Ocean Rates and Trends for US Market | February 22, 2023

From the Editor’s Desk

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Key takeaways for the US

• TPEB capacity remains open post-Lunar New Year.
• Congestion has disappeared in most North American ports.
• COVID-19 leads to a lag in demand.
• Adjustment in capacity during 2022 was not as good as that of 2020.

Read on for more in-depth updates.

Ocean Freight Market Update

Asia → North America

U.S / CA 

TPEB capacity remains open after the LNY break

• The market is arriving back to normal after the LNY break. The earlier space and volume crunches are steadying now.
• However, the market capacity has remained high and is notably higher than in the past few years.
• Blank sailings might continue if ports wish to stabilize their rates.
• COVID-19 led to a severe decrease in container demand at the start of 2020.
• However, carriers initially worked quickly to match the pace of the rapid decline in demand.
• In September 2022, a similar drop in demand was witnessed. This continued until the very end of the year.
• A study by SEA Intelligence suggests that the capacity adjustments made to combat this have not been enough.
• The reaction in 2020 was better compared to last year and the results are very evidently seen.
• Freight rates have dropped across the board and the decline in demand couldn’t be matched.
• Furthermore, the import volumes at ten of the largest US container ports dropped by almost 17.9% in January 2023. This is in comparison to January 2022 (last year).
• The biggest volume declines were in the US West Coast ports where 23.5% fewer containers were discharged.
• These values are based on January 2022 as compared to 2021.
• Space is expected to remain open in the second half of February.

Conclusions

Rates: Rates are soft on most origin-destination combinations.

Space: Space open, no issues with equipment.

Recommendation: We recommend blank sailings to continue. Book at least two weeks prior to the date your vessel gets ready to depart.

Turkey → North America

• The congestion on both coasts of North America has disappeared.
• This has resulted in more space on top of the extra capacity added by the carriers at the end of 2022.
• Rate reductions are continuing in the second half of February. However, there is a high chance of stabilization as we enter March 2023.
• The volumes at the Port of Long Beach saw the biggest drop of the year at 32.3% compared to 2022.
• When we analyze the US Gulf Coast and East Coast ports, there is a 12.6% decline in import containers.
• The contract negotiations between the International Longshore and Warehouse Union (ILWU) and 22,000 port workers have resumed smoothly.
• Both parties agreed to set the matter aside after a recent dispute over the Seattle jurisdictional issue.
• They may get back to negotiations for the new contract to be opened. It expired last July.
• There is also increased pressure to complete the new contract negotiations as soon as possible owing to a volume shift to the US East Coast and Gulf Coast ports.
• There was a decision to move to other ports to avoid any disruptions caused by the ILWU negotiations.
• There was a delay due to these contract negotiations which resulted in the loss of business for the US West Coast ports.

Conclusions

Rates: Rates are constantly dropping and the downward trend is expected to continue for the next few months. Vessel utilization is in the 65-70% range down from 90% a few months previously.

Space for capacity: No capacity issues or issues with space.

Space for equipment: No issues with equipment.

Recommendation: We suggest you book 2-3 weeks prior to your cargo-ready date and request premium service. This will ensure better reliability and no-roll.

North America → Turkey

• Rates are decreasing week over week.
• There are limited disruptions and very few blank sailings.
• However, equipment is an issue based on carrier choice and empty pickup locations.
• It is best for you to procure equipment from wet port vs inland container depots.
• This is because equipment deficits are experienced in several areas. However, there is equipment available in most major markets.
• There are improved operations as a result of lowered demands across most North American container yards.

Conclusions

Rates: Reductions in rate witnessed in the second half of February.

Space for capacity: Space is open but capacity and equipment issues persist.

Space for equipment: Equipment issues have started owing to low import levels and the choice of carriers. Try to be open to procuring equipment from wet ports vs. inland container depots.

North America Vessel Dwell Times

Terminal Updates

• Barbour’s Cut is expected to experience berth congestion in the upcoming few days leading up to March.
• There is an influx of imports at Oakland. This could lead to vessel berthing delays and we expect congestion as well.
• All terminal gates at LA/LB are running as published. They are in line with the Pier Pass program.
• There is increased yard congestion at the Prince Rupert terminal. It remains congested and rail operations are impacted.
• The designated import traffic is being trucked off terminals for temporary storage and dwell times for imports are 10.2 days.

US Domestic Trucking Market Trends

• The FreightWaves SONAR OTVI was down 25% year over year.
• This OTVI measures the contract tender volumes across all modes.
• This decline is 3.3% month over month or 9.6% when measuring the accepted volumes after the significant decline in tender rejection rates.
• The Cass report has indicated annual volumes that were down 3.9% in December of last year.
• This was after falling 3.3% every month from November 2022.
• This trend shows us that shipment volumes are declining compared to last year but at a more gradual pace.
• The Morgan Stanley Dry Van Freight Index is another way to measure relative supply rates.
• The higher the index, the tighter the market conditions.
• Market pressures were consistent in December with average historical trends.
• We can expect softening through February as seasonal demands ease in the first two months of the year.

Final Thoughts

With the given updates, we can safely conclude that the market is faring well with a sufficient supply of equipment and capacity.

Some areas have been badly affected due to the LNY and are taking time to get back to normal. This has resulted in various congestion, delays, and increased waiting times for vessels.

We can hope to get back on track during the start of March with regular rates and space availability. It is best to make informed decisions and choose ports that are open and without space or equipment issues.

We can expect a steady and consistent increase in the market owing to these trends which are bound to change in the upcoming days. With that being said, we are grateful that you perused our newsletter till the end. Be sure to subscribe to us and stay notified about the latest weekly market updates.