November 2021 Market Update

November 17, 2021

Ocean Freight

Measures taken by governments, carriers, and ports have thus far failed to remedy the capacity shortage and congestion crisis. Ocean carriers have recorded record-high Q3 profits at a time that they have failed to adequately add capacity, failed to control port congestion, and raised freight rates.

Company Q3 2021 Profits
A.P. Moller-Maersk – Parent of world’s largest container carrier (Maersk Line) and a major global container port operator (APM Terminals) USD 5.9 billion (355% increase from Q2 – largest profit in 100+ year history of company)
Hapag-Lloyd USD 3.92 billion (419% increase year-over-year)
Zim Line USD 1.46 billion (913% increase year-over-year)

 

The backlog of vessels waiting to berth at Los Angeles / Long Beach has reached 105 ships recently according to Maersk Line – a substantial increase over levels seen in prior weeks and months. These ships will wait 2/3+ weeks at sea just for the opportunity to dock in Southern California. This is also affecting other ports as backlogs spread. Congestion has grown increasingly worse at other US ports – namely Seattle and Savannah. At least one major carrier has temporarily suspended service to Seattle due to port congestion. Congestion remains an issue at New York as well, where congestion surcharges are being levied due to the challenges of retrieving equipment from terminals.

A supply chain bottleneck has emerged in recent days at the Port of Vancouver following a severe storm that triggered flooding and landslides in British Columbia. Rail operations to and from the port have been suspended and road connections that link Vancouver to other parts of Canada were severed.

A 24/7 operating schedule has been rolled out for the country’s largest and most congested container port complex: Los Angeles/Long Beach. A fee for any containers dwelling at the port complex for more than nine days (drayage) or six days (intermodal) has been introduced in an effort to alleviate congestion. The fee is USD 100/day growing by USD 100 each subsequent day, and is set to go into effect Monday, November 22. Importers should factor these fees into their budgeting.

Airfreight

Limitations in ocean freight capacity have led many shippers to upgrade time-sensitive shipments to airfreight. This trend coupled with peak shipping season and the pre-holiday rush have created strong demand for what is still a limited amount of global air freight capacity.

In recent days the U.S. has eased COVID travel restrictions for international travelers, which has led airlines to increase passenger flight capacity. This increase in belly-hold capacity will provide much needed relief to the airfreight market. Airport congestion and backlogs still persist though. Major airports continue to have severe congestion at cargo terminals, with truckers waiting hours to pick up and deliver freight. The most congested airports require prior scheduling. Often appointments are only available in the middle of the night. Trucks will routinely wait at least 1.5 hours to be serviced at an airport terminal. Truckers have reported waiting 4-8 hours at some of the busiest airports.

Due to widespread airport congestion, trucker wait time is unavoidable in many circumstances. Waiting time charges should be anticipated by shippers and factored into any budgeting.

Trucking

A trucking market characterized by a long-term, systematic capacity shortage has been further strained by a spike in the price of fuel. Fuel prices increased over 50% year-over-year in October according to DAT  – driving up rates. Spot rates and demand levels for all trucking categories increased year-over-year in October.

An infrastructure bill passed by Congress and signed by President Biden includes measures to enhance trucking and rail systems. It is unclear though what the impact of the bill will be on the trucking market in the short-term.

FTL and LTL transit times continue to run longer than usual due to carrier staff shortages and high volumes. Delays amongst even the most reliable carriers have become unavoidable, and should be factored into lead time planning by shippers.