Ocean freight on the Transpacific Eastbound lane is perhaps the most challenging it has been all year, with no end in sight. Freight rates have been roughly stable since September 1, especially since the China Ministry of Transportation encouraged carriers to hold the line on rates and capacity in favor of stability up to and after the China Golden Week holiday. Carriers obliged for the most part, but they are now eyeing increases for November to push spot market rates even higher than current record levels.
Import volumes continue to surge. US retailers and wholesalers are stocking up in preparation of a record holiday season and to beat the deadline for announced tariff increases. Despite most carriers having deployed all of their available capacity, volume demand is outpacing supply. Even as extra loaders are being launched to accommodate additional volumes, the alliances are announcing blank sailings for November in an effort to maintain their advantage in the supply/demand equation.
Equipment challenges are further complicating the issue. There is a serious shortage of containers of all sizes across China and Southeast Asia ports; in many cases, shippers do not know until the last minute if containers will be available for loading. Rollover pools at origin ports are also growing. Nearly all cargo booked is rolling at least one week, and much is rolling 2-3 weeks. Between equipment challenges and space constraints, service reliability is deteriorating significantly for freight moving to the US.
The situation is pronounced in India. A series of factors has created a perfect storm of obstacles for freight moving out of the country. Poor weather, terminal equipment breakdowns, customs delays, lack of equipment, and strained vessel capacity are the primary challenges. Across the major ports of Mundra and Nhava Sheva, to the inland container depots (ICDs), empty equipment is simply not available. Vessel working time limitations at the ports are preventing carriers from efficiently repositioning equipment across India. The result of this turmoil is skyrocketing rates. Carriers are rejecting long-term fixed contract rates in favor of high short-term spot rates, mirroring the current approach for Asia origins.
Severe congestion at ports across Asia and India, as well as the US, are wreaking havoc on vessel schedules. We are seeing delays on the majority of vessels in the trade. Ports are struggling to manage the volume of containers and vessels moving through their terminals on a regular basis, causing a domino effect throughout the service string. Services are omitting some port calls entirely to make up lost time, or to avoid additional delays that are impossible to work into the schedule. Schedule reliability has been deteriorating dramatically in the months since the onset of the pandemic. September figures paint a dire picture; globally, Sea-Intelligence reports that only 56% of all deep-sea vessels arrived within a day of their schedule arrival. On the TPEB trade, the figures are even worse: 47% reliability to west coast, and 49% to east coast.
On the air freight front, volumes and rates are increasing, especially out of China. Capacity is severely limited due to low global passenger travel, and the fourth quarter is a traditionally busy period for air freight ahead of the holidays and Chinese New Year. All cargo is moving at premium rates, and air space is booking up quickly.
Expect these ocean and air freight conditions to continue for the next few months, through the end of the calendar year and at least through Chinese New Year (early February 2021). Importers are forecasting very strong volumes for this period, and carriers are planning accordingly. Ocean carriers will continue with the disciplined approach that keeps capacity tight and rates high, a strategy that will be with us for the long-term.
Forecasting has never been more important.
Transatlantic, Domestic, Global Lanes
Carriers continue to implement blank sailings transatlantic trades, keeping space tight and putting upward pressure on rates. Equipment availability across Europe is very difficult, with weeks of preplanning required to secure a container. Air freight space remains tight as well due to limited service. COVID cases are on the rise in some parts of Europe and there are growing concerns about a new round of large-scale shutdowns and restricted access to border crossings. CVI is maintaining our weekly consolidation services out of North Europe (Germany) via air and expedited LCL ocean to the US southeast.
US exporters are experiencing capacity issues as well. Vessels from the US to Asia are overbooked several weeks in advance, as are many services to Europe. One carrier, HPL, recently canceled large volumes of export bookings to rush empty containers to Asia instead. US agriculture exporters are struggling with space as a result, as are many others. We may see other carriers follow suit.
The situation on the US domestic side has continued to deteriorate. Huge import volumes are clogging up nearly every major gateway. There is significant congestion at most major US and Canada ports. The west coast is particularly congested, from LAX/LGB up to Vancouver. East coast ports including NYC and ORF are also experiencing significant issues. Vessel berthing delays, terminal operational delays, chassis shortages, full warehouses, and tight trucking capacity are impacting all shippers. Truckers are waiting at LAX/LGB terminals for 10-20 hours at a time. Truck power is booked solid for 1-2 weeks in advance. Inbound containers are known to be waiting at entry ports for weeks before they are loaded on the rail to their final destinations. LCL coloaders have issued delay notices for cargo moving via NYC and LAX, and many have reduced the amount of free days at local CFS warehouses.
Trucking rates are surging in most markets and power is difficult to secure on short notice. Please be sure to plan accordingly and book truck power well in advance.
CMA-CGM is still recovering from the massive cyber-attack that crippled its operations during October. We are still seeing delays on certain lanes while systems are brought back online. Please track shipment issues closely, and keep clear timelines in the event you are running into problems that could result in charges due CMA’s delays. Please send all urgent issues to the Pricing team for assistance with follow up.
Lastly, the entire industry is looking ahead to global distribution of a COVID vaccine. When a reliable vaccine begins to ship, impacts will be far reaching. Distribution of such a highly anticipated product require a massive amount cargo space across all modes – air, warehouse, road. It’s likely that all global shippers will feel the impacts of a vaccine distribution rush. Limited capacity will result in higher rates and significant space challenges for shippers of other products. Some in the industry expect distribution to certain parts of the world to begin as early as Jan/Feb 2021. The timeline is uncertain, but it’s a good idea to make customers aware of the future impacts now, with updates to follow as the situation develops.
Your CVI team is here to assist you through these current market challenges. Ocean freight, air
freight, domestic road/rail, and Customs Compliance – count on our dedicated professionals to care
for you and your supply chain. Call us and let us show you what we can do!
Rachel serves as Director, Pricing and Procurement for CVI. Her responsibilities include vendor selection, contract management and negotiation, transportation pricing, FMC compliance, and international agent network management.
Rachel began her career in international shipping with CMA-CGM America. She joined CVI in 2011, gaining experience in various departments with a focus on inside sales and marketing for the company. In 2014, Rachel assumed the role of Manager, Transportation, working on service procurement and development of client proposals. She has served in her current position since 2018.
A native of Norfolk, Virginia, Rachel earned her bachelor’s degree from the University of Michigan in 2005. She holds a Master of Business Administration with a concentration in Maritime and Supply Chain Management from Old Dominion University.
– Rachel Shames, Director, Pricing & Procurement, CVI
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