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Panama Canal delays raise risks for shippers, but not yet biting

Vessel and draft restrictions on the Panama Canal have not affected most shippers — at least not yet — but the resulting queue of container ships waiting to transit the canal does bear watching for importers moving goods into the US for the coming fall and winter seasons.

On Tuesday, the Panama Canal Authority reduced the total number of ships that can pre-reserve a transit to 14 from 19, with that reduction expected to last through Aug. 21. The reduction means fewer than 34 ships can move through the canal in both directions daily, compared with the 34 to 42 it can handle at peak capacity. The reduction in the number of ships followed a move in June by the Authority that reduced the maximum draft for neo-Panamax vessels from 50 feet to 44 feet.

The latest restrictions come as a drought has reduced the level of Gatun Lake, which provides the fresh water for the canal’s locks, to about 79 feet, compared with a five-year average of 85 feet.

With the reduction in daily transits and maximum draft — the latter of which means vessels have to run lighter than usual — wait times on both sides of the canal are increasing. Port agency WaterFront Maritime Services said in a notice Thursday that neo-Panamax ships are waiting up to 18 days before transiting the canal northward, with similar delays for southbound transits.

So far, however, those delays have not translated into a significant increase in late arrivals at US East and Gulf coast ports. A cargo operations analyst at the Port of New York and New Jersey who asked not to be identified said there’s been “no impact so far” on vessel schedules to the largest East Coast seaport.

“Vessel capacity utilization is very low right now, so the impact shouldn’t be that significant since there’s capacity to absorb,” the analyst said. “It’ll be a few weeks” before delays are seen at the port.

A Gulf Coast cargo analyst said the Port of Houston’s draft limits are already below those of the canal, so vessels calling the region’s busiest gateway have not faced cargo limits.

Details please refer to JOC news.

Source:

Angell, M. (2023, August 11). Panama Canal delays raise risks for shippers, but not yet biting. Journal of Commerce. https://www.joc.com/article/panama-canal-delays-raise-risks-shippers-not-yet-biting_20230811.html

 

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Transit times improve as supply chain congestion fades

THE collapse in demand witnessed since last September has had a positive effect on transit times for cargoes shipped on key trade lanes.

Data from freight visibility provider e2open shows that in the last quarter of 2022 the time between booking a cargo and that cargo being released at the gate of the destination port fell significantly from the previous quarter.

“It takes a company an average of 63 days (down six days) to deliver goods to truck or rail carriers after booking with an ocean carrier and completing the cross-ocean journey,” e2open said.

Even more dramatic is the eight-day decline from the same quarter last year.

“The major drop in demand for goods shipping out of Asia has continued to reduce port congestion and resulted in shorter actual transit times,” it said. “There was also a notable reduction in the booking to gate-in time for shipments out of Asia.”

The continued improvement of the overall duration could be attributed to the “Booking to Gate-In” and “Actual Transit” components of the overall workflow, e2open said.

“This is the shortest overall duration in the past eight quarters, with total days from initial booking to clearing the gate, which will hopefully continue throughout 2023.”

On the Asia-North America trades, average shipment times fell nine days over the quarter to 67 days, and were 12 days shorter than in the corresponding period in 2021.

“The largest contributor to this decrease is the drop in ocean transit time,” e2open said. “The major contributor to the reduction in overall duration are time from booking to loading at the origin port, which was down three days.”

Asia-Europe cargoes took an average of 69 days from initial booking to clearing the gate at the final port during the fourth quarter.

This is down eight days since the previous quarter and 12 days from the same quarter in 2021.

The time from booking to gate-in at the port was down six days, while ocean transit time had decreased by three days. But some of this improvement was lost with the time from unloading to clearing the gate increasing by two days.

While the changes will be welcomed by shippers, e2open warned that there were still hurdles ahead.

“As we head into the new year with a backdrop of an unpredictable global economy, the resurgence of Covid-19, escalating political tensions, and an ongoing war, supply chain leaders are wondering what the next supply chain challenge might be,” it said.

There was a risk that with demand falling, more services would be blanked, making it harder for shippers to find ocean capacity.

“Economic conditions are still uncertain. Last quarter consumers were buying cautiously, but they were buying inventory that arrived well ahead of the holiday season. Key economic indicators such as economic growth, job creation, inflation, interest rates, and fuel costs remain top of mind and make forecasts about what we’ll see in the next year unreliable.”

Source:

Baker, J. (2023, January 17). Transit times improve as supply chain congestion fades. Lloyd’s List. Retrieved January 18, 2023, from https://lloydslist.maritimeintelligence.informa.com/LL1143615/Transit-times-improve-as-supply-chain-congestion-fades

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Doomsday clock’ ticking down as shipping lines lose control of the market

Ocean carrier voyage results could soon start appearing in red ink as freight rates flirt with breakeven levels on major east-west tradelanes.

Although the container spot rate crash appears to have bottomed-out in the past few weeks, annual contract rates are also now in sharp decline.

According to Drewry’s latest Container Insight report, carriers have “lost control of the container market” by failing to manage capacity and will “act on capacity only when they are forced to do so by heavy losses”.

The maritime research consultant claimed “a deep-seated instinct to preserve volumes has kicked in”, with carriers discounting rates heavily to secure short-term bookings.

It said that, until a few months ago it was fairly confident the lines would take “the necessary steps” to reduce capacity before the market got out of control, but now admits it was wrong and that it gave carriers “too much credit by thinking they would proactively manage capacity”.

Drewry said that, after talking to various stakeholders, it had been convinced a structural change had occurred in the liner industry and that “consolidation and more efficient carrier alliances would help change old habits”.

“That was wrong too,” said Drewry.

“The price paid for reverting to type is that contract quotations are now being set at a fraction of the levels of a year ago,” it said, adding it had “vastly downgraded freight rates and profitability forecasts” showing that, from Asia to North Europe and Asia to the US west coast, revenues were running at close to round-voyage slot costs.

Drewry described the scenario on the key tradelanes as “akin to a doomsday clock, counting down the time before carriers incur losses”.

Meanwhile, anecdotal reports to The Loadstar suggest carriers are “waiting for more visibility” after the Chinese New Year on 22 January before taking more radical action, such as suspending more network loops, but that they remain optimistic there will be an inventory restocking rebound in demand post CNY.

Indeed, an investor note from HSBC Global Research say post-CNY it expects “capacity discipline to keep contract and spot rates above breakeven”.

It adds: “China’s removal of Covid-19 restrictions and potential restocking demand could drive a recovery in shipments post-CNY and lift rates in the near term.”

Nevertheless, it believes there are downside risks, from inflation, on consumer spending that could dampen demand and “likely trigger another round of price competition”.

Drewry said it still thought there would be a “major capacity reconstruction” in the liner industry, “but it will be carried out to prevent freight rates from falling below breakeven, not to gently ease profit margins above historical averages”.

It concluded: “While cargo demand has contracted at a faster pace than many anticipated, and some action has been taken to address overcapacity, it has been largely too little, too late. Instead, carriers have lost control of capacity and reverted to price competition to retain volumes.”

Source:

Wackett, M. (2023, January 5). ‘Doomsday clock’ ticking down as shipping lines lose control of the market. The Loadstar. Retrieved January 10, 2023, from https://theloadstar.com/doomsday-clock-ticking-down-as-shipping-lines-lose-control-of-the-market/

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Ocean carriers plan to blank half their sailings from Asia, post-CNY

Against a background of extremely weak demand forecasts, ocean carriers are preparing to blank around half their advertised sailings from Asia to North Europe and the US after Chinese New Year on 22 January.

High inventory levels in Europe and the US, coupled with uncertainty surrounding future consumer demand, has seen orders cancelled or postponed, resulting in Chinese factories preparing to shut down well ahead of the CNY holiday.

For example, apparel marker Inditex said in its earnings call this week its inventory levels on 31 October were 27% higher year on year, and 15% higher on 8 December. It would not be drawn on its orderbook for next year.

In its latest North America market update, Maersk said this year “more shippers are opting to wait until the holiday period concludes, as stocks shipped earlier in 2022 are already in position to fulfil demand”.

Meanwhile, after several consecutive weeks of double-digit falls, container spot market indices plateaued this week, suggesting the bottom may have been reached.

For example, on the transpacific, the Asia-US west coast component were all virtually unchanged on the week, with Xeneta’s XSI recording an average rate of $1,496 per 40ft. While, for the east coast, Drewry’s WCI edged down just 1%, to $3,952 per 40ft.

Indeed, joining the port of Los Angeles monthly media briefing this week, ONE CEO Jeremy Nixon said he expected short-term rates would remain flat into 2023, and added: “I think we are effectively on the bottom of those spot market rates.”

But he warned of a “big drop” in exports from Asia after the CNY holiday, and a “very soft” February and March.

“Let’s see whether demand starts to push back up around April/May time,” he said.

Elsewhere, on the Asia to North Europe tradelane, the average spot rates recorded by the publishing indices this week ranged from a reading of $2,167 per 40ft by the Freightos Baltic Exchange, down to $1,674 per 40ft by the WCI.

However, reports to The Loadstar indicate that space is becoming tight for sailings to North Europe prior to CNY.

And many annual contract negotiations for the route – traditionally finalised in December or January – appear to have stalled, as neither shippers nor carriers want to commit in the uncertain market conditions.

Spot rates from Asia to Mediterranean ports were also stable this week, with, for instance, the WCI reading unchanged at $2,909 per 40ft.

The transatlantic tradelane remains the outlier, with headhaul North Europe to US east coast short-term rates still at least three times higher than before the pandemic. In fact, this week’s XSI reading for North Europe to the east coast rates even ticked up slightly, to $7,189 per 40ft.

The strength of the US dollar against the euro and sterling, along with the increased focus on sourcing product from Europe instead of China, has enabled the trade to stay robust despite the downturns elsewhere.

Nevertheless, according to Sea-Intelligence, freight rates are about to nosedive on the tradelane, due to a huge 43% year-on year injection of capacity on the route.

“Spot rates on the transatlantic are primed to collapse in the coming months,” said the consultant.

Source: Theloadstar

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US inventories stocked ahead of expected drop in imports

Retailers have prepared before peak season and have plenty of merchandise in stock

INVENTORIES of US retailers are fully stocked amid concern that imports are expected to decline to the lowest levels since early last year, according to a forecast.

The National Retail Federation and Hackett Associates expects a slowdown because retail sales for the first eight months of 2022 are 7.5% higher than 2021, and annual growth is expected to be between 6% and 8%.

“The holiday season has already started for some shoppers, and thanks to preplanning, retailers have plenty of merchandise on hand to meet demand,” said NRF vice-president Jonathan Gold. “Many retailers brought in merchandise early this year to beat rising inflation and ongoing supply chain disruption issues.”

US container imports fell 11% in September compared with the same period a year earlier, according to a report by logistics consultant Descartes, though volumes were 9% higher than in September 2019.

The NRF projects that October imports in major US ports will decline 9.4% year on year, while further declines of 4.9% and 6.1% are expected for November and December respectively. It forecasts second half of the year imports will drop 4% compared with last year.

However, it still forecasts that 2022 volumes will eclipse 2021 by 0.7%, owing to a strong first half of the year, which saw volumes rise 5.5% year on year. The NRF’s projection of 26m teu in 2022 is also 20% higher than 2019 volumes.

August was a particularly strong month for ports on the east and US Gulf coasts, as New York and New Jersey, Houston and Savannah handled record import volumes, while Virginia had its second-strongest month for imports.

While the port of Virginia expects volumes to remain consistent throughout the rest of the year, Georgia Port Authority executive director Griff Lynch said in September he expects volumes to soften. Port of Los Angeles executive director Gene Seroka echoed that view when he announced the port’s August imports figures, which came in at an eight-year low.

Data from ports and Lloyd’s List Intelligence suggests that vessel backlogs are easing in most major ports on the east and US Gulf coasts. The number of boxships at anchorages is down to about 70, a decrease of more than 25% from early September.

“The growth in U.S. import volume has run out of steam, especially for cargo from Asia,” said Hackett Associates founder Ben Hackett. “Recent cuts in carriers’ shipping capacity reflect falling demand for merchandise from well-stocked retailers even as consumers continue to spend.”

The closure of factories during China’s October Golden Week holiday coupled with the Chinese government’s continuing zero-Covid policy “have impacted production, reducing demand for shipping capacity from that side of the Pacific as well”, he added.

Source: Lloyds’ List