Captain’s Log

As we enter Q3, we are witnessing a continued rise in customer demand, surpassing last year’s figures. This trend is evident across the board, marked by increased rates, PSS (Peak Season Surcharge) and GRI (General Rate Increase) announcements, along with space and equipment shortages. While Q3 is traditionally the peak season, we remain vigilant about global geopolitical issues and regional conflicts that could impact the market. In response, we are committed to strategically collaborating with all carriers and alliances, ensuring our reach and offerings span every trade lane. We take pride in our expertise and dedication, striving to make the impossible possible for our clients and partners every day. If you haven’t worked with us before, now is the perfect time to start! Bethany 🌎 Gabbett

Space Reductions

Carriers Cut Vessel Space

Ocean carriers are reducing the space they previously promised to non-vessel-operating common carriers (NVOs) and retailers in their service contracts. This is due to a rapid decrease in vessel capacity in the eastbound trans-Pacific. Smaller shippers and mid-size companies are also experiencing cuts in their agreed capacity. The situation has been escalating, with carriers not honoring their space commitments, causing frustration among NVOs and other shippers. The spike in early bookings is due to various factors, including longer transit times caused by vessels avoiding the Red Sea and Gulf of Aden, congestion at key Asian ports, and potential labor issues on the US coasts. This rush to secure space early has led to a significant reduction in available capacity. Carriers are now taking advantage of this tight market by raising spot rates and implementing peak season surcharges more frequently than usual. Shippers are facing increasing difficulties due to the reduced space allocations. The current market conditions are causing NVOs and retailers to scramble for available vessel space, which is becoming scarcer. Carriers are focusing on more profitable spot market cargo, leaving fixed-rate allocations unmet. The ongoing congestion and potential labor strikes are compounding the problem, pushing importers to book space earlier than usual to avoid disruptions. This environment is making it challenging for shippers to plan and manage their logistics effectively.

Port Congestion

Port Congestion Shifts to India

Congestion at major ports in North and Southeast Asia, such as Singapore, Ningbo, Qingdao, and Klang, has eased, and equipment availability has improved in China. However, the congestion problem is now shifting to India. Singapore, for instance, has seen a reduction in vessel delays, partly because carriers are redirecting ships to Malaysian ports like Klang and Tanjung Pelepas. These ports have experienced significant increases in container volumes as a result. Despite the improvements in Asia, India’s largest container port, Mundra, is facing severe congestion due to rising transshipment volumes. This has led to longer container dwell times and significant backlogs in container yards. Rail operators are struggling with train turnaround disruptions, further exacerbating the situation. The congestion at Mundra is causing additional port charges for importers and prompting calls for urgent measures to improve cargo flows.

Booking Crunch

India-Europe, US Bookings Halted

Indian shippers and freight forwarders are facing severe challenges in booking vessel space to Europe and the US due to a capacity crunch. The availability of space, which was abundant two months ago, is now a significant concern. Forwarders report that spot bookings for July are mostly sold out, especially for trades to North Europe and the US West Coast. This is largely due to schedule disruptions caused by diversions in the Red Sea and congestion at Asian transshipment hubs. The situation is worsened by carriers prioritizing highly profitable China-origin cargo, transshipping through Indian ports to the US. This has led to a temporary halt in bookings for upcoming sailings, with the earliest availability expected in the last two weeks of July. As a result, shippers are struggling with elevated rates and the need for more flexible carrier options. Additionally, carriers are implementing various surcharges, further increasing the cost burden for Indian shippers.

Cargo Trends

Air Cargo Growth Driven by E-commerce and Shipping Disruptions

General air cargo has been growing rapidly this year, driven by increased e-commerce and disruptions in ocean shipping. Data from WorldACD shows that from January to May, general cargo volumes rose by 13%, outpacing special products like perishables, dangerous goods, and high-tech items, which increased by 10%. Overall, the air cargo market grew by 12% compared to last year. The rise in general cargo is mainly due to the boost in cross-border e-commerce, which typically ships as general cargo. Additionally, disruptions in container shipping since last November have pushed more freight from sea to air. These changes have led to significant increases in air cargo weight from regions like Asia Pacific and the Middle East & South Asia. Despite this, special products still account for 35% of the market, with some categories like high-tech and meat seeing substantial growth. Regions like Asia Pacific and the Middle East & South Asia have shown significant increases in air cargo volumes, partly due to the conversion of sea freight to air cargo because of shipping disruptions. Cross-border e-commerce has played a crucial role in driving up general cargo volumes, as these shipments are often classified as general cargo rather than special products. Even though the growth rate of general cargo has outpaced that of special products, special products like high-tech items and meat still see notable growth, reflecting their importance in the air cargo market. Freight carriers have also experienced growth in their volumes. The increase in air cargo from various regions highlights the shifting dynamics in the global logistics and transportation industry. The ongoing challenges in ocean shipping have made air freight a more viable and necessary option for many businesses, leading to this notable rise in air cargo volumes.

TRADE UPDATES

U.S. Customs and Border Protection (CBP) FY 2023 Trade Highlights

U.S. Customs and Border Protection (CBP) recently published its FY 2023 Trade Fact Sheet on June 12, 2024, highlighting significant achievements and activities over the past fiscal year. The agency processed over $5 trillion in combined imports and exports, and more than 1 billion de minimis shipments valued at over $50 billion. Additionally, CBP seized 19,522 shipments for intellectual property rights (IPR) violations, with a total estimated value of $2.4 billion if the items had been genuine. The agency also collected more than $38 billion in Section 301 duties and stopped 4,415 shipments suspected of being made with forced labor. CBP’s efforts extended beyond trade facilitation to protecting American consumers and industries. The agency’s initiatives in enforcing IPR and preventing the entry of dangerous goods were notable, including the seizure of products posing health and safety risks worth over $125 million. Furthermore, CBP’s modernization efforts, such as the Automated Commercial Environment (ACE) and technology pilots, resulted in significant economic benefits, saving billions in processing costs and improving supply chain efficiency. These accomplishments underscore CBP’s crucial role in ensuring fair trade practices and safeguarding the U.S. economy. For more detailed information, you can access the full FY 2023 CBP Trade Fact Sheet here.

Marine Insurance

Marine insurance is crucial for businesses involved in shipping goods internationally. It provides comprehensive coverage that safeguards shipments against various risks and uncertainties during transit by sea, air, or land. This type of insurance is essential for ensuring that businesses can recover financial losses from potential damage or loss of cargo. Importance of Marine Insurance: Protection Against Financial Loss: Covers the cost of goods lost or damaged during transit, ensuring businesses do not bear the financial burden alone. Risk Management: Helps manage and mitigate risks associated with transportation, including natural disasters, accidents, and piracy. Peace of Mind: Provides reassurance that goods are protected, allowing businesses to focus on operations without worrying about potential losses. Legal Compliance: Often a requirement in international trade contracts, ensuring that businesses meet legal and contractual obligations. Comprehensive Coverage: Includes protection against various risks such as theft, fire, and other perils specific to maritime transportation. For more information, call Southern Star Navigation at 833.782.7628.

As we continue to navigate the evolving landscape of global logistics, Southern Star Navigation remains committed to providing unparalleled service and innovative solutions to meet your needs. Whether it’s tackling space reductions, managing port congestion, or leveraging air cargo growth, our team is here to ensure your supply chain remains resilient and efficient.

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