per port call, is creating surges in volume and mounting congestion at European ports.

Rotterdam is operating with berthing delays of 2 – 10 days due to ongoing congestion and the Ever Given (the Suez Canal blocker) has returned to service on European destinations, but has been forced to drop the Hamburg port call because of concerns surrounding navigation safety.

Bangladesh is close to breaking point with severe national lockdowns, restrictions on container movements and enforced factory closures.

Asia to North Europe

The space and equipment crunch continues, with market demand exceeding supply and rates skyrocketing.

The overall situation is exacerbated by blank sailings and poor equipment availability at most significant origins throughout China and other manufacturing regions.

Carriers that are overcommitted are limiting booking acceptance or rolling shipments and schedule reliability remains at all time lows.

Rates increased on the 15th July and are expected to move up again with GRI’s on the 1st August across all major trade lanes, led by the transpacific trades.

This is without the consideration of weather influence and relentless hurricanes and typhoon disruption being caused at ports and airports throughout the continent.

Shippers need to be flexible on equipment and provide as much notice of requirements as possible and book no later than 5-6 weeks prior to order ready date.

North America to Europe

The reopening of the US and European economies after last year’s COVID-19 lockdowns spurred a resurgence in the trans-Atlantic container trade, with total containerised volume between the US and Europe rising 7.4% in the first five months of 2021 compared with the same period a year ago.

In the first five months of 2021, eastbound shipments picked up 2.6% to 732,618 TEU, compared to the same period in 2020.

Space is still very tight from the west coast and while the east coast is being managed tightly by a few ocean carriers, with sufficient lead time, securing capacity is more achievable.

Equipment at east coast ports are available and rates are generally steady.

Recommend 4+ weeks lead time on bookings from the east coast and 5 to 6 weeks for the west coast.

Europe to North America

US imports from Europe hit an all-time single-month record of 328,627 TEU in April, a 14.7% increase from a year earlier. May imports reached 316,687 TEU, a 26.4% gain from the same month last year

Capacity and equipment remains severely restricted and strong volume forecasts, together with the existing cargo backlog is going to keep pressure on rate levels.

Several vessels are omitting Rotterdam from their schedule, due to the ongoing port congestion and shipper flexibility on departures from different origin ports is pragmatic.

New blank sailings announced will reduce capacity further to the west coast in the first week of August.

Shippers need to be flexible on equipment and provide as much notice of requirements as possible and book no later than 5 weeks prior to order ready date.

Federal Maritime Commission to audit detention and demurrage

The US Federal Maritime Commission (FMC) has informed the top nine container lines operating on US trades that the agency will immediately begin auditing how they bill detention and demurrage charges amid increased pressure from the White House to crack down on unreasonable storage fees tied to ongoing port congestion.

Our commercial and operations teams work closely with our partners across Asia and North America, monitoring the sea freight market and the port congestion that continues to impact most regions globally.

As we enter the traditional peak season much uncertainty remains and we will continue to keep you updated as the situation evolves; day by day.

Please do continue to send us your forecast data and order information, at the earliest opportunity, so that we can manage cargo bookings and transit deadlines, to meet your expectations.

If you have any questions, concerns, or would like any further information regarding the situation in China, please don’t hesitate to contact Elliot Carlile or Grant Liddell.