July 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 has announced, effective June 26, the maximum authorized draught was raised to 14.33 meters (from 46 to 47 feet) and increased to 14.63 meters (48 feet) on July 11.
  • Additionally, a new booking slot for the Neopanamax locks will be added beginning on August 5, bringing the total number of transits to 35 ships per day. 

• Red Sea / Suez Canal: Container market conditions tighten on key deep-sea trades.
  • June saw further tightening of market conditions on key deep-sea container trades, with spot rates and associated surcharges increasing every week throughout the month. 
  • Lars Jensen, CEO of Vespucci Maritime, identifies three primary drivers behind the spiking markets:
    • The diversion of major vessels around Africa
    • Port congestion in Asia
    • Surge in export demand from Asia.
  • Resolving the Red Sea crisis is challenging in the short term, with port congestion in Asia indicating that market conditions may peak in July and gradually ease through the latter part of the peak season, ending in September. Jensen stresses that the Red Sea crisis is the main concern for Q4 and 2025.
  • Continued vessel diversions could improve the global supply-demand balance as new vessels are delivered, potentially stabilizing the market without causing overcapacity, provided demand grows normally. Jensen notes that while overcapacity due to a re-opening of the Suez route or a demand collapse seems unlikely soon, significant labor disruptions on the US East Coast in September could worsen global supply/demand dynamics by causing port congestion and vessel delays.
  • Freight rates increased in two stages during the pandemic: initially in late 2020 and early 2021 due to pandemic ripple effects, and later in late 2021 and early 2022 due to the Ever Given incident in the Suez Canal, reaching record rates of $15,000 USD/FFE. Jensen warns that a strike on the US East Coast in September could trigger similar effects, potentially leading to another phase of record-high rates. He advises stakeholders to monitor two pivotal elements in the short to medium term: whether the demand boom abates in July, indicating early pre-positioning of cargo, and the outcome of union negotiations on the US East Coast.

• Trans-Pacific Eastbound (TPEB):
  • ILWU threatened  Strike at DP World Canada Starting 8 July. 
  • Idle containership fleet dips to pandemic-era lows as carriers hunt tonnage. 
  • Taiwanese regional carrier TS Lines will join SeaLead Shipping’s relaunched Asia-US West Coast (AWC) service, marking its comeback to long-haul trades. 
  • Zim launches its new Central China Xpress (ZX2) service, connecting Shanghai, Ningbo and Los Angeles, deploying five 4,200 TEU vessels. 
  • The Panama Canal has announced, effective June 26, the maximum authorized draught was raised to 14.33 meters (from 46 to 47 feet) and increased to 14.63 meters (48 feet) on July 11. Additionally, a new booking slot for the Neopanamax locks will be added beginning on August 5, bringing the total number of transits to 35 ships per day.

• Trans-Pacific Westbound (TPWB):
  • Congestion at transshipment hubs in Asia is an ongoing issue, with some carriers experiencing delays of up to three weeks. Several adverse weather events recently, mainly at China ports, have only added to the delays. Some U.S. East Coast ports have also been experiencing congestion-related issues.  
  • The congestion issues are putting a strain on equipment supply, especially at inland rail locations. 
  • Demand for services calling U.S. West Coast ports has remained high despite increasing daily booking slots for vessels transiting the Panama Canal. 

• Transatlantic Eastbound (TAEB):
  • The Olympic games will commence in late July in Paris. Security will be increased significantly both during the events and in the lead-up to them.  
  • Similar to Asian transshipment hubs, both West and East Mediterranean ports are experiencing issues with congestion.  
  • Space continues to be largely available on TAEB services. 

• Latin America Southbound (LATAM):
  • The state of Rio Grande do Sul in southern Brazil has seen unprecedented flooding that began in late April. The flooding has caused substantial infrastructure damage, complicating transportation and logistics. Rio Grande port has been open, although operations have been consistently compromised by the weather. 
  • Paranaguá has acted as an alternative port to Rio Grande but is struggling with increased demand.  

• Canadian Rail Strike – West Coast port strike averted after Board Order:
  • A strike planned for Monday, 7/8 by ship and dock foremen at west Canadian ports has been called off after the country’s industrial relations board found the union’s strike notice was in violation of the labor code, the board said in an order. “The Board directs the union to rescind its strike notice,” Canada Industrial Relations Board (CIRB) said in the order, adding that the strike violated the Canada Labour Code.
  • The strike was called to protest against port operator DP World’s labor contracts and related issues such as changes to overtime, jobs becoming redundant due to automation and retirement benefits. A maritime employers’ association of British Columbia in the west of Canada had said earlier that a coast-wide lockout could potentially shut down all cargo operations of its member companies across the province, except cruises and operations of grain vessels.

• East and Gulf Port Labor Negotiations to start soon:
  • Both sides aim to land a new contract before the current deal expires Sept. 30, but strike concerns have shippers mulling mitigation plans, Supply Chain Dive reports. Labor contract negotiations covering port workers on the East and Gulf coasts are expected to begin soon with local-level bargaining slated to wrap up Friday, according to a joint announcement from union and employer representatives. The current six-year contract covering workers at ports from Maine to Texas will expire on Sept. 30.
  • Both the International Longshoremen’s Association — with 85,000 members in its ranks — and the United States Maritime Alliance (USMX) say they are committed to reaching a new agreement prior to that date. “The ILA and USMX expect to continue the success of our 2012 and 2018 Master Contract negotiations where two landmark six-year agreements were achieved without any disruption or delays in shipment of cargo,” ILA President Harold J. Daggett and USMX Chairman and CEO David F. Adam said in a joint statement.
  • Although both sides want to reach a deal without any disruption, Daggett warned ILA locals last year to prepare for a strike if an agreement isn’t achieved by Sept. 30, adding that the union won’t extend the current pact as it pursues a landmark deal.
  • A strike would add to the labor unrest shippers have had to account for in recent years, sparking heavy disruptions for U.S. supply chains reliant on East Coast and Gulf Coast imports.

• U.S. International Trade in Goods and Services: May 2024
  • May 2024: -$75.1B
  • April 2024: -$74.5B
  • According to the U.S. Bureau of Economic Analysis and the U.S. Census Bureau, the goods and services trade deficit increased in May 2024 to $75.1B, as exports decreased more than imports.
  • The goods deficit increased +$0.9B in May to $100.2B.
  • The services surplus increased +$0.3B in May to $25.1B.

Before choosing a carrier, it’s crucial to understand the essential vetting standards every freight broker should follow.

STABILITY

• June 2024 U.S. container import volume declined from May, decreasing 2.1% to 2,297,979 twenty-foot equivalent units (TEUs).
  • Versus June 2023, TEU import volume was up 10.4%, continuing to demonstrate exceptional year-over-year performance.
• Although Chinese import volumes into the U.S. remained high in June at 891,456 TEUs, they were mostly flat month-over-month (up 0.1% from May), while recording impressive performance over June 2023 (up 13.8%).

• In May 2024, global schedule reliability improved by 3.8% M/M to 55.8%.
  • This is now the highest schedule reliability figure for 2024, and 1.2% higher than the previous highest figure of 54.6%.
• On a Y/Y level however, schedule reliability in May 2024 was 11% lower. Despite the improvement in schedule reliability, the average delay for LATE vessel arrivals deteriorated, increasing by 0.34 days M/M to 5.10 days.
• This figure is now inching closer to pandemic highs than the pre-pandemic lows. On a Y/Y level, the May 2024 figure was 0.73 days higher.

Future Lookouts

• Weekly analysis: July 5, 2024
  • Across major East-West head haul trades – Transpacific, Transatlantic and Asia-North Europe & Med:
    • 51 cancelled sailings have been announced between week 28 (July 8-14) and week 32 (August 5-11), out of a total of 706 scheduled sailings, representing a 7% cancellation rate. 
    • During this period, 55% of the blank sailings will occur on the Transpacific Eastbound, 25% on the Asia-North Europe and Med, and 20% on the Transatlantic Westbound trade.
    • Over the next five weeks, OCEAN Alliance have announced 14 cancellations, followed by THE Alliance and 2M with 12 and 7 cancellations, respectively. During the same period, 18 blank sailings have been implemented by non-Alliance services.
    • The shipping industry is once again grappling with supply-demand imbalances, port congestion, and container shortages reminiscent of what has been experienced during the pandemic. However, this time the disruptions are generated by the unfolding Red Sea crisis.