Table of Contents
The European Energy Crisis
Seasonally colder temperatures and higher energy costs associated with the Russia-Ukraine war are impacting production patterns throughout Europe. Energy intensive, intermediate production for goods, such as glass, metals, and chemicals, are shifting production abroad to locations like the United States where energy costs are less. More than 25% of businesses in the chemicals sector and 16% in the auto sector reported cutting production.
Chinese New Year Holiday – 2023
The Chinese New Year holiday will fall on the 22nd of January 2023. This is much earlier than previous years and will bring an earlier rush to the market early January for approximately 3 weeks. Ocean rates are expected to drop further throughout December but expected to rise slightly leading up to the Chinese New Year.
Overall, FCL rates are continuing to fall from the main ports of China, and we are hoping to see some stabilization in the coming months.
Airfreight Update
Asia
Historically the peak season for demand, Q4 began much weaker than in past years. The outlook for air cargo demand leading into 2023 remains uncertain. Even though travel restrictions eased, and most countries (except China) reopened, capacity remains limited. Airlines adjusted flight schedules to help ensure rate stability.
Europe
Transatlantic capacity declined as airlines transition to winter schedules. The low demand is keeping the market relatively stable for U.S. and EU exports.
Oceania
Softening demand continues in Oceania. Capacity continues to be somewhat volatile, with further reductions forecasted before the end of the year. As the perishable season approaches, expect further capacity reductions where restrictions are in place, particularly for Trans-Tasman. Anticipate a higher level of demand and delays through December.
Ocean Freight Update
Global
Demand for ocean freight in most trades continue to decrease or remain flat, with shipping rates following the same pattern. Expect shipping lines to rationalize services and use blank sailings to adapt capacity to demand and prevent rate-level decreases.
Asia
Expect export volumes from Asia to all East-West trade lanes to remain weak in December. Trade volumes may recover late December/early January as exporters try to move cargo before the 2023 Chinese New Year.
Rates on all trades continue to diminish. Shipping lines are cutting some weekly services, mainly in the Trans-Pacific trade, and applying ad-hoc blank sailings to remove excess supply. Despite these capacity reduction efforts, spot rates continue to fall.
Europe
As a result of the Russia-Ukraine war and winter energy limitations in Europe, expect export and import demand to continue slowing. However, ocean capacity remains relatively stable, as congestion at origin ports and at U.S. East Coast and Gulf ports continues to cause rotation disruptions and delays.
After two months of strikes over wages and work rules, an agreement has been reached to provide terms for a settlement of the labor disputes between dockworkers and the Port of Liverpool. Both sides are confirming that an agreement has been reached which would prevent further planned strikes.
The Port of Felixstowe also experience 2 strike actions and are currently in contract negotiations. Belgium and Germany also experienced port strikes which are expected to continue in the coming months until resolutions are finalised.
North America
Vessel capacity increases have resulted in significant congestion as U.S. East Coast and Gulf Coast ports, removing an estimated 7-10% of capacity from the market.
By contrast, however, the Los Angeles/Long Beach port experiences improvements to congestion with less than 10 vessels on average waiting to berth outside the port. With no sign of a strong peak season from Asia, expect the current level of congestion at U.S. West Coast ports to remain stable.
Average vessel berth times: New York: 15 Days Norfolk: 14 Days
Savannah: 10 Days Houston: 3 Days
Los Angeles/Long Beach: 2 Days Oakland: 2 Days
South America
Space is tight but remains available to eastern South American ports, particularly from U.S. East Coast and Gulf ports. Space to Western South America is very tight due to suspended and limited carrier services. Space constraints and severe congestion persists at these ports.
Carriers are limiting services and space availability, rerouting through Houston, or prioritizing U.S. East Coast services as more direct options for Eastern South America ports.
South Asia, Middle East, and Africa
Congestion at transshipment ports in Asia remains significant, with shipment delays of 14-21 days at major transshipment ports, such as Busan, South Korea; Kaohsiung, Taiwan; Malaysia and Singapore. As a result, carriers are pushing for direct services only. Ocean space for exports out of India is generally available.
Oceania
As Southeast Asia markets continue to soften, rates are starting to decline. While capacity is opening up, demand is expected to remain steady, making pre-planning essential. Book at least three weeks in advance to avoid disruptions. While availability remains tight for 40ʹ high cube (HC) containers, there are fewer equipment shortages.
The Northeast Asia market has softened, with rates dropping drastically over the past three to four weeks. Because demand remains soft even with added capacity, carriers are using omissions/blank sailings to halt rate declines. Expect this lane to remain challenging leading into 2023. Repositioning equipment has alleviated some of the difficulties seen in prior weeks.
The Trans-Tasman market continues to remain strong with limited capacity. The addition of the new shuttle service out of Brisbane, Australia will add tonnage to the lane. Carriers continue to replace smaller vessels with larger ships. Even with service changes, the Trans-Tasman eastbound/westbound market remains significantly challenged for space.
North Europe, Mediterranean, Oceania (NEMO) services continue to be in demand. Rates remain elevated, while transhipment rates are dropping quickly as carriers actively seek more support. To slow further rate reductions, the transhipment carriers are blank sailing or removing capacity from the market.
Advanced bookings of up to five weeks are recommended for the United States. While equipment availability in the main ports has improved, chassis shortages continue to be an issue.
Expect decreased import volumes from Asia to continue to impact equipment availability.
Demand is steady, however there has been a shift in export volumes, which may help ease congestion at rail and port terminals.
Potential workforce strikes remain until both the rail and International Longshore and Warehouse Union (ILWU) come to agreements.
Inland Drayage Update
Asia
Fuel charges remain elevated, contributing to increased overall transportation costs compared with last year. The impact to surface transportation due to the COVID-19 outbreak in many regions is easing, and the highway in China is open. Customs clearance is averaging five to six hours for importing from Hong Kong to Shenzhen, and about three to four hours for exporting from Shenzhen to Hong Kong.
North America
Equipment shortages continue to affect many markets. In the Northeast, there is a shortage of gensets due to a surge of refrigerated cargo.
The chassis shortages in the Ohio Valley and Dallas/Fort Worth area persist. Additionally, there are congestion issues at most Canada rail terminals. Equipment, railcar, and driver shortages over the past several weeks have created a backlog of rail cargo in the Toronto, Montreal, and Halifax terminals. This is slowing the movement of rail cargo, which is leading to longer-dwelling containers at Canada ports.
In late October 2022, a potential rail strike was announced for mid-November, however that timeline has changed to allow rail lines to present a better offer. A labour strike could occur in early December if no agreement is reached.
Oceania
Congestion in the empty container yard network and terminals is easing slightly. This means transport companies can reset ahead of the peak holiday season.
Expect rising fuel costs to significantly impact fuel levies in December and into next year. In addition, expect another round of rate increases from wharf operators.
Oceania importers should plan ahead of the holiday season and discuss storage options over the holiday period. Warehouses and container storage depots remain at high-capacity levels. Expect this capacity to fill quickly toward the end of the year.
Importance of Maritime Insurance
Shipping freight overseas almost always goes smoothly, with cargo being safely delivered on-time in most cases. However, in a small number of instances, cargo can be damaged or lost due to theft, fire, natural disasters, and this could be detrimental to your business.
Importers mistakenly believe that loss or damage to their shipment will be covered by the freight carrier, forwarder, or supplier, but this simply isn’t the case.
Billions of dollars’ worth of cargo is damaged or stolen every year, and insurance will mitigate your loss in the even of an incident.
International laws require shipping companies to carry a certain minimum amount of cargo insurance. However, this insurance covers a meagre dollar amount, making it insufficient for most shippers. Sudden loss of cargo can immediately and dramatically cut into profits and cause a domino effect on business operations for months to come.
Purchasing additional cargo insurance is the best way to protect shipments, as it can cover the full cost of the cargo regardless of carrier liability.
If an importer has purchased under CIF basis, they may only be covered to the Port/Arrival CFS. We recommend importers look at purchasing further insurance to cover them from the Port or CFS to Door (and especially when devanning & loose delivery is applicable). Importers should always consult with their Insurance Broker on all insurance matters.
For more details on any of these articles please contact your Harders Key Account Manager.
We will continue to evaluate all market options and work with you to provide individual solutions for your business.