AVAILABLE OCEAN SPACE AND EQUIPMENT FROM ASIA TO USA IS NOW AT THE LOWEST LEVEL SINCE THE BEGINNING OF PANDEMIC
KEY FACTORS CONTRIBUTING TO THE GLOBAL SPACE PROBLEM
1. Suez Canal incident has caused massive delays, canceled sailings and increased port congestion throughout the world reducing global capacity by as much as 30% in the next two to three months.
2. Panama Canal low water levels has forced a reduction of weight capacity on vessels which lowers the volume of containers and products moving through the Panama Canal to the USA from Asia.
3. US has hit the lowest inventory levels ever reported by the Institute for Supply Management since the ISM index was established in 1997. There is now a huge push to replenish those inventories.
4. New Covid-19 Relief Package fueling spending power with a continued shift of buying goods instead of services.
PLEASE READ SUPPORTING ARTICLES BELOW:
Demand boom on collision course with ocean transport ceiling
Greg Miller, Senior Editor, Freightwaves.com / American Shipper, April 2, 2021
U.S. containerized imports show no sign of letting up as the second quarter begins. On the contrary: Consumer demand is strengthening in the wake of fiscal stimulus and falling inventories that necessitate even more restocking.
The biggest risk to Q2 container-shipping volume is not demand for goods, it’s transport supply.
Fallout from the Suez Canal accident will constrain vessel and container-equipment availability, leading to longer delays. By the end of this quarter, shoppers in America’s stores could find more bare shelves. Online shoppers could increasingly see the words “out of stock.”
Inventory restocking tailwinds
The positive data on demand keeps piling up. On Thursday, the Institute for Supply Management (ISM) Customers’ Inventories Index (SONAR: ISM.MCIN) sank to 29.9 points.
“This reading is the lowest ever reported since the sub index was established in January 1997,” said Timothy Fiore, chairman of the ISM survey committee. “For eight months in a row, [the index] has been at historically low levels.”
According to Amit Mehrotra, transportation analyst at Deutsche Bank, this falling index number “tells us there is additional runway for restocking demand as retailers shift away from just-in-time inventory.”
Mehrotra expects cargo volumes to be “stronger for longer” as a result of both inventory restocking and increased consumer confidence driven by vaccines and stimulus.
New retailer surveys at investment bank Evercore ISI paint a similarly bullish picture. As of Thursday, the Evercore retail sales survey index was at 67.5, up from an average of 47.1 in February.
Evercore ISI’s retailers pricing power survey index rose to 33.4, its highest level since December 2019. “Improving demand with lean inventory” drove the rise, said the bank.
In general, if demand outpaces inventory replenishment, import demand grows.
Bookings are still rising
FrieghtWaves’ SONAR platform features a proprietary index of shippers’ ocean bookings. Bookings are measured on a 10-day-moving-average basis in terms of twenty-foot equivalent units (TEUs) as of the scheduled date of departure. On Friday, the index for China-U.S. bookings (SONAR: IOTI.CHNUSA) hit a record high.
The nationwide index for inbound cargoes from all countries reached its highest-ever level on Wednesday.
The index also tracks bookings seven days into the future. This forward view shows that a fresh all-time high is coming next week.
The cargoes tracked by this data will not arrive at U.S. ports until late April or early May. In other words, as strained as ports are now, they face even greater pressure in the near future.
In California’s San Pedro Bay, off the ports of Los Angeles and Long Beach, there were 32 container ships at anchor on Thursday. That’s back up above the average of 30.5 container ships per day that have been at anchor since the beginning of the year.
Meanwhile, up in Northern California, ship-position data showed 14 ships at anchor off Oakland on Friday. Anchorage levels there have been in double digits since February.
Suez Canal fallout is coming
The Suez Canal accident is putting more pressure on an already strained global system. The number of ships waiting to transit the canal peaked last Monday, at 367.
About 80-90 ships have transited per day since the Ever Given was refloated, according to Leth Agencies. Prior to the accident, there were 52.7 per day (year to date).
But even as transits surge, more ships keep arriving. As of Saturday, there were still 156 ships at anchor awaiting passage through the Suez Canal. That’s about three times as many as normal.
After container ships transit the canal northbound, they head to Europe or the East Coast. “What’s going to happen is we’re definitely going to see bunching at European ports,” said Nathan Strang, global head of ocean freight at freight forwarder Flexport, during a webinar presented by Flexport on Wednesday. “Bunching” refers to too many ships arriving at once, creating congestion.
“There may be reduced time in port to try to recover those schedules. That’s going to lead to export cargo and equipment being left behind,” said Strang. He added that “there’s going to be delays for Europe and East Coast services.”
‘Curveball’ to prolong situation
Strang also speculated that carriers could “blank” (cancel) sailings on other routes so they could switch more ships to Asia-Europe services to counteract the accident fallout. “Carriers may start blanking trans-Pacific and trans-Atlantic routes to recover on the more lucrative Far East [to Europe] route,” he said.
Anders Schulze, Flexport’s global head of ocean freight, predicted that the Suez Canal accident would lead to “a capacity reduction across the board, both in terms of vessel capacity and [container] equipment. There will be a domino effect in terms of vessels and equipment getting back to Asia.”
The disruption at the Suez Canal and congestion at European ports will limit the number of empty containers transported back to Asia. This, in turn, will reduce the number of empty containers available to stuff with Chinese exports bound for the U.S. on trans-Pacific routes.
“The equipment situation was already somewhat critical,” said Schulze. “We were just seeing a light at the end of the tunnel with equipment availability and now this curveball will prolong the situation.”
Further compounding challenges for shippers, at least one carrier — Maersk — has temporarily halted short-term bookings in the wake of the Suez Canal accident. As of Friday, Maersk’s short-term bookings from Asia to both North Europe and North America remained suspended until further notice.
Add it all up — rising consumer demand, very low inventories, a halt to some bookings, voyage delays, vessel and container capacity curbed by Suez Canal fallout — and it’s a recipe for more bare shelves at American stores.
Ever Given’s Owner Files Suit and Declares General Average
BY THE MARITIME EXECUTIVE 04-01-2021 06:00:00
The owner of the boxship Ever Given has filed suit against operator Evergreen in connection with the vessel’s grounding in the Suez Canal on March 23, according to UK outlet The Lawyer. The details of the filing are not public, but the defendants include Evergreen and all other parties who may claim damages in connection with the incident.
The Panama-flagged Ever Given is owned by Panama-based Luster Maritime, a subsidiary of Japanese shipowner Shoei Kisen Kaisha. She is chartered to Taiwanese carrier Evergreen, with ship management by Japanese firm Higaki Sangyo Kaisha and technical management by the Hong Kong division of BSM.
As the shipowner, Shoei Kisen Kaisha is widely expected to bear the brunt of damage claims from shippers and shipping interests. Egypt alone believes it is owed at least $1 billion in compensation for the six-day shutdown and the cost of the refloat effort, Suez Canal Authority chairman Osama Rabie told reporters Wednesday. He did not specify who should be liable to pay the damages, but he emphasized that Egyptian responders “saved [the shipowner] so much by rescuing the ship without any major damage or losses.”
“We could agree on a certain compensation, or it goes to court,” Rabie said. “If they decide to go to court, then the ship should be held.”
Shoei Kisen Kaisha has declared general average in connection with the disaster, indicating that it will impose a bond requirement on cargo interests before releasing containers from the ship. Richard Hogg Lindley has been appointed as the GA adjuster, according to The Loadstar.
GA charges are typically assessed as a percentage of the value of the cargo, and in the case of massive losses – like the catastrophic fire on the Maersk Honam – shippers may be asked to pay GA and salvage bonds exceeding half the value of their cargoes. No cargo has been damaged in connection with this incident, but the bonds may be used to recover the cost of the refloat effort.
For its part, Evergreen believes that as the charterer it has “very low” exposure to financial risk from the grounding, president Eric Hsieh told Taiwanese reporters on Thursday. “Our risk exposure from the Ever Given incident is very low – even if there are damages, it will be covered by insurance,” Hsieh said. “Evergreen is free of responsibility from cargo delays [under the terms of carriage].”
Suez Canal Impact
BOC is continuing to monitor the fallout of the MV Ever Given blocking the Suez Canal. Below is a list of the services that have been affected. If you have any questions please contact your local BOC representative.
Suez Canal Update
Suez Canal to be re-opened soon – no more deviations via Cape of Good Hope
Hapag Lloyd reporting:
The vessel EVER GIVEN has refloated in the early morning and will be towed to Great Bitter Lake for inspection. Towage operations for the vessel should commence very soon during high tide. Damaged area of the canal will be inspected and repaired if necessary.
We expect transits to start later this evening. It is still not clear if any vessels might be prioritized for passage. Current backlog should be cleared within four days.
We currently do not know the exact ETA of our affected vessels, but we will do our utmost to optimize the rotations in order to minimize potential bottlenecks at ports and terminals.
Please be assured that we are tirelessly working 24/7 to keep the impact on our customers as low as possible. We will keep you regularly updated about the further developments.
The BOC Blasts 403 – Canada Border Services Agency Assessment and Revenue Management Project – coming soon!
Canada Border Services Agency Assessment and Revenue Management Project – coming soon!
The CBSA Assessment and Revenue Management (CARM) project is a multi-year initiative that will transform the collection of duties and taxes for goods imported into Canada. Through CARM, the CBSA will modernize and streamline the process of importing commercial goods.
Once fully implemented, CARM will:
• simplify the overall importing process.
• provide a modern interface for importing into Canada.
• give importers self-service access to their information.
• reduce the cost of importing into Canada.
• improve consistency of compliance with trade rules.
The implementation of CARM is structured in a series of releases. The Accounts Receivable Ledger (ARL) was the first phase of the CARM project. For details on ARL, consult the Commercial payments and accounts section of our website.
Read more about the CARM features and on how to prepare for the CARM initiative.
CARM Release 0: January 2021
The existing ARL system will be moved from its current data centre configuration to the more robust SAP S4/HANA system. External users of the system will not experience any change. Importers’ Daily Notices may be delayed a few days during the implementation of Release 0 for Electronic Data Interchange (EDI) clients.
CARM Release 1: Spring 2021
Release 1 will launch the CARM Client Portal, a self-service tool to facilitate accounting and revenue management processes with the CBSA.
CARM Release 2: Spring 2022
Release 2 will expand on the functionalities of the CARM Client Portal.
Join the CARM GCcollab group, an online forum for the trade chain community, where members can access the latest communications materials related to CARM. To join, simply create a GCcollab account and make a request to join the CARM group.
For questions about the CARM project and/or to register for future CARM-related communications, contact CARM Engagement (email@example.com).
CBSA has also established a Trade Chain Partner Working Group, whose members continue to receive information on the CARM project.
Vestager to examine competition in red-hot container market
By Louise Wendt Jensen, Astrid Sturlason – Published: 08.03.21 at 14:59, ShippingWatch.com
EU Competition Commissioner Margrethe Vestager now plans to scrutinize the extreme situation unfolding in the global container market together with the industry. The EU will subsequently “consider ways forward,” a spokesperson tells ShippingWatch.
The European competition authorities will now – together with the industry – examine the current conditions in the global container market. Conditions that have so far been criticized by both US and Chinese authorities.
Rising freight rates, growing container shortages and major delays have long been the consequence of a red-hot market that has seen extraordinary demand for transporting goods from Asia to Europe and the US during the coronavirus pandemic.
“We are discussing with market participants, i.e. shippers, freight forwarders, port operators, carriers, to fully understand the current circumstances, and consider ways forward,” says a spokesperson for Margrethe Vestager, EU executive vice-president and competition commissioner, in a comment to ShippingWatch.
“It seems that these price increases were caused by a combination of factors, such as fluctuating high demand, port congestion, and shortage of containers, in markets which are intertwined at worldwide level,” the spokesperson continues.
This is the first time the EU exhibits such a clear reaction to the current situation in the container market, seeing as the EU’s stance is often more tentative and based on a requirement that evidence must first be presented – at least if it concerns a possible breach of the container liners’ particularly favorable competitive conditions.
The rate boom and current customer dissatisfaction with the low service levels have already led authorities in both the US and China to speak up. The Chinese authorities last year summoned the world’s largest container lines to a meeting in which they were urged to curb rates.
The Federal Maritime Commission in the US has also upped its surveillance of the three large container alliances, under which the world’s largest container lines have organized themselves.
Criticism of liner companies
Shipping companies such as Maersk have been under scrutiny from the US authorities, which now demand monthly updates from the carriers in order to monitor the market. Previously, these updates were only given quarterly.
Maersk has – like many of its competitors – acknowledged that its service is currently substandard, but the carriers also all refer to the extraordinary circumstances created by the Covid-19 pandemic.
“We’re actually dismayed by the level of service we’re forced to provide right now,” said Maersk CCO, Vincent Clerc, recently.
“It doesn’t feel like a big high five moment right now. It feels like a moment where too many customer promises are not being delivered on and we are all hands on deck in trying to alleviate the situation,” he said.
Maersk CEO Søren Skou has set a stated target of bringing the company’s reliability up to between 85 and 95 percent as early as 2021. In January this year, this figure sat at 46.3 percent for Maersk’s ships against 76.4 percent in January last year.
Criticism from US agriculture
In the US, associations like the Agriculture Transportation Coalition and transport associations such as HTA have voiced their opinions. Just last week, Global Shippers’ Forum also voiced its criticism.
In a new review, GSF criticized shipping companies for continuing to provide poor service while cashing in record-level rates.
The industry association’s quarterly survey, conducted by MDS Transmodal, examines eight key performance indicators (KPIs).
“Importers and exporters around the world are paying record high shipping rates but receiving appalling levels of service reliability,” asserts Global Shippers’ Forum in the review.
Difficult for shippers to resolve
Organizations the European Association for Forwarding, Transport, Logistics and Customs Services (CLECAT) and European Shippers’ Council (ESC) have previously urged the European Commission to take action against the container lines, which they believe to be taking advantage of their special position and special competition exemption.
But so far, this has not been possible.
Because in order to do something, the two associations must either submit a formal, well-founded complaint about the competitive conditions or wait for the EU to, at some point, begin their evaluation of the so-called Block Exemption Regulation (BER).
BER is a special competition regulation that allows the container majors to coordinate their efforts through alliances such as, for example, Maersk and MSC’s 2M alliance. With the alliances, container lines are able to coordinate their networks and utilize space aboard each others’ vessels, if their market share is lower than 30 percent, that is.
Derailment Impacting Intermodal Operations in Southern California
BNSF RAILWAY, BNSF.com | March 04, 2021
BNSF experienced a derailment yesterday afternoon at Ludlow, Calif., approximately 60 miles east of Barstow. As this incident occurred on the Southern Transcon, our primary route between Southern California and the Midwest, rail operations have been significantly impacted. Both main line tracks in this location are currently out of service.
Engineering crews and equipment were quickly deployed to the scene. The first main track is currently estimated to reopen this evening, with the second main line back in service early tomorrow morning. With the high volume of intermodal traffic to/from California, customers with shipments designated to move through this corridor should expect delays until operations have fully normalized.
Gate allocations are being utilized at our Southern California intermodal facilities to ease congestion due to elevated inventories and car supply issues. Limiting gate activity will help expedite the pace of our recovery efforts once the affected main line tracks reopen.
As always, we remind customers that prompt pick-up of shipments will help improve traffic flows, reduce lot congestion and provide the space needed for processing inbound freight as expeditiously as possible. BNSF has multiple tools available for customers to track their shipments.
We appreciate your cooperation and quick response as we work together to rebalance equipment flows. Our operating teams remain focused on safely restoring service to the level you expect from us.
Vaccinations for LALB and Severe Weather Affects Rail
Lots of news coming out today in the world of transportation. 800 longshoremen in the ports of Los Angeles and Long Beach have received their first COVID-19 vaccinations. This will significantly help to reduce potential service reductions due to labor disruptions. Hopefully more states throughout the United States will follow suit and vaccinate their port and transportation workers.
With the severe weather that is affecting the majority of the country the Union Pacific Railroad will be closing most of their intermodal network due to snow and icy conditions. These conditions have affected transportation the Pacific Northwest, Midwest and as far south as Texas.
BOC will continue to monitor these stories and all those that affect global trade.