Transpacific

Ocean freight demand on the Transpacific Eastbound lane continues to outpace supply, and conditions
are not expected to improve until early 2021. The most likely timeline keeps US import cargo surging up
to Chinese New Year, which begins February 12, 2021. Equipment availability at high demand locations
is still deteriorating, particularly for 40’/HC containers. Ports throughout China and Southeast Asia are
struggling to cover cargo needs. Carriers are having difficulty managing their own supply given the
imprecise timing of container unloading and empty return to depots. Our partners and shippers at origin
are coordinating continuously with container depots in attempts to secure empty containers for freight
that is piling up in manufacturers’ warehouses, ready to move as soon as equipment is available.

Carriers have deployed all available capacity, including extra loaders, between Asia and the US, yet
space constraints persist. 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.

Congestion at ports across Asia and the US continues to play a major role in the unreliability of vessel
schedules. Terminals are overwhelmed with the huge volumes moving across the trade, and wait times
for vessel berthing and working have increased significantly. Poor weather conditions, including several
recent typhoons, are exacerbating the situation. Congestion is so severe that some services have had to
omit 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.

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.

Freight rates have been roughly stable since September, though carriers continue to secure premium
fees in exchange for space and equipment allocation. Guarantees are few and far between, however.

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.

In this market, it is imperative that all transpacific eastbound shippers place bookings at least one
month prior to cargo ready date. For all business, contract/long term and floating/short term, advance
booking is required. We urge you to proactively communicate any specific space needs to your
dedicated CVI customer service or sales representative.

Transatlantic/Domestic

Carriers continue to implement blank sailings on transatlantic trades, keeping space tight and putting
upward pressure on rates. Equipment availability across Europe is the most difficult it has been all year,
with weeks of preplanning required to secure a container. Air freight space remains tight as well due to
limited service. New lockdowns and restrictions to slow the spread of COVID-19 are now in place across
Europe. With holiday closings fast approaching, securing space and equipment prior to the end of the
year is a significant challenge. CVI is maintaining our weekly consolidation services out of North Europe
(Germany) via air and expedited LCL ocean to the US southeast. For more information on our
Southbound Select LCL Service please visit our website.

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. Carriers are prioritizing empty containers so
they can more quickly position them for reloading in Asia. US exporters, including those in the
agriculture sector, are struggling to secure timely space. With slot demand high, carriers are
implementing rate increases on the US-Asia trade, effective late November and early December, until
further notice.

Early booking and forecasting are critical so we can plan appropriately for allocation and scheduling
requirements. Again, we urge you to proactively communicate any specific space needs to your
dedicated CVI customer service or sales representative.

The situation on the US domestic side is also deteriorating. 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; we recommend avoiding the LAX/LGB gateway entirely if at all possible. Vessel
berthing delays, terminal operational delays, labor shortages, chassis shortages, full warehouses, and
tight trucking capacity are impacting all shippers. Truckers are managing huge backlogs while trying to
plan for even larger volumes that are forthcoming. Inbound containers are known to be waiting at entry
ports for weeks at a time before they are loaded on the rail to their final destinations. These challenges
are especially severe at US ports, but we are seeing the problems spread to inland points as well. Chassis
and trucker shortages are becoming more common at locations including Chicago and Columbus.

To alleviate some of the pressure shippers are experiencing due to port congestion, the FMC is being
urged to step in. The concerns from shippers and truckers focus on LAX/LGB and NYC, and specifically
request suspension of detention and demurrage charges for the industry. No action has been taken by
the FMC at this time.

In addition to extra surcharges truckers are levying for terminal wait time and general market
congestion, ocean carriers have announced new surcharges to address congestion. Most of these new
fees are focused on LAX/LGB routings, though applicability varies by carrier; some are charging on local
LAX/LGB truck moves only, while others are charging on any container moving through the port complex
by road or rail. Further, some are implementing the charge on all inland moves, including any US inland
CY or door destination. Amounts vary from carrier to carrier and will be effective early December until
further notice.

Truck rates are surging in most markets and power is nearly impossible to secure on short notice. CVI is
proactively trying to schedule at least two weeks prior to cargo arrival and we are once again urging our
customers to provide forecasts as far in advance as possible.

Global

With recent positive developments in the quest for effective COVID-19 vaccines, the industry is closely
watching progress and distribution plans. Some estimate wide-scale distribution to begin as early as next
month and continuing through next year. When a reliable vaccine begins to ship, impacts will be far
reaching. Distribution of such a highly anticipated product requires 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. We are monitoring the development and will provide updates and solutions as the
situation progresses.

Background of Industry-Wide Container Shortages:
• Low production in 2019 to match the usual scrapping ratio
• Fewer orders in Q1 2020 due to COVID-19
• Sudden/Unexpected trade/shipping resurgence in Q2
• Global container and vessel utilization at record high levels
• Port congesting negatively impacting equipment turnaround
• Container manufacturers are at full capacity and unable to ramp up to meet demand
We anticipate container shortages at least through February 2021

 

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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!

Connect with us

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
Connect with Rachel

 

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