Ocean freight import growth to continue at least through the first half of 2021

As 2020 gives way to 2021, ocean freight demand continues to replenish inventories from a busy holiday season, inventory build-up ahead of the Chinese New Year manufacturing closures in February and supply just-in-case inventories as COVID-19 continues around the world.

The Shanghai Containerized Index ended 2020 with the index down $61 to $4,018 per TEU for US West Coast Ports and down $148 to $4729 per TEU for US East Coast Ports. While a slight dip in average spot rates was welcomed news, the likelihood is high that the already steep spot rates will increase at least throughout the first quarter of the new year as containers remain scarce and US import demand remains high.

Indeed, in a Dec. 28 CNBC interview, “It’s all the change in the American consumer,” Port of Los Angeles Executive Director Gene Seroka said. “We’re not buying services, we’re buying goods.” Year-to-date through November, total TEUs at the port are down 2.99%. However, the story is in the imports, up 25.17% so far for the year.

Meanwhile, on the east coast, year-to-date through November, the Georgia Port Authority has reported total TEUs on par with 2019 TEUs while loaded imports are up 1.7%.

The US ocean freight market story seems to be mainly on the West Coast thanks to Asian exports; however, as bottlenecks occur at US ports on the West Coast, the entire inland supply chain has and will continue to struggle with capacity shortages and delays through to the final-mile.

As a result, shifts from West Coast ports to East Coast ports are occurring, according to some publications. Over 60% of the US population resides east of the Mississippi River, which could be beneficial for ocean freight movements by positioning TEUs closer to customers and potentially reducing transportation costs, improving transit times, and speeding up the final mile.

The latest Port Tracker from Hackett Associates and the National Retail Federation (Dec. 9) suggests positive year-over-year monthly increases through April. However, keep in mind that for March and April, year-over-year comparisons are easy positive gains due to the coronavirus pandemic occurring in March. A clearer picture of the US ocean freight market will not emerge until the second half of 2021 or actually in 2022.

The Shanghai Containerized Index ended 2020 with the index down $61 to $4,018 per TEU for US West Coast Ports and down $148 to $4729 per TEU for US East Coast Ports.

Seroka noted in the CNBC interview that Los Angeles’ cargo volume is up 50% in the second half of 2020 compared to the first half of the year. As noted earlier in this article, strong monthly inbound TEUs were due to many reasons, including delays from earlier in the year when Chinese manufacturers were closed due to the Chinese New Year and to COVID-19. However, once these manufacturers reopened, the virus had spread worldwide, shutting down businesses, some temporarily and others permanently. To survive, many of these businesses shifted to online selling, which tends to have a different set of logistics requirements and, as a result, caused retailers, manufacturers, logistics, and transportation providers to stumble from lack of forewarning and preparation.

Risk mitigation and agility are valuable lessons that many retailers, manufacturers, logistics, and transportation providers learned in 2020. How they translate and implement these lessons in 2021 will determine the winners and losers as trade continues to be reshaped quickly by COVID-19.

January 2, 2021
Freight

Despite shortage, containers rotting in depots?

Container availability across China is still at a record-low, while US ports are overwhelmed by a surge of shipping containers from Asia, full of products retailers are eager to get on shelves for the holidays.

CAx 40HCs for Shanghai | Above 0.5 indicates a surplus and below 0.5 indicates a deficit of containers Source: Container xChange

Due to the fastest increase in demand after months full of blank sailings, container availability for 40HCs is only at 0.05 CAx points compared to 0.63 at the same time last year, according to the Container Availability Index.

Although the US East Coast is usually a surplus location of equipment (last year’s CAx value for 40DC was 0.7), this, the container availability dropped to 0.43 indicating actually less containers than needed.

Containers spend 45 days on average in depot

Average and median time of containers (in days) between “empty in depot” and “empty dispatched” | Source: Research Project FraunhoferCML & Container xChange

Although containers are very much in need, they still spend on average 45 days empty at depots according to a research project by FraunhoferCML and Container xChange.

Especially in regions with low container availability such as China and the US, the average is comparably high with 61 and 66 days compared to the global average of 45 days.

The high standard deviation of 85 days in North America and 129 days across Asia indicates many cases where containers spend far more days inside depots than the average suggests.

Compared to the Middle East (21 days on average) and Europe (23 days on average) it takes more than 30 extra days to move containers out of the depots and make money with them.

December 16, 2020
Freight