Transpacific Eastbound Market Update
March 8, 2018
To Our Valued Customers:
Market Conditions - Post New Year lull in China manufacturing is slowly coming back online and we expect freight volumes to pick back up by the latter half of March. The abundance of blank sailings over the last couple of weeks had little impact on keeping short term rates from falling back to pre-CNY levels and we expect this trend to continue until market volumes recover. Ocean carriers have filed rate increases on anticipation of a market recovery for 3/15 & 4/1 which will be highly dependent on market volumes at the time (GRI average filings listed below).
US & Canada port congestion - The Canadian West Coast ports have been slowly recovering from the terminal congestion that was delaying intermodal departures by an average of 4+ days due to heavy volumes into the port of Vancouver. The congestion was caused by the temporary re-routing of vessels from Prince Rupert down to Vancouver due to terminal construction. The bouts of severe winter weather only added to the intermodal departure delays.
Last mile delivery update (ELD) - The last mile deliveries will continue to be in the spot light moving thru 2018 and beyond. The shortage of capacity in certain markets is causing significant delays and resulting in additional costs to expedite delivery. Ocean carriers such as CMA implemented a $300 per container door delivery surcharge in the Chicago, Houston, Savannah, Memphis & Columbus markets while MSC announced they will not accept new bookings for door deliveries in the USA until further notice. Dray rates have increased on average of 20% in many markets facing capacity shortages and with the electronic logging device (ELD) penalty enforcement phase fast approaching on April 1st the potential for further rate increases exists throughout 2018, especially during market volume surges.
Market capacity for 2018 - Capacity once again looks to outpace demand however the gap is noticeably shrinking with most projections under 10%. Vessels upsizing on most sub-trades, especially the USEC will account for the majority of the capacity increase while new services such as SM Lines launching of its new PNW service will also attribute to the increase in capacity. Import growth projections vary from anywhere between 5% to 7%, a very healthy number as the economy continues to show strength.
Long term BCO contract negotiations - The annual negotiations between ocean carriers, NVOCC and BCO will quickly heat up after the annual TPM (Transpacific Maritime Conference) that is being held in Long Beach, CA on 3/5/18 and while it’s early to speculate on where long term fixed rates will land it’s our opinion that East Coast shippers will again be in a good position to negotiate favorable pricing.
General Rate Increases announced in the market -
March 15, 2018 of $1000/40’
April 1, 2018 of $1000/40’
Airfreight Capacity - Airfreight space out of China and Hong Kong has opened up following Chinese New Year. Rates are at the lowest in over a year, as factories return to work and utilize this time to complete new orders, but the low costs are not expected to be long-lived. The market is expected to correct itself mid-to-late March when factories have caught up with demands.
Our #1 priority as always is to help maintain our customers’ competitiveness, to keep your cargo flowing as quickly and as consistently as possible, and to continue to communicate effectively along the way. Our nimbleness, market awareness, and “Built Different” philosophy enable us to do this - as your partner.
Thank you very much for all your support.
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