Trans-Pacific

US importers have finally cleared out most of the inventory overhang that kept their warehouses at capacity and created bottlenecks in their supply chains.

Although the incoming capacity will outstrip demand on the major trades over the next two years, the capacity overhang that has been touted in many corners of the shipping sector is being overstated, says an industry analyst.

The project, in coordination with the Vancouver Fraser Port Authority, is due to be completed in late 2024 and will help move cargo faster through Western Canada.

The soonest the Panama Canal Authority says it could see significant relief is 2028, raising the possibility of persistent drought restrictions and reduced container capacity and transits until then, writes Journal of Commerce Executive Editor Mark Szakonyi.

Carriers, shippers and logistics executives may have to get accustomed to drought-related restrictions along the critically important waterway, with costly water-saving infrastructure improvements years away.

While October is typically one of the busiest months of the year for West Coast ports, the region’s market share of imports from Asia slipped markedly from September, but carrier executives said that was an anomaly linked to capacity cuts in the eastbound trans-Pacific.

Yang Ming said the imbalance between vessel supply and cargo demand, high inflation and geopolitical risks will be among the factors pressuring the ocean market into 2024.

The carrier has followed its peers with a sharp decline in earnings, and although still highly profitable, its CEO warned that rates on the east-west trade lanes are at unsustainable levels.

US e-commerce imports are filling much of the available air cargo capacity out of China, spurring the ocean carrier to bring back an expedited service it was forced to mothball eight months ago.

On-time performance to the West Coast improved during the busiest month of 2023 for Asian imports to date, but East Coast reliability took a dip.

Pacific-focused Matson has already enjoyed the return of some cargoes that had been diverted to the East and Gulf coasts but are now returning to the West Coast after the ILWU ratified its contract in September.

A month ago, no one was predicting a peak season for air cargo on the trans-Pacific, but finding space from China to the US has become difficult as e-commerce demand heats up.

The Panama Canal faces the prospect of transit and loading limitations becoming a regular feature of all-water transits to eastern North America, while a shift of trade out of China increasingly favors Suez Canal routings in the longer-term, writes Journal of Commerce Executive Editor Mark Szakonyi.

The world’s largest ocean forwarder by volume said that despite an uptick in container freight during the third quarter, many customers still have too much inventory on hand from prior years.

Facing the prospect of low-single-digit volume growth through the Lunar New Year in February, carriers so far this month have effectively reduced almost 22% of trans-Pacific capacity through blank sailings, according to Sea-Intelligence Maritime Analysis.

Efforts by carriers to mitigate overcapacity via blank sailings amid depressed container spot rates spell sustained deterioration in container service in general for the foreseeable future, writes Journal of Commerce Executive Editor Mark Szakonyi.

The normalization of container shipping markets is being accelerated by a surplus of capacity, with predictable results on the profitability of ocean carriers.

Both Hongkong International Terminals and Modern Terminals confirmed cargo handling operations at their facilities at Hong Kong’s Kwai Chung container port were halted for about 33 hours, gradually resuming late Monday afternoon.

The Cosco subsidiary reported mostly positive volume metrics for both the third quarter and nine months through September, although revenues were down sharply.

Marine terminal operators in Los Angeles-Long Beach and the Pacific Northwest are dealing with an increase in rail container dwell times owing to an east-west imbalance in rail equipment that has worsened in recent weeks.

While the costs of meeting shipping’s net-zero 2050 target are expected to run into the trillions, Europe’s emissions trading system presents a more immediate decarbonization cost that awaits European cargo owners in the new year.

For importers and forwarders, the blank sailings mean the resulting schedule disruptions and “rolling” of cargo they are already experiencing at Asian load ports will force them to book more of their cargo with carriers they can count on to maintain schedule integrity.

New forwarding and ocean services are being added to South American trade lanes as service providers move to capture rising trade growth in the region.

The phased implementation of Europe’s emissions trading system on the shipping industry beginning next year will generate significant costs for carriers that will be passed on to customers in the form of new charges.

The decision to suspend a service outright may represent a new leg down in terms of ship capacity, which is expected to grow sharply this year and next.

Carrier executives and others say the draft limitations imposed due to a shortage of rainfall are creating a more difficult economic rationale for the so-called all-water route to the East Coast of North America.

The top four US ports, which accounted for 68.2% of US imports from Asia through August, experienced greater than 20% declines in Asian imports in the first eight months of 2023 whereas imports through Houston, the dominant port on the Gulf Coast, declined only 3.7%.

Although importers can look forward to paying low freight rates at least into 2024 due to weak volumes and significant overcapacity in the trans-Pacific, aggressive capacity reductions through blank sailings will disrupt service levels, this week’s IANA conference was told.

The gains in spot rates for ocean freight are eroding again as US importers see little need to book more space ahead of the holiday shopping season.

As many have observed in disparaging the notion of a “digital” forwarder, of which Flexport was the prototype, forwarding at its core is a business of people solving real-world problems for which there is not — and probably never will be — a technology solution, writes Peter Tirschwell.

Facing an operating loss of up to $500 million for 2023, Zim hopes the sharing arrangement with its larger competitor will help drive efficiencies “amidst continued near-term headwinds.”

US retailers historically stock up for the spring season and top off inventories following winter holiday depletion and before the Chinese New Year, but forwarders and carriers admit there’s no guarantee this time around.

The ports of Vancouver and Prince Rupert experienced a series of labor disruptions in July during longshore contract negotiations, while the Panama Canal implemented draft restrictions amid a severe drought.

But in its interim earnings announcement, Cosco Shipping Holdings also maintained a cautious outlook due to challenges it cited, including the global economy, inflationary pressures in Europe and America, and the delivery of new vessels.

Supply overcapacity coupled with mediocre freight demand has the top 25 trans-Pacific non-vessel-operating common carriers deciding whether to chase lower margin business or suffer volume losses.

MSC, which has implemented large-scale network realignments in recent months, halted Indian calls on the Sentosa service in April when it opened a standalone intra-Asia loop.

Blank sailings during August held largely steady from July as the outlook for US import demand remains unclear, according to forwarders.

The Cosco Shipping subsidiary noted that significant uncertainties over economic growth prospects and the huge injection of capacity into major trade lanes made forecasting difficult.

The fresh data also showed — starkly — how the West Coast’s share of imports from Asia eroded during the 13 months of contentious contract negotiations between the ILWU and waterfront employers.

Getting shippers to commit to premium-priced, low-emissions shipping services is a hard sell for ocean carriers and forwarders as cargo owners enjoy rates that are now mostly below pre-pandemic levels after two years of record highs.