February 2024 International Market Update

AN UPDATE FROM SUNSET’S INTERNATIONAL TEAM:

The following information from Sunset’s International team details the 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 sees no need for further vessel transit restrictions until at April, when its authority will evaluate water levels at the end of the dry season. According to Deputy Administrator Ilya Espino via Reuters, “at least until April, we will maintain 24” authorized transits per day.”
  • A severe drought last year forced the canal to reduce the number of vessels allowed to pass per day. In December, rains in the last quarter of the year allowed the waterway to suspend further restrictions that would have been applied in January.
  • In recent months, attacks to ships at the Red Sea have prompted many vessel owners to take longer routes to and from Asia, increasing demand for transit through Panama, Espino said.

• Suez Canal:
  • The Red Sea shipping crisis has impacted in the supply chain in several ways. According to Jose Asumendi at J.P. Morgan, “depending on the situation in the region, shipping times and prices may change throughout the year. Traffic in the Red Sea may remain low for the foreseeable future.”
  • How is this affecting shipping costs? “While several aggregate measures of container shipping costs are now two-and-a-half to three times of their early December levels, prices along routes that typically go through the Suez Canal — particularly from Asia to Europe — have surged nearly five-fold. Costs from China to the U.S. have also more than doubled,” says Nora Szentivany, J.P. Morgan.
  • Ocean spot rates — one-time fees that shippers pay to transport a load at current market pricing — have soared in light of the Red Sea shipping crisis. During the week of January 25, spot rates from China to the U.S. West Coast and East Coast saw a significant spike of ~140% and ~120% respectively compared with November 2023. The extent to which this will feed into contracted rates is unclear.
  • At this time, there appears to be no resolution in sight, with Suez transits showing no recovery.

• Trans-Pacific Eastbound (TPEB):
  • Extended transit times and blank sailings continue due to issues at the Panama and Suez Canals.
  • Pre-Chinese New Year (CNY) rush is somewhat existent; demand is still lower than in years; however, supply is down as well.
  • The situation is stable on both the East and West Coast with isolated congestions.
  • Savannah’s wait time for vessel berth at the terminal is up to 2 days, depending on the vessel size.
  • New York has no wait time expected for a berth at Maher Terminals LLC and APM Terminals. A 3-day waiting time at Port Liberty Terminal Bayonne can be expected.
  • LA/LB have no vessels at anchor, berth on arrival conditions, dwell is averaging 3.5-4.5 days.
  • Oakland’s average wait time is up to 6 days at Oakland Int’l Container Terminal (OICT) and 3 days at TraPac.
  • Tacoma has a wait time of up to 3 days at Husky, 8 days at Washington United terminal. Seattle wait time of 2 days.
  • Vancouver has a 5-day average dwell. Vanterm and Deltaport average 4-5 days, while Centerm is 7 days.

• Trans-Pacific Westbound (TPWB):
  • Potential labor disputes with regard to the upcoming ILA contract negotiations, along with continued low water levels at the Panama Canal, have increased demand for services moving via U.S. West Coast ports as shippers look to avoid delays. This shift also has the potential to cause congestion at rail ramps.
  • As carriers divert from both the Panama and Suez canals, blank sailings on the USEC/USGC to Asia trades will likely increase in Q1 2024.
  • India and the Middle East have been especially impacted by Red Sea diversions, with space to these destinations, mainly from the U.S. East and Gulf coasts, becoming tight as a result. 

• Transatlantic Eastbound (TAEB):
  • Germany has experienced several strikes in recent weeks. A rail strike that ended on January 29 was quickly followed by farmers protesting the removal of tax breaks applicable to agricultural diesel. The farmers have blocked access to key ports, which will impact deliveries.
  • Similar protests by agricultural workers have occurred in Portugal, France, Belgium, Italy, Poland, Romania, and Greece. Farmers have been protesting stricter “green” policies, high costs, competition from cheap imports, and falling incomes.
  • The Emissions Trading System (ETS) officially took effect on January 1, 2024. Red Sea diversions and capacity injected into trades to continue with weekly service could translate into carriers charging higher fees as their costs rise. Shipping schedules may also see adjustments at some point to reduce exposure.
  • Space continues to be available ex U.S. east and gulf coasts, with the west coast continuing to see higher utilization.

• U.S. International Trade in Goods and Services: November 2023
  • December 2023: -$62.2B
  • November 2023: -$61.9B
    • The U.S. monthly international trade deficit increased in December 2023 according to the U.S. Bureau of Economic Analysis and the U.S. Census Bureau. The deficit increased from $61.9B in November (revised) to $62.2B in December, as imports increased more than exports. 
    • The goods deficit increased $0.7B in December to $89.1B.
    • The services surplus increased $0.4B in December to $26.9B.

STABILITY

• January 2024: U.S. container import volumes increased 7.9% from December 2023 to 2,273,125 twenty-foot equivalent units (TEUs). Versus January 2023, TEU volume was higher by 9.9%, and up 9.6% from pre-pandemic January 2019.

• Global schedule reliability decreased by -5.0 percentage points M/M in December 2023 – the largest M/M drop since February 2021 – to 56.8%.
  • With this, December 2023 schedule reliability was the second-lowest of 2023. On a Y/Y level, schedule reliability in December 2023 was only 0.4 percentage points higher than in December 2022.
  • Due to the round-of-Africa sailings, the average delay for LATE vessel arrivals deteriorated, increasing by 0.30 days M/M to 5.35 days

Future Lookouts

• Weekly analysis: February 9, 2024
  • Across major East-West head haul trades – Transpacific, Transatlantic and Asia-North Europe & Med:
    • 100 cancelled sailings have been announced between week 07 (Feb 19-26) and week 11 (Mar 11-17), out of a total of 650 scheduled sailings, representing 15% cancellation rate.
    • During this period, 56% of the blank sailings will occur on the Transpacific Eastbound, 37% on the Asia-North Europe and Med, and 7% on the Transatlantic Westbound trade.