State of the Trade

State of the Trade

December 14th –

information fro this article provided by Neil Gross of Radiant

As we enter December, the state of Ocean trading continues to be rocky. Operational blank sailings is increasing, and demand is continuing to to climb in the trans-Pacific trade. The chances of severe cargo backlog in Asia by January and early February has gone from possible to probable. Fresh off the month of November, when 25 percent of the entire month’s sailing capacity from Asia was cancelled, the first three weeks of December look like a situation worsening and at the wrong time prior to the lunar new year cargo rush.

Over 40 percent of capacity deployed to the Pacific Southwest (LA/LB) in week 48 was cancelled. Now, the mid-to-late December capacity outlook appears dimmer by the week. While the scarcity of carrier space has been well-documented and continues to be a major challenge for shippers, available space in wholesale/co-load markets is reaching its ceiling as well. This indicated 2 things. One, the drawn-back capacity caused by global port congestion; and two, carriers re-focused on contract cargo more than earlier in the year. During this time they were spot-focused and allocated more space to spot-cargo.

General FAK and premium rates have risen only an average of 4% in December. Co-load (secondary market) rates have stalled in recent weeks. This suggests a ceiling which is unlikely to move any higher in the month of December andJanuary as well.

Coronavirus Update

Nervousness about the Omicron variant persists in Asia. The recent news of small outbreaks in Zhejiang province (where Ningbo port resides) in China have sent shockwaves through the industry with talk of potential port closures.

However, it is unlikely that the China government will resort to such measures as it had during past outbreaks. Earlier this year the ports of Ningbo and Yantian closed or limited terminal operations for days and weeks, respectively.

To prevent this from reoccurring, the actions by the government to mitigate this latest outbreak in Zhejiang have been swift and decisive. These actions will hopefully be enough to prevent any further disruption in one of the strongest cargo origins this time of year.