Market Q2 2024 Update #2

There have been several schedule and market changes these last 10 days and will likely take the market another 10 days into May to settle. Fixed rates are likely to be finalized next week, and it will take the majority of the next week before we have a real idea where the actual spot freight market lands in the near future.

Here is what is going on :

Rates and Projections
Blank Sailing

Please refer to the attachment in link below for bland sailings and vessel schedules ex China.

Bad Weather Delays:

Bad weather and resulting congestion at ports in Asia are causing vessel delays of up to a week at key gateways in the region, carriers say. Hapag-Lloyd said fog is the main problem at ports in China, including Shanghai and Ningbo, while torrential rain and poor visibility were issues in Malaysia and Singapore.
The adverse conditions meant vessels could not berth even as more ships arrived at anchorage, leading to vessel bunching that exacerbated port congestion. Yard congestion in Singapore also contributed to the delays there, Hapag-Lloyd said in an advisory Thursday. The delays come on top of the extra 10- to 14-day transit carriers face due to diverting vessels around southern Africa to avoid the risk of attack in the Red Sea region. Please see the reference documents for more details.

Demand:

  • BCO demand increased before the end of April. Overall demand is strong for all lanes for Wk17-18.
  • May Spot rate projection:
  • As you can see, there are many schedule changes/space reductions in order to "balance" supply and demand.
  • A recent cargo surge to beat the May holiday in Asia (May 1-4) and overall demand increase - YOY to the tune of around 15% (also attached) and you have the makings of a GRI which will be happening to all spot cargo May 1-14 most likely.
  • Whether it will last beyond that remains unclear and we have also seen press releases that carriers are planning to bring space back into the market to stabilize the schedules and service the growth that has resumed to the USA
  • Market GRI is bandied around right now at $800/20' and $1000/40' however, it will be a very mixed bag and as mentioned we do not think it will last at a high number for a long period of time unless there are some sustained market shifts.

Space:

  • PSW/PNW: PSW space is very tight with heavy rollover for all regions due to blank sailing increase in the coming 2 weeks. PNW is manageable.
  • USEC/GULF: Tight with rollover for USEC in all regions. Manageable for GULF in SPRC, full in EPRC and NPRC.
  • Schedule integrity
  • China Port Congestion - weather-related and vessel bunching at most major China ports leads to about 3 day delay at origin on average.
  • Cape of Good Hope routing through the second half of the year seems almost certain, around 5M TEU in capacity.
  • As you can see from the attached schedules are off by a week around 50% of the time. Hapag was proud to announce their #1 position in schedule integrity with a 53% on time rate so that gives you an idea of where the bar is set.
  • Difficult to maintain any schedule integrity when the market is having sailings pulled at random to reduce supply, which has happened quite a bit in April and now to the point where space is tight moving into May.

Baltimore

  • Minimal issues/impacts reported to the supply chain as far as routings via NY/Norfolk have increased and ports could handle. Truck pricing went up in these areas (and obviously more expensive than Baltimore local)
  • The Baltimore Captain of the Port (COTP) has announced the opening of a third temporary alternate channel to provide limited access for commercially essential vessels in the Port of Baltimore. This channel, with a controlling depth of 20 feet, could potentially allow Maersk and other carriers to operate limited barge services into and out of the Port of Baltimore. We will contact customers directly should we be able to offer a barge service.

Ocean Carriers' Quest for Clarity: FMC's New Detention and Demurrage Rules

  • The World Shipping Council (WSC) files a petition with the District of Columbia Court of Appeals to seek clarification on the FMC's detention and demurrage rules regarding billing for port truckers.
  • The Federal Maritime Commission (FMC) issues final rules for detention and demurrage billing, aiming to protect port truckers from shouldering charges, but cargo receivers may still bear fees without contracting for transportation.
  • Highlights of the FMC's final rules include rejecting marine terminals' exemption requests and specifying time requirements for ocean freight forwarders to issue bills.

Gemini Cooperation's strategy to eliminate blank sailings:

  • Maersk and Hapag-Lloyd's initiative to eliminate blank sailings as part of their vessel-sharing partnership indicates a shift towards prioritizing schedule reliability and customer service.
  • The adoption of a 'hub-and-spoke' model aims to optimize network efficiency and improve transit times, aligning with customer demands for faster and more reliable shipping services.
  • Achieving 90% schedule reliability on 58 global services upon partnership launch demonstrates a commitment to meeting customer expectations and enhancing market competitiveness.

Port of Portland's container business closure:

  • The Port of Portland's decision to cease container service by October underscores the challenges faced by smaller ports in maintaining container operations amid financial constraints.
  • The inability to find a third-party operator highlights the competitive nature of the container shipping industry and the difficulty in sustaining operations without sufficient demand or financial viability.
  • This development may have implications for regional trade flows and logistics networks, potentially leading to shifts in cargo routing and port utilization patterns.
  • For TP trade lane, both SML and MSC deploy one direct call service to Portland and if with terminal closure at Portland then there would be no capacity available for these services.

HMM's expansion plans:

  • HMM's ambitious plan to double its container vessel fleet and lifting capacity by 2030 reflecting a proactive approach to capitalizing on anticipated growth opportunities in the container shipping market.
  • The expansion aligns with South Korea's government support for the maritime industry and aims to enhance the country's competitiveness in global trade.
  • Increasing fleet size and capacity may enable HMM to capture a larger market share and strengthen its position as a key player in the container shipping industry.


Regards,

Matthew Crocker / CCO


Reference Docs:

Bad Weather in Asia article

West-Coast-Trade-Report-April-2024

Space Situation as of 20240422

TP Service Rotation 2024W18-22

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