August 2024 International Market Update

AN UPDATE FROM SUNSET’S INTERNATIONAL TEAM:

The following information from Sunset’s International team details current International market conditions. Customer communication is vital with the instability of international trade. 

Sunset is here to help with the most basic or complex shipments.  Email [email protected] to speak further about how to manage any International needs that arise.

Ocean Industry

• Panama Canal:
  • The Panama Canal expects to increase the number of daily transit slots for vessels to 36 from the current 34 beginning in September, the canal’s deputy administrator said, as rains allow authorities to ease drought-imposed restrictions.
  • Panama experienced its third-driest year on record in 2023, lowering the canal’s water level and forcing its authority to limit the number of vessels using the waterway that connects the Atlantic and Pacific Oceans.
  • At times, more than 100 ships at a time lined up and waited up to 21 days to use the canal, which is responsible for about 5% of global shipping.

• Red Sea / Suez Canal:
  • Spot freight rates have surged by approximately 105% in the last three months, and a severe container shortage is impacting industries ranging from agriculture to automotive, according to a report by The Economic Times.
  • Supply chain issues have been exacerbated by the Red Sea crisis, which has also disrupted food shipments. JSW Infrastructure anticipates some relief from rising freight rates within 4-6 weeks, while Adani Ports and Special Economic Zone (APSEZ) forecasts continued challenges throughout the coming season.
  • According to Drewry’s World Container Index (WCI), spot freight rates have climbed to $5,806 per 40-foot container as of July 25, although this is still lower than the pandemic peak of $10,377 per 40-foot container in September 2021, the report claimed.
  • The auto sector is particularly affected by the container shortage. The business daily cited Rakesh Sharma, executive director of Bajaj Auto, on the severity of the current situation, noting, “In the last six months, freight rates to most destinations in Latin America and Africa have doubled. Availability of containers is also an issue.” Bajaj Auto exports to nearly 100 countries across South Asia, Southeast Asia, Africa, and Latin America.

• Trans-Pacific Eastbound (TPEB):
  • East Coast Gulf dockworkers will meet next month to discuss a strike plan. A labor strike that would shut down six out of 10 of the busiest ports in the US just weeks before the presidential election is looking increasingly likely.
  • FMC finalizes rule on ‘unreasonable’ ocean cargo space refusals. The move comes after carriers rejected shipments from agriculture exporters during the pandemic to capitalize on high import demand from Asia.
  • The Panama Canal will increase transit slots in September as rains come early. Beginning in September, it expects to increase the number of daily transit slots for vessels to 36 from the current 34.
  • Protests in Bangladesh continue, resulting in congestion at ports and squeezed capacity.

• Trans-Pacific Westbound (TPWB):
  • Panama Canal transits continue to improve, however, USWC services/ports are seeing a sustained increase in demand.
  • Congestion at transshipment ports is an ongoing issue. Some carriers have chosen to omit these ports in an attempt to regain schedule integrity, while others have switched to other transshipment hubs, which has created congestion issues further down the line.
  • Vessel diversions around the Cape of Good Hope are not likely to end. These diversions, coupled with congestion, have removed a significant amount of capacity from the market. This drain has been enough to counter any new vessel capacity that entered the market in 2024.
  • The reduction in capacity has led to a shortage of containers in Asia. Carriers are increasing empty lifts to supply that market, which may lead to availability issues for export moves. 

• Transatlantic Eastbound (TAEB):
  • Vessel utilization of USWC services to Europe has been better than their USEC counterparts, largely due to the limited number of services.
  • A strong resin export market has seen U.S. Gulf services improving utilizations.
  • Carriers have been taking larger vessels out of U.S. East Coast services to North Europe for use in more demand-driven trades.
  • Mediterranean ports are still experiencing issues with congestion as carriers use those ports as transshipment hubs for Middle East/India services.

• Latin America Southbound (LATAM):
  • Santos has been a preferred port for carriers as heavy rain continues in southern Brazil, leading to congestion and operational constraints.
  • Amazon River water levels have been static entering the dry season. As a result, carriers may restrict the amount of cargo that can traverse the river.
  • This hurricane season is anticipated to be more active than in normal years. Should this prediction come to fruition, Central America could see significant disruptions in port operations and vessel delays.

• Canadian Rail Strike – Negotiations resume August 7 between CN Railway, CPKC, Union:
  • Negotiations to avert a major railroad strike in Canada resume August 7 after talks between the three parties were stalled for months.
  • Leaders from Canadian National Railway Co., Canadian Pacific Kansas City and the union representing their workers met with Labor Minister Steve MacKinnon on Aug. 5 in an effort to forestall a work stoppage that could lead to massive supply chain disruptions.
  • No strike can occur until the government finishes assessing which shipments must continue during a work stoppage. The Canada Industrial Relations Board must determine how a service interruption might impact health and safety. That ruling is anticipated Aug. 9, and a strike could begin three days after that.

• East and Gulf Port Labor Negotiations – ILA preps for East and Gulf coast port strike:
  • Next month, the International Longshoremen’s Association (ILA) will amend its final contract demands, while also preparing its U.S. East and Gulf coast port worker members for an October 1 strike. It has been 47 years since the ILA last went on strike in 1977.
  • Last week, the ILA alerted all its locals covered by the Master Contract with United States Maritime Alliance (USMX) that Wage Scale Committee Meetings will be held, beginning on Wednesday, Sept. 4 at the Teaneck Marriott Hotel in Teaneck, N.J., according to ILA President Harold J. Daggett.
  • While the main purpose of the Wage Scale Meetings will be for ILA Wage Scale Delegates to review demands the ILA makes to USMX, the president and chief negotiator of the ILA said the gathering will afford the union an opportunity to prepare for a potential coast-wide strike on Oct. 1, 2024, if a new agreement is not reached by then.
  • The ILA has called for two days of meetings, Sept. 4 and 5, in Teaneck, and expects to put in marathon hours over those two days presenting the ILA’s final contract demands to its Wage Scale delegates, the ILA statement said. The union plans to devote time to instruct locals on strike strategies and what to expect if the ILA is on strike at the beginning of October.

• U.S. International Trade in Goods and Services: June 2024
  • June 2024: -$73.1B
  • May 2024: -$75.0B
  • According to the U.S. Bureau of Economic Analysis and the U.S. Census Bureau, the goods and services deficit was $73.1B in June, down -$1.9B from May.
  • The June decrease in the goods and services deficit reflected a decrease in the goods deficit of $2.5B to $97.4B, and a decrease in the services surplus of $0.6B to $24.2B.

STABILITY

• July 2024 U.S. container import volumes increased from June 2024, growing 11.2% to 2,556,180 twenty-foot equivalent units (TEUs). 
• July volumes represent a 26-month high since the all-time high set in May 2022. This also marks the first time in 22 months that volumes have been above the 2.4M TEU level that created port congestion and delays during the pandemic years. 
• Versus July 2023, TEU import volume was up 16.8% YoY and 16.3% versus pre-pandemic July 2019. The growth in import volume over the first seven months of 2024 is 15.6% higher than the same period in 2019. 

• June 2024, global schedule reliability dropped by -1.2% MoM to 54.4%.
  • This is keeping in line with the trends seen so far in 2024, where global schedule reliability has largely been within 50%-55%.
• On a YoY level, however, schedule reliability in June 2024 was -9.8% lower. The average delay for LATE vessel arrivals also deteriorated, increasing by 0.04 days MoM to 5.19 days.
  • This is now the third-highest figure for the month, only surpassed by the pandemic highs of 2021-2022. On a YoY level, the June 2024 figure was 0.82 days higher.

Future Lookouts

• Weekly analysis: August 2, 2024
  • Across major East-West head haul trades – Transpacific, Transatlantic and Asia-North Europe & Med:
    • 59 cancelled sailings have been announced between week 32 (August 5-11) and week 36 (September 2-8), out of a total of 694 scheduled sailings, representing a 9% cancellation rate. 
    • During this period, 56% of the blank sailings will occur on the Transpacific Eastbound, 29% on the Transatlantic Westbound trade, and 15% on the Asia-North Europe and Med.
    • Over the next five weeks, THE Alliance have announced 17 cancellations, followed by OCEAN Alliance and 2M with 12 and 10 cancellations, respectively. During the same period, 21 blank sailings have been implemented by non-Alliance services.
    • Seeing a decline in the schedule reliability; on average 91% of the ships are expected to sail as scheduled, over the next five weeks