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.

While The House of Representatives passed the Ocean Shipping Reform Act this week, to overhaul regulation of the container shipping industry, its focus on detention and demurrage billing and the container lines’ responsibility to load exports, will have little impact on import congestion, or record sea freight rates.

Carriers may leave India even as GRI’s bite

Freight rates from India to the U.S, which are already at their highest level, are increasing further as shipping lines prepare a round of big general rate increases (GRI) as peak shipping season approaches. But even with further elevated rates and the Indian peak season approaching, with a spike in demand from China growing, capacity may fall, as lines move vessels between trade lanes to carry higher-revenue cargo.

The China conundrum

Despite evidence of consumer demand slipping, there is no sign of imports from China slowing and, with Shanghai reopening, an early start to the peak shipping season is more likely, possibly as early as late June.

An early peak season is almost certain to increase spot rates, but the scale of rate increases and length of the peak season are uncertain, as some shippers are delaying or canceling orders and others will have forward-booked cargo.

US imports from Asia increased 2.7% in January through to April compared to 2020, despite the lull typically experienced over the Lunar New Year holidays and the disruption following Shanghai’s lockdown.

Port congestion

All ports within the United States have seen continued congestion for the last two years and has been a leading cause of product shortages during the pandemic, contributing to higher freight rates and supply-chain costs, which have pushed inflation in the U.S. to a 40-year high. 

NY, NJ, and Savannah are the latest to be hit with added congestion and while the east coast ports managed import increases last year, early 2022 has brought further volumes, as shipments reduced to the west coast with shippers avoiding the congestion and wanting to remove further risks of delays associated with ILWU contract negotiations uncertainty. 

Canada’s west ports are struggling with Asian imports and are announcing that all terminals are completely full. Which means that are not able to handle diversions because of ILWU negotiations or a continuance of USWC port congestion. 

Contract talks between the International Longshore and Warehouse Union (ILWU) and West Coast waterfront employers represented by the Pacific Maritime Association (PMA), which had been suspended on May 20th, until June 1st, are scheduled to continue on a daily basis, with both sides committed to good-faith negotiations without disruption, until an agreement is reached.

We are working closely with our offices and network partners in North America to set up contingency platforms, that will ensure product is delivered to market, without the delays experienced with alternative providers.

We would ask that shippers to the U.S. contact us at the earliest opportunity so that we can review their situation and prepare their supply chain for the latest challenges.

For further information please EMAIL Elliot Carlile, he will share all current options. They will take you through the alternative services and solutions, that we are able to offer, to ensure that your product reaches its destination, within vital deadlines.