US flag and port

Interpreting mixed US peak season signals

Jul 7, 2022 | , ,

With the Asia/Europe trade typically mirroring trans-pacific trends within weeks, we are watching how much US importers are pulling back on orders from Asia, and the degree to which container lines will adjust capacity, if demand suggests a slack US peak season, or alternatively a hectic and congested one.
 
The market had been expecting a hike in Trans-Pacific rates, with an early peak season beginning in late June, but with capacity and rates remaining stable, the peak season hasn’t yet materialised as anticipated. Shippers have been pulling back or even cancelling orders, while others have possibly shipped cargo early, to avoid a spike in spot rates, preferring the alternative of higher storage costs on arrival within the US.
 
Orders for Asian imports to the US have been rising since February, with the highest monthly volume of new orders suggesting very strong demand. Yet rates remain basically unchanged and premium rates imposed last year, when demand exceeded vessel supply, have faded, which suggests there is excess capacity in the trade for the first time in two years.
 
Some US retailers are reportedly pulling back on their purchase orders with Asian factories due to uncertainties over the direction of the economy and consumer spending from goods to services including dining out and travel. In addition the influence of foreign exchange, reliability of supply from Asian factories, delays within the logistics platform with shipping lines and ports and a trend for on-shoring are also having an impact.
 
With some US retailers slowing down orders until the direction of the economy becomes clearer, it is possible that the peak will be pushed back to late summer and be relatively compressed.
 
While spot rates may have softened the carriers have demonstrated that they are capable of managing capacity against sustained volume softness so it is likely we will continue to see elevated rates regardless of volume uncertainty.
 
That said, blank sailings haven’t been the issue this year, because vessel schedules have been so disrupted by congestion in Asian and US ports that the transpacific has experienced “structural” blank sailings, with vessel on-time performance from Asia to the US West and East coasts in April only about 20%, with capacity reduced by similar percentages.
 
Another significant issue has been shippers moving marchandise in from Asia early this year, to protect against possible west coast supply chain disruptions, if talks between the ILWM and PMA break down. The changes of which appear to be increasing.
 
So how does this effect you? The Trans-Pacific situation is very frequently a forerunner to the westbound Asia to Europe trades and they are intangibly linked with The European lanes generally following the same model a month or so later. So, as a precursor for the European market, it is worth being aware of the spot rate, schedule reliability, port congestion at origin and destination and any other influences on the US market, because invariably they filter through to the European trade.
 
We are working closely with our offices and network partners in North America to ensure product is delivered to market, without delay, however the peak season develops. We will also always have the most reliable services available in the market with our fixed validity contracted capacity model. In addition we have access to our own dedicated fleet of vessels to further enhance the access to container slots.
 
Contact Elliot Carlile to learn more about our US capabilities, or to discuss your supply chain requirements or the up and coming peak season so that we can ensure that you are prepared for the expected increased market activity. Bespoke and tailored services are what we deliver – based on knowledge, collaboration and partnership of all the links in your supply chain.

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Air freight industry continues to battle capacity

Jul 7, 2022 | ,

Despite the capacity challenges facing air cargo, the industry will not suffer any “lasting negative impact” from the pandemic, because global economies will recover, high value goods require expedited transport and customer demand for speed continues to increase.

The pandemic, Ukraine war and global macroeconomics illustrate how uncertainty is increasing, with one crisis after another, but over the last few years the air cargo industry has demonstrated how resilient the sector is.

Belly capacity from passenger flights, continues to be massively constrained, particularly on long-haul East/West routes and the Ukraine-Russia war has further affected capacity because of the closure of airspace, meaning airlines that are operating scheduled flights are forced to fly a longer Europe-Asia route than normal.

When passenger flights were grounded and belly-hold capacity vanished, at the onset of COVID, high demand for air cargo - to move PPE and medical products - led aviation safety authorities to amend the rules to allow the carriage of cargo in passenger cabins – on seats, or with seats removed.

In many cases, these exemptions provided the sole income for passenger airlines, but gradually the ‘preighters’ are disappearing from the market and from the end of July, Europe’s safety agency (EASA) ends the exemptions.

The FAA, meanwhile, ended the exemptions for US carriers at the end of last year and in China no cabin loading, Including PPE is allowed from July, and that’s all airlines, Chinese and foreign.

In Hong Kong, there seems to be a continuing flexible approach to the carriage of cargo by passenger aircraft, with the Civil Aviation Department adopting a facilitating approach to meet industry demand for loading in the passenger cabin.

Local operators in Hong Kong that opt to remove passenger seats for carrying cargo, will require a Supplemental Type Certificate (STC) by the CAD, while non-local operators will need to submit relevant safety procedures to CAD and obtain approval from their own civil aviation authority.

The Shanghai and Beijing COVID lockdowns also further affected capacity due to the lack of ground facilities in China and while passenger demand is greater than expected, the capacity gap remains, with projections suggesting we may not return to pre-COVID conditions before 2025.

Supply chain disruption and PO delay has been exacerbated by a lack of spare parts and materials following lockdown factory shutdowns, which is likely to put more demand pressure on airfreight when these orders become available.

With such capacity constraints there are hopes that this year’s peak season will be more shallow than initially expected, with orders getting pulled forward, as retailers try to avoid disruption leading into the back-to-school season and Christmas trading period.

For many shippers it means balancing business needs with timeline uncertainties, to meet demand, which comes with a necessary investment in air freight, particularly if inventory is likely to be held up in sea freight supply chains. 

Port congestion continues to be an advantage for the air cargo industry and while fewer ships are waiting at ports, huge delays remain and eCommerce continues to increase demand for airfreight capacity.

Anticipated changes to the market include Asia to Europe trade because of the end of the Shanghai COVID lockdown, and the North Atlantic trade due to more belly capacity creating overall excess capacity.

In summary the air cargo market is still very volatile and there are many challenges ahead, with different trade lanes effected by varying events and market conditions. This is without consideration of the macro-economic situation and the dampening of demand for goods, which would usually have a rapid impact on air cargo sentiment. 

Also, the traditional peak season for the time-critical mode usually begins to build from late August and this will create more stress and strain on some routes. In particular, as China production increases, it is expected that space will be hard to find, with passenger flights still very much restricted.

Despite ongoing challenges, we continue to find solutions for urgent and time-sensitive shipments, using a blend of scheduled, dedicated and chartered air cargo services. 

We work closely with our global network to continuously monitor market capacity and service opportunities that might benefit our customers.

Evaluating and blocking space on viable services early, including our sea/air platforms and hub services, is a critical factor in achieving the most demanding deadlines. 

Please call Elliot Carlie for insights and advice on how to move your express time-sensitive products globally.

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Ports struggle to clear congestion ahead of peak

Jul 7, 2022 | ,

The re-opening of Shanghai after its extended COVID lockdown has not triggered the surge of sea freight that had been feared, but while volumes softened as a consequence, many UK and North European ports are still struggling with congestion.

High yard densities at container terminals and inland transport bottlenecks continue to aggravate port congestion problems, which are exacerbated by lack of port labour and shortage of truck drivers, that lead to increased dwell times for import containers.

Container ships deployed on the Asia-North Europe trade are still massively delayed to complete voyages, arriving in Europe 10 days late and up to 20 days late in China for their next round trip, forcing carriers to blank some sailings as there are no vessels available.

The time needed to discharge and load at the three biggest European container ports was a total of 36 days between arrival at Rotterdam and departure from Hamburg, largely as a result of a surge in ultra-large container vessels (ULCVs) from Asia. Such delays cannot be caught up by sailing back to Asia at full speed.

Delays for feeder vessels and inland waterway operators have been particularly bad, with delays at Rotterdam climbing from 66 hours to 89, with Antwerp’s hovering at the 37-hour mark, but delays in excess of a week are commonplace.

Several COVID infections have been reported within the Rotterdam workforce, with less gangs being deployed and the start of the school holidays next week will put operational capability under further pressure.

Long dwell times for transshipment and import cargo continue and off yard storage for custom blocked Russian cargo and long stay imports is now being fully utilised, with no empty containers being accepted until further notice, as a yard protection measure. Regular feeder calls in-between main liners are necessary to cope with the high yard utilisation.

The congestion in Antwerp and Rotterdam is impacting inland situation, with less trucking capacity - approximately 50% of usual transport capacity.

Yard utilisation stands at 90% in Hamburg and operations have been severely impacted by strikes and low productivity due to labour shortages, resulting in extreme waiting times for vessels.

Labour disputes are impacting French ports too and while train capacities are OK, local haulage is full at Toulouse, Bordeaux, Lyon and Gevrey for up to two weeks.

We are closely monitoring the situation throughout all European ports. You may think that delay and congestion in a European port does not have impact on your container movements, but it does. The consequences are delays for UK vessel calls and and extended overall transit time.

Metro try to work with the most reliable partner shipping lines, but with only 19% on-time reliability on the Asia to Europe trades (across all carriers) as reported in the trade press in 2022, this is not an easy task.
 
Metro issue regular market reports, including comprehensive statistics and we are happy to share these with our clients for transparency and visibility, on the current market situation and conditions. If you would like to receive this report please email your usual contact or call Grant Liddell who will be delighted to discuss and provide the detailed document.

To learn how we can help you avoid European/UK disruption and port congestion, please get in touch with our sea freight director, Andy Smith, who can advise on the best solutions for your ocean supply chain.

FXT slave loading

Two thousand dollars penalty for container weight mis-declaration

Jul 7, 2022 | ,

The accurate weighing of a container is a legal requirement, that is critical for safe handling and correct vessel stowage, to avoid stability-related issues which may contribute to capsizing or sinking of the ship, with severe penalties for non-compliance.

The Verified Gross Mass (VGM) declaration was introduced by the International Maritime Organization (IMO) six years ago to safeguard port workers, increase the safety of container vessels, improve vessel stability and prevent the collapsing of container stacks.

With the SOLAS (Safety of Life at Sea) amendment, a packed container will not be loaded on board vessels unless its VGM - the combined weight of the container tare weight and weight of all cargo, including all packaging and dunnage - has been provided by the shipper to the ocean carriers and/or port terminal representatives prior to the load list cut-off date.

The shipper, is responsible for providing the VGM of the packed container. It is critical that this information is accurate and provided prompt as port terminals follow the “NO VGM – NO GATE IN” policy and additional charges will be incurred for the time spent awaiting submission of VGM.

There are two permissible weighing methods: (1) The first requires weighing the container after it has been packed, using approved weigh-bridge or similar equipment; (2) while the second requires the weighing of all the cargo and contents of the container and adding those weights to the container’s tare weight as indicated on the door end of the container. 

Estimating the weight is not permitted.

The shippers’ VGM declarations should confirm that the determination of the weight of the cargo container is true and correct and in accordance with SOLAS regulations Article VI 2.4.2. and typically include the following information:

- VGM declared
- Weighing Method
- Container number
- Booking or B/L number
- Signatory
- Date

Regulatory bodies conduct random checks and impose fines in case of violations and shipping lines apply fines up to $2,000 for reporting an incorrect VGM, including:

- Discrepancy between VGM and weight declared
- Declared VGM exceeds Max Gross Weight of the container
- Declared VGM is less than Tare Weight of the container

So now not only is there a moral obligation to get declared container weights correct, but also a financial penalty for those that are incorrect, whether by design or due to an error. 

Please reinforce with all of your supply chain partners and vendors/ suppliers and export teams to ensure that issues are avoided in the VGM declaration, as this will also undoubtedly have an impact, causing delays of movements and potential storage as a consequence. It is really very serious.

Our sea freight team simplify VGM compliance for our customers, helping them determine and record accurate weights, in accordance with SOLAS requirements.

We also have a network of accredited weigh-stations, when customers would prefer for us to submit VGM to the carrier and terminal on their behalf.

For more information on our VGM solutions, please get in touch with Emma Hulbert, Senior Import Commercial Manager, or Andy Smith, Sea Freight Director. They can advise and recommend the best solutions for compliant FCL exports/imports.

Category: Supply Chain

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