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JAS FLIGHT OPERATIONS has expanded to 3 major air freight corridors:
Now twice per week between USA and EUROPE
Additionally, we continue to offer our SEA-AIR solutions via Singapore and Incheon hubs which are connecting Europe, North and South America with China.
Our Airfreight team is closely watching the market regarding the latest developments and coordinating solutions based on our clients' needs.
Ocean Market Update: May 2021
Carriers have effectively increased capacity on the major East/West trade-lanes. Weekly average nominal capacity in the Asia to North America trade-lane this week stands at 568,351 TEUs, the highest level ever recorded and up 45.7% on a year-over-year-basis. This compares to 423,689 TEUs for the Asia to Europe trade-lane; up 24.7% compared to a year ago. All available ships are currently sailing.
Schedule Reliability Further Deteriorates
Even though the Ever-Given blockage of the Suez Canal happened over 6 weeks ago, the overall vessel schedule reliability is still impacted by this incident and will be for several months to come. Severe congestion at major ports and equipment repositioning continue to be contributing factors to the delays.
Equipment Availability in Asia Under Further Pressure
The carriers are also investing in more equipment: Maersk said it’s adding 260,000 20-foot equivalent units, or TEUs, by the end of this quarter, Germany’s Hapag-Lloyd AG is ordering 150,000 and France’s CMA CGM SA will have introduced 250,000 by July.
The industry has been facing significant equipment shortages in Asia since Q3 of 2020. While every effort has been made at resolution, including the in-fleeting of new and leased equipment to support the demand, the most crucial lever remains the ability to return containers on schedule to Asia from all regions globally. To this end, the Suez event has placed a 2-week minimum delay in container repositioning back to Asia. With no signs of demand ebbing, the carrier equipment teams continue all efforts to position both dry and reefer equipment as intended and needed at origin while actively reviewing how sailings in the coming weeks may be adjusted, which will affect the delivery of both laden and empty containers to those origins. Finally, terminal capacity around the world needs to be accounted for as a variable; as container yards become strained and new restrictions are imposed. These knock-on effects will likely cause global disruption into June.
The global pool of containers is forecast to increase by 5.8% to 45.7 million TEUs this year, said John Fossey, Drewry’s head of container equipment and leasing research. That’s up from a 1% gain last year and nearly double the projected annual increases from 2022 to 2025, he said.
The Shanghai Containerized Freight Index (SCFI) recently reached a record high of 2,979.76 points with average freight rates on the spot market nearly breaching a new historical benchmark of USD 5,000 per FEU between Shanghai and the US West Coast. It must be noted that these SCFI rates EXCLUDE any premiums paid. Meanwhile, spot rates in the Shanghai – North Europe trade-lane increased to an average of USD 8,650 per FEU, only USD 250 less below the record seen in early January.
The overheated market cooled down somewhat in Q1, with Asia – North Europe rates losing some USD 1,600 or 18% between early January and the end of March. However, freight rates on this route started soaring again in April after the Suez Canal incident.
Due to increased demand, there is now a greater demand for fuel. BAF levels are starting to rise and there will be more increases in BAF in the coming months. Q2 BAF levels to be approximately 28% higher than Q1 2021.
Global schedule reliability improved slightly compared to the past several months, with a poor reliability of only 40.4% in March. Statistically, Maersk is the most reliable carrier (48.7%) and Evergreen taking over as the carrier showing the poorest schedule integrity of 29.6%.
All carriers recorded a M/M improvement in schedule reliability, whereas none of the carriers recorded a Y/Y improvement in schedule reliability in March 2021. Wan Hai recorded the largest M/M improvement of 17.6 percentage points, while ZIM recorded the smallest M/M improvement of 2.7 percentage points.
Delays on individual trade-lanes can be far worse (see details per trade-lane further below). It is important that these delays are taken into consideration when reviewing your supply chain.
The global average delay for LATE vessel arrivals also increased as well and is now at 6.16 days.
Not only is there severe vessel schedule integrity, but the number of containers being rolled continues to be at an all-time high. According to the latest statistics from Ocean-Insights, 39% of all containers are rolled at least one time with certain ports standing out. Data from Port Klang, Rotterdam, and Piraeus all showed endemic congestion, posting rollover rates of 64%, 54%, and 59% respectively.
On the carrier side, Hapag-Lloyd, CMA CGM, and ONE all showed worsening performance in April, posting rollover rates of 51%, 56%, and 53% respectively.
Congestion continues to be a major factor at many ports globally, including ports in the USA, Canada, South Korea, China, Singapore, and the United Kingdom. Congestion challenges will continue for months to come due in part to the increased volumes, and specifically because of the Suez Canal situation.
Until the congestion improves, expect on-time performance to be extremely poor.
Carriers are beginning to announce their Q1 2021 profitability reports, and across the board all carriers announced a very successful Q1. Here are just a few results:
The first-quarter increase in rates and volume pushed Maersk’s total revenue up 30% year-over-year to $12.4 billion. Group earnings before interest and taxes (EBIT) rose sixfold year-over-year to $3.1 billion. Net profit reached $2.7 billion compared to $209 million in the first quarter last year, and not far off full-year 2020 net profit of $2.9 billion.
Hapag-Lloyd banked a $1.45 billion net profit in the first quarter, blowing past its $1 billion full-year 2020 net profit in just three months, with the significant increase in global demand that drove first-quarter earnings expected to sustain momentum through at least the first half of the year.
In a securities disclosure on the Hong Kong Stock Exchange, COSCO pre-announced net income for Q1 2021 of 15.45 billion yuan (RMB), the equivalent of $2.36 billion. That is 53 times the profit COSCO reported in Q1 2020.
There is no improvement in the equipment supply. We expect the situation to continue and become more challenging through the month of May.
Space is extremely critical due to the impact of the Suez Canal. Ships delayed in Asia are now delayed in Europe and are not able to return to Asia in a timely manner creating a capacity shortage. All schedules have been impacted, with multiple void sailings every week.
Rates continue to go up to historically high levels with the addition of multiple premiums being implemented on top of the existing GRI's. This is expected to continue for the foreseeable future. Instability in this trade-lane is expected to continue and possibly worsen before we see improvements
Rates were deflated in March and April due to capacity increases by the carriers. However, expect rates to jump back up in May due to cancelled sailings in the dedicated loops.
No improvement in the equipment supply and getting worse day by day. Situation will continue to worsen throughout May. However, the space is stable at this time but expect changes as East/West trade-lanes tighten capacity.
Schedules are delayed but comparatively more stable than the East/West trade-lanes and rates are relatively stable compared to other trade-lanes. If space and equipment shortages deteriorate it will put pressure on the rates.
The Transpacific container shipping system is sagging under a seemingly unending deluge of imports from Asia into North America. Blank sailings due to schedule recovery measures taken by the carrier continue through May and into June as carriers struggle to get vessels back into proper rotation, leading to a small reduction in capacity. FAK rate levels continue to rise and importers are often shelling out more than double the posted rates to secure ship and container equipment capacity.
Marine terminals at the Los Angeles and Long Beach port complex don’t expect the congestion that has been building since last summer to clear until this summer, while other major ports grapple with the surge that has slowed, but not stopped operations. Container lines and marine terminals continue to battle vessel delays and congestion and this looks set to continue for the foreseeable future as orders remain strong through June to both the east and west coasts of the USA.
There is still massive port congestion on the US West Coast, with Los Angeles seeing the worst of it. There is now congestion on the East Coast, with Savannah being severely affected with vessels at anchor for up to 9 days before getting a berth. Expect delays on Intermodal points in the US as rail carriers are struggling to reposition their rail cars back to where the cargo is. Chassis’ are also in short supply. Allow at least an additional 12+ days for cargo availability once vessels arrive. Carriers advise that they are fully booked through May and June, so the booking window is 6 weeks in advance.
Equipment shortages continue as carriers are prioritizing the empty repositioning of containers over full export loads. The Port of LA and Port of Long Beach data confirm this trend. Empty exports grew 65% year-to-date over the same period last year, while full containers contracted by 2% over the same period.
Capacity shortages continue to be acute as carriers introduce blank sailings to bring services back on schedule. However, this means reduced capacity in the short term - an unwelcome development in light of an already tight space availability environment.
Schedule integrity remains poor due to port congestion and omitted sailings. The hinterland network continues to feel the strain with rail having a major impact to services across North America
May 1 GRIs have been announced by most carriers. GRIs are significant and expected to remain under pressure.
There are no reductions in capacity on the LATAM trade-lanes, on either of the WCSA and ECSA trade-lanes. Vessels are 100% full and bookings remain strong through May and into June. A few extra loaders have been added to the West Coast over the coming weeks, but not to the East Coast. After several weeks of relative rate stability, carriers have announced GRIs for later in May. As with all trade-lanes, shippers are paying an extra premium to ensure space on ships, and as with most trade-lanes, bookings must be made at least 4 weeks in advance.
Equipment continues to be a major issue; carriers are prioritizing containers for revenue-earning, long haul legs.
The services themselves are not changing dramatically. There have been a couple of vessels shifted to create more capacity on mid-haul trade-lanes but no significant impact. Congestion at major ports or trans-shipment points such as Singapore and Hong Kong are worsening. Connections to mother vessels from Intra-Asia feeders is becoming harder to commit to.
Equipment is still in short supply and not improving. Many carriers are choosing to decline laden shipments in favor of moving empty containers back to Asia. Space is tight, but not critical. Nevertheless, pre-booking is essential for securing the needed capacity. Several delays are seen on all routes as all vessels are arriving with significant delays and facing further challenges at already congested ports. Rates are starting to increase and the trend is expected to continue in the coming weeks due to equipment and schedule challenges. Instability in this trade-lane is expected to continue and possibly worsen before we see improvements.
The situation from the Med and North Europe to North America is critical. Volumes continue to surge in this trade-lane leading to 100% vessel utilization and heavy rollings. Substantial rate increases have been implemented in recent weeks and more to follow in the coming weeks.
All carriers are full through the entire month of May and June. Some carriers have announced a complete booking stop. As with all trade-lanes, ensure that bookings are made at least 4-6 weeks prior to departure.
There are still a number of blank sailing programs continuing into the summer as carriers try to adjust for vessel delays caused by port congestion. The alliances are omitting ports in North America, creating delays and multiple schedule changes.
The JAS World Ocean Team is working diligently with all core partners to meet customer requirements. It is imperative forecasts are provided to our local offices to allocate our space properly. Please consider utilizing our LCL services which will allow to ship at lower costs and alleviate equipment problems.