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Rachel Shames’ Market Update – Quarter 4

By October 13, 2021 No Comments

Capacity challenges continue to plague international shippers, with new roadblocks developing frequently. In China, the week before the Golden Week holiday brought rolling power outages as the government began rationing low power supply. Factories across some of the largest manufacturing hubs in the country were impacted, slowing production of goods. The slowdown has allowed China ports to mostly clear congestion that had developed at some major gateways, especially the Shanghai and Ningbo. Rates out of China to the US have softened quite a bit as well. Loadable, short-term rates to US west coast ports dropped below $10,000 per FEU, and they fell to roughly $10,000-15,000 per FEU on many US east coast services. New carrier entrants bringing additional capacity on Asia to US west coast lanes have eased space challenges, though major congestion and landside issues greet cargo once it arrives in the US.

The markets out of Southeast Asia and India ports remain extremely tight. In Malaysia, most factories have reopened after months of COVID shutdowns. Vietnam manufacturing is expected to be mostly operational by mid-October. There are huge order backlogs across the region, so freight rates to the US are likely to remain elevated.

The industry is closely watching adjustments in import demand and US consumer confidence. The JOC reports that US consumer spending was weaker than predicted in August and early September; if this trend continues, coupled with China power-related production slowdowns, we’ll see more capacity and rate easing across Transpacific Eastbound trade lanes in the fourth quarter. However, inventories in the US are still near record lows. Supply chain challenges and product shortages are the leading headlines across US media outlets as importers sound the alarm on expected holiday season stockouts. Some are predicting a relatively stable period through Q4, with lower rates on certain lanes, and an upswing in January ahead of the Lunar New Year holiday beginning February 1.

Air freight rates out of Asia are still elevated, and capacity is tight due to limited service and passenger flights. As usual, we expect a late-season surge in air freight volumes and rates closer to the holidays and immediately prior to Lunar New Year.

The Transatlantic market remains very tight. Equipment availability in Europe is spotty, especially at inland container yards. Vessel space is a challenge; carriers are implementing structural blank sailings when delays caused by port congestion in the US and abroad necessitate a complete update of the rotation. These structural blank sailings are occurring on all US trade lanes as a result of inconsistent rotation timing. Air freight options are slowly improving now that travel is opening up between the US and Europe. More passenger flights create additional capacity and routes for shippers in both directions.

Ports in the UK are severely congested, and carriers are skipping some UK port calls to avoid huge delays. UK trucking is also difficult to secure; there is a serious shortage of drivers that dates back to Brexit and subsequent reductions of EU driver capacity. Overall, logistics operations in the UK are extremely challenging.

On the US side, the shift in inventory approach from Just-in-Time to Just-in-Case continues to overwhelm US ports, trucking, and warehouse capacity. This week, the Biden Administration secured commitments from the Port of Los Angeles, the International Longshore and Warehouse Union, and major US importers to ramp up operations to clear the bottleneck at the country’s largest gateway. The Port of Long Beach has been operating 24 hours a day since last month, making only modest progress to date. Shippers including Walmart, Home Depot, Target, and Samsung agreed to utilize night gates to move an additional 3500 containers off terminal each week.

On the east coast, Savannah vessel congestion has prompted some services to skip the port for the next few weeks to avoid major schedule delays. Trucker and chassis shortages are still very problematic, contributing to the port congestion as container dwell times on terminal remain elevated. Available warehouse space is virtually non-existent in some large markets, and extremely tight in others.

The landside challenges in the US are expected to take quite a while to clear. A sustained period of lower volume would help improve the situation at ports and inland gateways, though there is no consensus on when that may occur. According to the JOC, to improve the efficiency of the supply chain in the future, “major US gateways must expand the cargo-handling capabilities of their marine terminals. Also, the railroads, trucking companies, and equipment providers that serve those gateways must significantly increase the assets they deploy throughout the port-related supply chain.”

Meanwhile, the world’s largest ocean carriers are still reporting record profits. Drewry now estimates that total container line profit could top $300 billion by the end of 2021, thanks for record volumes and sky-high freight rates. Shippers are looking forward to see how the lines may reinvest those massive sums to improve service levels across the board.

Please book ALL cargo early – at least one month in advance, for all trades/directions. Trucks and vessels are still booking up well in advance.

 

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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!

 

Rachel Shames

Director, Pricing & Procurement

CV International, Inc.

 

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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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