LOGISTICS: Container rates rise on peak season surcharges, but rate of growth slowing

HOUSTON (ICIS)–Rates for shipping containers continue to surge as carriers are implementing peak season surcharges while capacity remains tight from Red Sea diversions, but some shipping analysts think there are signs that the dramatic rate of growth may be slowing, which leads off this week’s logistics roundup.

CONTAINERS
Shipping container rates continued to rise this week, but the rate of increase slowed, according to data from supply chain advisors Drewry and as shown in the following chart.

Ocean freight rates analytics firm Xeneta said its data indicates spot rates on major trades out of Asia will increase again on 15 June, but to a less dramatic extent than witnessed in May and early June.

Average spot rates from Asia to US West Coast are set to increase by 4.8% on 15 June to stand at $6,178/FEU (40-foot equivalent unit). However, on 1 June, rates on this trade increased by 20%.

From Asia into the US East Coast, rates are set to increase by 3.9% on 15 June to stand at $7,114/FEU. Again, this is a far less dramatic jump than when rates increased by 15% on 1 June.

Rates from north China to the US Gulf are at the highest this year but leveled off this week, as shown in the following chart.

“Any sign of a slowing in the growth of spot rates will be welcomed by shippers, but this is an extremely challenging situation, and it is likely to remain so,” Xeneta chief analyst Peter Sand said. “The market is still rising, and some shippers are still facing the prospect of not being able to ship containers on existing long-term contracts and having their cargo rolled.”

Container ships and costs for shipping containers are relevant to the chemical industry because while most chemicals are liquids and are shipped in tankers, container ships transport polymers, such as polyethylene (PE) and polypropylene (PP), are shipped in pellets.

They also transport liquid chemicals in isotanks.

LIQUID TANKER RATES
US chemical tanker freight rates assessed by ICIS were mostly unchanged. However, rates were lower from the US Gulf (USG) to India and unchanged from the USG to the Caribbean.

From the USG to Asia, the market has gone overall quiet after a few busy weeks in the month of May.

The spot market faces headwinds as activity has been slow, causing spot space to pile up for July, placing downward pressure on spot rates.

Recent force majeures in the USG have caused some COA vessels to look for additional cargoes, adding pressure to rates.

Market participants are optimistic that freight rates for larger parcels will stabilize in the near term.

US PORT OPERATIONS
Operations at US ports are stable even as import volumes are at the highest since 2022, and railroad performance has improved over the past month, according to analysts at freight forwarder Flexport.

Nathan Strang, director of ocean freight, US Southwest for Flexport, said that apart from the Port of Charleston, South Carolina, volumes are moving really well through the East Coast ports with rail dwell averaging about two days.

Charleston is undergoing an infrastructure project on its Wando Welch Terminal to expand the docks.

Dock construction at Wando Welch terminal started on 11 March, reducing berth space from three to two berths for one year, with berths given on first come, first serve basis.

Strang said some vessels are discharging at the Port of Savannah, Georgia, and then moving material to Wando Welch via trucks, or using other terminals within the Port of Charleston as space becomes available.

Overall port omissions from all carriers are starting to reduce the extent of the delays, with six to nine days delay expected in week 24, according to a port update from Hapag-Lloyd.

RAILROADS
Strang said Flexport customers are seeing lower dwell times for rail cars at ports over the past month.

“I have been talking about how rail performance to and through the West Coast has been suffering a little bit,” Strang said, describing his point of view in past webinars. “I will say that we have seen real improvement.”

Strang said West Coast port operations have remained stable, with local pick-up dwell at six days for Los Angeles/Long Beach, at five days in Seattle/Tacoma (SeaTac) and at four days in Oakland.

For the first 23 weeks of 2024, ended 8 June, North American chemical railcar loadings rose 3.8% to 1,082,614 – with the US up 3.9% to 745,780.

In the US, chemical railcar loadings represent about 20% of chemical transportation by tonnage, with trucks, barges and pipelines carrying the rest.

PORT OF BALTIMORE OPENS
The Fort McHenry Federal Channel – the entrance to the Port of Baltimore – is fully reopened just 11 weeks after a container ship lost power and struck the Francis Scott Key Bridge, causing its collapse and essentially shutting the port.

The Unified Command (UC) said salvage crews successfully removed the final large steel truss segment blocking the 700-foot-wide Fort McHenry Federal Channel on 3-4 June.

Deep-draft commercial vessels have been able to transit the port since 20 May when the UC cleared the channel to a width of 400ft and depth of 50ft.

Following the removal of wreckage at the 50-foot mud-line, the UC performed a survey of the channel on 10 June, certifying the riverbed as safe for transit.

The closing of the port did not have a significant impact on the chemicals industry as chemicals make up only about 4% of total tonnage that moves through the port, according to data from the American Chemistry Council (ACC).

PANAMA CANAL
The Panama Canal Authority (PCA) is offering an additional booking slot for the Neopanamax locks as of 11 June, increasing the total number of daily canal transits to 33, and is also raising the maximum authorized draft based on the current and projected level of Gatun Lake.

The PCA will open an additional slot on 8 July, which will bring the total number of daily transits to 34.

Because of the improved water levels now that the rainy season has arrived, the PCA is also increasing the maximum authorized draft for vessels to 14.02 meters (46.0 feet).

This is the second increase in draft restrictions over the past few weeks.

Wait times for non-booked southbound vessels ready for transit have been relatively steady at less than two days, according to the PCA vessel tracker.

The tracker is only for non-booked vessels in the queue and shippers should consider two additional days as a minimum to estimate transit times for unscheduled vessels, the PCA said.

Focus article by Adam Yanelli

Additional reporting by Kevin Callahan