Ocean booking volume dropped slightly out Asia last week, surprising many in the industry. This caused the spot rate markets to finally take a breath and level off at the $20,000 level while the ocean carriers try to understand facts behind the booking slowdown. One factor being looked at is the Chinese government imposing unforeseen Power Rationing policy last week, forcing many smaller low-end and labor-intensive operations to shut down production because of the newly imposed outages. Little information is being made available on the plan, and the after-effect of these power cuts, long term plans, or impact is still unknown. (Headline from today’s Wall Street Journal. “China Power Outages Pose New Threat to Supplies of Chips and Other Goods. Coal shortages and efforts to control energy consumption are making it harder for Chinese factories to operate”).
- Further contributing to the drop is the strict COVID rules still in place in Vietnam. Production impacts have caused a 26.7% reduction in the import/export volumes from this region.
However, the booking slowdown did nothing to relieve the issues plaguing the current global ocean pipeline. Vessel delays continue to worse as the whiplash effect of larger volumes sailing and arriving in shorter windows is putting global ports beyond their short-term capacity limits. Vessels are piling up at anchorages outside ports in Asia and US, becoming nonproductive assets and driving the Asia Pacific trade lanes to a critical level of gridlock.
- Over 20% of the global container capacity is lost each week due to vessel delays.
- The number of container ships anchored off Shanghai and Ningbo has surged over recent weeks. There are now 242 container ships at anchor off the ports in China waiting for berths country-wide.
- Los Angeles / Long Beach hit a new record last week of 73 vessels stuck in anchorages or floating in drift boxes farther off the coast, with 70 vessels in the bay this morning.
- Ships waiting time at anchorage in Southern California have increased to a record 9-day average.
- Ships at anchor off the port of Shanghai and Ningbo are averaging 9 days delays.
- To ease the historic cargo surge in the San Pedro Bay, Total Terminals International (TTI) container terminal at the Port of Long Beach has begun a new pilot program offering 24-hour cargo pick up.
- The extended gate hours are welcome, but it does nothing to resolve the underlying problems in all US ports of chassis shortages, container dray driver shortages, no space available for empty container returns, and a US inland intermodal infrastructure woefully underdeveloped to handle the relentless surge.
Blank sailings and continued container shortages throughout Asia and India are becoming more commonplace as carriers struggle to keep vessels moving and desperately needed empty containers arriving back into the Asia ports.
- Carriers, including Mediterranean Shipping Co. (MSC), Ocean Network Express (ONE), and Hapag-Lloyd have confirmed a raft of blank sailings for week 39 and 40 that starts Sept. 25.
- A booking number is no assurance that a container will be available, or the intended ship will be loading on the scheduled week.
- Carriers are having to re-deploy vessel routings on a daily basis to keep even a slight level of fluidity in the transits as the number of idle vessels continues to grow.
- Transship ports are hit especially hard with the “mother vessels” having to re-route or all together skip a transship to allow the ship to catch up.
- Container delays at transship can add an additional two to three weeks to ocean transit while waiting for the next available vessel to come through with available space.
- Taiwan, Japan, and Korea continue to be hit especially hard with blank sailings as carriers lose the capacity for the “end of rotation” calls and are forced to top off in the Chinese ports and steam direct to the US to avoid worsening the vessel bunching that is occurring. This is leaving these ports short on empty equipment and short of available vessel capacity on an ongoing basis.
- As vessel capacity continues to shift to the Pacific to take advantage of record rate levels, India transits are suffering with long delays at transship ports as carriers struggle to secure capacity for the growing trade lanes.
There are multiple factors contributing to the latest ocean supply chain crisis of vessel bunching. They include:
- Americans’ buying strength is so strong that we can’t absorb all this cargo into the domestic supply chain. Ocean carriers are chasing the money with little regard for the land side bottlenecks occurring with the number of vessels on the transpacific growing.
- The number of Far East to West Coast service providers has surged from 48 carriers offering vessel service in January to 67 this month.
- As smaller carriers and charter operators are transferring smaller vessels into the Asia US trade lanes to take advantage of the $20,000.00 plus container rates, the average size of the vessels calling at the US West coast ports is shrinking.
- Smaller vessels traditionally deployed in the Asia Middle-East, Africa, and India markets are now diverting to the more lucrative Pacific lanes, adding stress to the ports, with the number of vessels needing crane space growing but the number of containers discharging each week more stable. (More ships with the same amount of cargo flowing through)
- Ports start to lose economies of scale as vessel size shrinks. It takes the same size crew to berth a 4000 teu vessel as a 9,000 teu vessel, and crane setup also takes the same time.
- The average capacity of ships serving Asia-West Coast services was 8,601 TEUs in January and is 7,125 TEUs currently, a decrease of 17%.
- The US infrastructure is not built to handle the volumes that are inundating the ports. The four Major US rail carriers seem hesitant to invest the hundreds of millions of dollars into their operations to increase capacity for what is considered by most industry experts a historic, although temporary, spike in container volumes. The feeling is, “normal volumes, (Pre COVID) will return to the industry at some point”, although the actual date for a return to “normal” at current trends has pushed out well into 2022.
- Trucking infrastructure in Asia and the US is under never-seen before capacity crunches with global driver shortages for both container and domestic truckers.
- The PNW has an outbound load to truck ratio of 7 load for every 1 available over the road truck.
- Southern California has 12.7 outbound loads for every 1 available truck.
- Rates out of both ports are well over $3.00 per mile to secure capacity.
- Container drayage is suffering a 9% shortfall on needed truck to handle available port pulls. It is a combination of driver shortage and wasted resources caused by the port congestion. Truck turn times are down by 1/3 due to delays with empty returns and appointment constrictions.
- Carriers are struggling to handle the empty container returns at ports around the country. Space is at a premium, and the inability for the port truckers to get rid of an empty is hurting the turn time, reducing production.
- The following is a message sent by the port operators operating on the West Coast that provides an example of the almost impossible rules container drayage operators are subject to daily.
“To our valued customers and partners:
Please note the following update for empty receiving at T5 and T18.
Terminal 5 is currently available to receive empty equipment for the following ocean carriers provided that the transaction includes picking up an import load (from T5 or T18).
- Wan Hai
- CMA CGM
T18 is currently open to receive empties from all other ocean carriers (currently calling T18) provided that the transaction includes picking up an import load.
Gate hours of operation for T18 and T5 : 7:00 AM – 4:15 PM.
Based on this plan we encourage you to schedule picking up your import loads as soon as possible. Please check the T18 web site daily for any updates to this plan. Updates are normally available by approximately 3 pm.”
- Basically, it boils down to, you can only return an empty when we have room, you can’t pick up a load unless you return an empty and oh, by the way, the load we will not give you an appointment to pick because we have no room for the empty you need to return is now on pier storage. The limitations and stress it is putting on the ability to move loads off the terminals is unsustainable, and driving historic pier storage charges back on the importers. The ports and carriers have got to find a solution for the lack of empty container return space or the US port situation will only worsen.
US exports are now feeling the full effects of the vessel delays and equipment shortages the US import surge is causing.
- Booking dates are moving out weeks at a time as the intended vessel is stuck in the anchorages or severely delayed arriving from Asia.
- A single export booking can have 6 or more sailing date revisions before the cargo is on a vessel and moving.
- The amount of import containers now terminating at the US ports, then transloading and trucking to destination, is having an impact on available empty containers at the interior US export locations.
- Carriers are now having to ration export containers from many of the Midwest container depot locations, leaving exporters in a continuous equipment shortage cycle.
- Exporters are having to truck cargo to ports of loading and transload to the containers near the ocean terminals, driving substantial cost into the export process.
- US rails are suffering congestion delays with the import surge. This is causing the railroads to “meter in” or limit the number of export containers the allow to be delivered to the rail terminals each day so they do not worsen the congestion situation. This is causing loading delays, carrier booking rejections and dry runs for the container carriers.
- A booking number is not a guarantee of an available container, a set vessel, space o the vessel or drayage capacity. Carriers are basically making the booking as a starting point and the pieces must all fall into place before it actually becomes a shipment.
Air charter rates from Asia to the US hit another record high last week with KE securing a flight for $1.7 Million for a 747-400F to ORD. Charter rates are anticipated to soften slightly this week with the factory interruptions noted in this message having an impact on the needed space.
- General cargo space has leveled off at $13.00 kg to $15.00 kg.
- Ground handling in LAX and ORD continues to struggle with the volumes but the delays are now down to a manageable 4 to 5 days in most cases.
Thanks and Best Regards,
Superior Brokerage Services
FMC License # 018910
1015 Collinsworth RD
Palmetto, GA 30268
Office: 404 565 1511 | Cell: 404 825 6868