Freight Market Update: August 2024| C.H. Robinson (2024)

In our top story of this report, we discuss how U.S. truckload carriers have been experiencing a squeeze in profits due to increased operational costs. Carriers are not the only ones fighting increased operational costs. Despite truckload freight rates generally being down, there are some modes, services and regions where pricing isn’t as advantageous for shippers due to various global disruptions causing rates to increase beyond seasonal trends.

It is widely expected that much of this volatility will not disappear in the short term. Whether looking at the direct increases associated with freight rates, the added costs associated with rerouting around the Cape of Good Hope, or origin/destination port congestion, many factors are impacting KPIs today. So, what can you do to mitigate costs?

1. Work backward from your economic ordering quantity (EOC)

Little charges can add up quickly in the aggregate, so break down your bill of materials to their core parts, or bundles of components whenever possible. Doing so can help ensure weight/dimensions are not inadvertently bearing "minimum quantity" charges.

2. Forecast periods (slushy/frozen periods)

While sales is focused on closing business, that can cause production problems when it’s impossible find capacity to deliver the goods. Ensuring that business forecasting is accurate and halting excess orders based on lane demand can prevent costly expedited freight charges.

3. Book early

Advance booking is an absolute best practice to secure the best outcome at the best cost. For global shipments, five weeks in advance is strongly encouraged for today’s market.

4. Stress test current practices

Updated general systems of preferences (GSPs), changes to product composition or dimensions, and trade policy updates can significantly impact margins and open new business lines. Engaging in a discussion about sourcing strategies, reasons for current practices, and competitor actions will help boost confidence in decisions and their value in the broader market.

General updates

2M and THE alliances dissolving, new Gemini cooperation is coming

MSC and Maersk are dissolving the 2M alliance effective in 2025. The reason for the dissolution is that MSC is acquiring sufficient vessel capacity to run their own independent service by 2025. Maersk will form an alliance with Hapag.

THE Alliance also breaks up at the end of January 2025 as Hapag and Maersk have announced plans to form a new vessel-sharing agreement on main east-west trade lanes. This will go into effect in February 2025 and be called the Gemini Cooperation. THE Alliance members Hapag/ONE/HMM/YML reassure the market that business will continue as usual for 2024, but this will mean significant changes and disruption to vessel services in early 2025.

The Gemini Cooperation is designed to be a hub and spoke network with relatively few direct port calls, and a predominance of feeder connections from the central port hubs to offer a full scope of global services. The goal is to offer best-in-class schedule reliability that is higher than 90% on average. How successful the carriers will be with their on-time performance will depend on the success of their transshipment program. The FMC has requested more information from Maersk and Hapag concerning this new alliance, to determine potential competitive impacts.

Ocean alliance extending their agreement

Originally set to expire in 2027, the Ocean Alliance (OOCL, CMA, Cosco, and Evergreen) announced they would extend their agreement for an additional five years through 2032. This may be one way to reassure the market of the stability of this alliance after the upheaval of the other two major east-west alliances scheduled for early next year.

Reroutings

The repeated attacks from Houthi rebels along the coast of Yemen on the Suez Canal means ocean carriers have rerouted their vessels via the Cape of Good Hope, adding an additional 14 days of transit time. While this situation has existed for over six months, it continues to have a large influence on the ocean shipping market, consuming capacity and impacting timing.

Canal updates

Panama Canal

Due to low water levels at the reservoir that feeds the Panama Canal, draft restrictions have been in place since April 2023.

Typically, daily transits through the canal are 34–38 vessels per day. There have been incremental increases in vessel allowance this year, and starting in August the number of daily transits will increase to 35 per day, up from 34, returning to an expected range.

By early 2025, the Panama Canal authority expects to return to full capacity for daily transits, which would be 38–40 per day (as long as the rainy season continues to deliver the needed rainfall).

* Temporary slot reduction due to scheduled dry chamber maintenance.

Thanks to more slots becoming available, steamship lines are beginning to resume their normal service routings via the Canal, though some exceptions remain. The alternatives remain to route via the Cape of Good Hope or the Suez Canal, yet both extend transit time by about 14 days.

Suez Canal

Since December 2023, most maritime carriers have temporarily paused or rerouted vessel traffic through the Red Sea and Suez Canal due to attacks on container vessels launched from Yemen. There is no expected change to this situation for the foreseeable future.

The majority of vessels are travelling around the Cape of Good Hope which adds, on average, 14 days to transit time. Rerouting or pausing even a portion of those vessels can have a significant impact, not just to trade that moves via the Red Sea, but across all global trade lanes. This leads to blank sailings and service changes. It is estimated that 6 to 9% of global capacity is absorbed by this alternative routing.

Blank sailings/tight capacity

Carriers have added more vessels to the services routing via the Cape of Good Hope to maintain weekly service between Asia/India and the Europe/North America markets. This has tightened vessel space and, coupled with a surge of demand on some key east-west lanes, it has completely removed the excess capacity from the market.

It is also estimated that the congestion levels at key Asia, West Mediterranean, and Latin America (LATAM) ports is causing as much as 8% capacity removal from the market due to vessels being delayed at various ports. The markets most impacted by the Suez Canal diversions such as U.S.–India and U.S.–Asia are seeing more blank sailings than other lanes due to challenges maintaining schedule integrity.

Sea Intelligence reported global schedule reliability improved by 3.58% from April to 55.8% in May (the highest in 2024). However, reliability remains 11 percentage points below May 2023. CMA was the most reliable carrier at 57.1% on-time performance.

Port congestion/container shortages

With all the vessel diversions required due to the situation with the two canals, adverse weather in Asia and LATAM, coupled by surging demand/volumes on several key trade lanes such as Asia–Europe, Asia–North America, and Asia–LATAM, means severe port congestion at the major transshipment ports in Asia, LATAM, and the West Mediterranean.

This is causing more schedule instability with carriers. The extended transit times are also contributing to container shortages in some key markets, such as Asia (north China specifically), Europe, and at rail ramps in North America.

War in Ukraine

The war in Ukraine and resulting sanctions on Russia may affect capacity from/to Europe, the Middle East, and North Africa. There remain numerous service suspensions/port omissions to Russia and Ukraine.

Supply and demand

From Asia to the North America West Coast, space has improved as carriers have injected significant capacity for July and August. However, capacity to the U.S. East Coast is fairly flat and both LATAM and Mexico face congestion at local ports.

The trend is different to Europe, where rates are holding strong. Despite a temporary increase in capacity in July to North Europe in July (11%), August will see capacity back down. To the Mediterranean, capacity is down 14% in July versus June, and congestion at destinations continues to disrupt schedules.

On Trans-Atlantic Westbound (TAWB) lanes, capacity is enough on most services from North Europe. Steamship lines are starting to shift capacity to other trade lanes by swapping vessels for smaller ones, or allocating more transshipment capacity to the lanes with strong demand (e.g., Asia to U.S. East Coast).

Mediterranean origins are subject to congestion and space is becoming critical, leading to rate increases. Bookings are 3–4 weeks out. Carriers are also re-shuffling capacity to accommodate other lanes and leaving smaller vessels/no extra loader options to Mediterranean origins. As the largest ports in the region have also become transshipment ports to help manage the Suez Canal issues, their terminal yard spaces are saturated, causing challenges to ingate export cargo.

While fairly balanced, ISC-North America has been directly impacted by the Suez Canal disruptions. Equipment and vessel space issues from Asia are spreading. Steamship lines are shifting capacity and equipment away from lower paying India to NAM shipments, to accommodate the very strong Asia exports yielding higher rates. On this lane, carriers are struggling to maintain schedule integrity due to a lack of assets and congestion.

U.S. Container Import Volume Year-over-Year Comparison

According to Descartes Datamyne, in June 2024 U.S. container import volumes declined from May 2024, 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.

Asia

August is the middle of traditional peak season and rates in the core Asia trade lane remains elevated because of it. Despite high demand, spot rates are softening on some selected lanes, like Trans-Pacific West Coast (TPWC) and LATAM. This is mainly due to injection of more ad hoc loaders and some new services.

CMA, Cosco, and MSC have started to deploy new services into TPWC and East Coast. Shipping lines have also moved capacity from lower paying trade lanes to higher paying ones to maximize margins.

The Asia to Oceania trade lane is one of those affected; it is helping push up spot rates for the month of August.

Rates for the Asia to North Europe market is holding up better than Southern Europe and Mediterranean markets. There are three new independent services launched by Hapag-Lloyd, CMA CGM, and MSC to North Europe.

Port congestion in the core Southeast Asia transshipment hub ports, Port Klang and Singapore, have improved. However, there is more congestion being reported for major China ports.

Asia–Europe

Due to the longer transit time routing via the Cape of Good Hope, there are fewer weekly vessels serving this lane, which has also tightened effective capacity.

Demand increased in April and May as shippers moved cargo ahead of the planned general rate increases (GRIs) and the May holiday in Asia, resulting in tight space.

For Asia–Europe, Alphaliner and Drewry estimate report:

• Services are currently 10% short of the capacity needed
• Spot freight rates have increased by as much as 20%

Once normal Suez Canal transits can resume, overcapacity will re-assert itself in the market, and the expectation is pricing will soften once again.

Europe

Labor challenges

Labor disruptions in Italy, Germany, and France have been frequent over the past couple of months. Impact is limited, unless it compounds with other existing issues (e.g., congestion in the Mediterranean).

Space is getting very tight on the Trans-Atlantic lanes from the Mediterranean to Canada and Mexico. Carriers will likely increase rates. Because carriers are not required to communicate rate increases with 30 days’ notice (as is required in the United States), it may make forecasting rates to these countries more difficult to predict. Expect to plan far in advance and place pre-bookings to secure space when needed.

LATAM

Intra-America and Asia services are still struggling with space. Accordingly, carriers have been implementing GRIs in the Americas since April 2024 for all types of contracts. Consider booking at least four weeks in advance.

Europe is stable; rates are flat.

Ports in south LATAM are facing several omissions caused by ship sling delays from ongoing port congestion. Currently, the most reliable schedule is in Santos, but this port is also impacted by congestion. There is a shortage of 20′ and special equipment across the coast.

The Rio Grande port is currently open, but switching to an alternative port can help overcome congestion and lack of yard capacity currently being experienced at the port. Due to these disruptions, carriers are omitting this port to recover their schedules and prioritize other ports with bigger volumes.

Both Paranagua and Itapoa ports are struggling with port facilities and release windows to deliver empty containers and receive loaded ones in time to operate vessels. Previously, shippers had almost seven full days to work on container loading and delivery, now there are just 2–3 days to complete it.

North America

U.S. labor challenges

Shippers are watching developments with the labor negotiations for U.S. East and Gulf Coast ports. The International Longshoremen’s Association (ILA) published a statement on Friday July 12, 2024, increasing pressure for the United States Maritime Alliance to take action on the APM Terminals Auto Gate system in Mobile, Alabama.

The ILA advised in June that negotiations on the Master Agreement will not start again until their concerns regarding this automation process are answered. ILA reiterated they are ready to strike on October 1, 2024, if no new agreement is in place.

In a July 24, 2024, event hosted by Supply Chain Dive, transportation secretary, Pete Buttigieg, said the Biden Administration continues to monitor the situation and is trying to encourage positive outcomes for both sides.

U.S.–Europe

Port strikes

There have been intermittent port strikes in Hamburg, Bremerhaven, and the inland port city of Bremen as dockworkers demand increased wages to match the increased cost of living. The most recent strikes took place on July 9–10, 2024.

Growing demand

Demand is improving on the TAWB lane as traditional peak season begins. At the same time, ocean carriers are starting to remove capacity on U.S. East Coast (USEC) services by reducing the size of the vessels. They are reallocating the larger vessels to other lanes where demand is stronger. There are no cancelled service strings planned at this time, but there is an increased frequency of blank sailings.

Space is still tight from U.S. West Coast (USWC) to Europe due to lack of sailing options, and carriers are substantially booked on all water services, especially Los Angeles and Oakland. As an alternative to all water service, CMA and OOCL are offering rail service via Houston to Europe.

Space at USGC ports to Europe improved, but carriers still have solid load factors due to limited service options and a strong resin export market.

Space is currently tight on the EMA service into East Mediterranean and Turkey ports due to strong cotton volumes (ex. United States).

Congestion issues

There is a growing congestion issue at key west Mediterranean ports such as Valencia, Algeciras, and Tanger due to rapidly rising volumes. The volume increases are largely due to carriers having to now transship cargo via west Mediterranean ports, connecting with feeder vessels into the Middle East and India to continue to serve those markets.

Olympic games

The Olympic Games are coming to France, running from July 26 through September 8. The influx of tourist activity and the establishment of security measures will cause disruption, congestion, and shipment delays into and out of France during this period.

U.S.–Asia

USWC

Volumes at USWC ports have increased approximately 20% compared to the same period in 2023. Carriers are experiencing more demand for services via the USWC due to the continued challenges with obtaining appointments through the Panama Canal and extended transit times through the Cape of Good Hope.

Trans-Pacific Eastbound (TPEB)

Demand has continued to show some strength on the TPEB lane, therefore the number of planned blank sailings continue to be relatively low. However, port congestion in Asia and at some USEC ports like Charleston, is causing some schedule unreliability, which can lead to some blank sailing weeks.

Asia port congestion

Congestion at transshipment ports in Asia remains a significant issue. Shipments can be delayed as much as 14–21 days at many major transshipment ports, such as Busan, Shanghai, and Singapore. This is mainly due to the increase in transshipment services caused by carriers choosing to omit port calls to re-establish schedule integrity and catch Panama Canal transit appointments. Carriers report it is taking as much as 5–7 days to have their vessels worked at some large Asia ports like Singapore and Shanghai.

Some carriers are switching their transshipment hubs to alternative ports in Malaysia, India, and Columbo, which has a downstream effect, building congestion in those ports as well.

Singapore has opened the first of three new container berths at the Tuas mega-container terminal, which should help ease some current congestion.

New vessels increasing capacity

A wave of new vessels entering the market in 2024 has increased capacity by as much as 10%. The vessels are mainly expected to be added to the Asia trade lanes. However, the impact of this increase in capacity has been completely cancelled out for the time being by the vessel diversions through the Cape of Good Hope, coupled with growing port congestion, and the rise in demand seen on multiple Asia lanes since early Q1 2024.

Equipment shortages

There are equipment shortages in Asia due to extended transit times, rising demand, and schedule instability, which is causing carriers to use vessel space to move empties to serve TPEB demand, rather than leave them in North America to support exports.

Rate increases

Carriers announced important rate increases for July and August 2024. Carriers seek higher rates to support the added costs from port congestion and to justify carrying loaded exports, rather than just sending empty containers back to Asia to meet strong Asia export demand.

U.S.–Oceania

Due to continued congestion and operational issues in Charleston, North Carolina, Hapag, MSC, and Maersk’s direct service has shifted to the Savannah port.

Demand in Oceania has softened in many sectors since Q4 2023, and some economists expect the economy is currently in recession. Peak season normally starts in Q3, but so far it has been soft this year.

Vessel space to Oceania is relatively open

Rates are expected to remain stable for Q3 2024, however if peak season were to be stronger than expected, this may change. CMA has noticed fuller vessels on their USEC–Oceania service and have announced a GRI for August 2024.

Carriers with direct services to Oceania continue to go through the Panama Canal from the USEC.

Carriers with transshipment services via Asia into Oceania will route via the Panama Canal or the Cape of Good Hope, depending on U.S. port of exit and their port of transshipment. Routings via Cape of Good Hope have impacted transit times by 10–14 days.

U.S.–LATAM

Congestion and delays

Schedule reliability to South America East Coast (SAEC) ports has been impacted by significant delays at the ports of Navegantes and Rio Grande in southern Brazil, which are heavily congested, leading to blank sailings and port omissions.

Recent heavy rains in the southern Brazil region are adding to the existing port delays and congestion. Many carriers are choosing to omit south Brazil ports with their main vessels, and instead transship into the region via the Santos port. Consider shipping into Itapoa and Paranagua ports in southern Brazil where direct service options are more available. However, be aware congestion is growing at these ports as well, due the cargo diversions.

The congestion issues have caused an increase in the volume of transshipment cargo, and the main transshipment ports are starting to experience dramatically increased congestion, leading to significant delays at these transshipment ports as well.

Carriers serving the Caribbean and South America markets have announced GRIs for July and August 2024.

Amazon River levels

The Amazon River has not seen a water level increase since mid-June 2024. With the region entering a dry season from July 2024 to early 2025, anticipate restrictions on cargo levels and low water surcharges.

Hurricane season

Hurricane season has started early this year with severe weather sweeping across the region already, particularly in the Caribbean and Central America. Weather experts warn this could be a particularly difficult hurricane season. Anticipate disruption and vessel delays throughout the remainder of Q3 and into Q4 2024.

U.S.–South Asia, Middle East, Africa (SAMA)

Tight space, canceled services, and rate increases

Rate increases were announced for July and August 2024 due to the current instability of service and very tight vessel space.

Space from USEC and U.S. Gulf Coast (USGC) ports to the India and Middle East lanes have been significantly impacted due to the piracy risks associated with transiting through the Suez Canal by Houthi rebels in Yemen. All container carriers are now diverting their vessels via the Cape of Good Hope, which is increasing transit times and blank sailings.

Services into Red Sea ports are currently suspended with many carriers, and for those carriers still offering service, significant surcharges have been added to the freight costs. There is limited service to Persian Gulf ports in the Middle East. Carriers are accessing the Red Sea ports via feeder service from Mediterranean ports, which has led to significant congestion at these West Mediterranean port hubs. Expect to book four or more weeks in advance to secure space.

Port congestion and delays

Congestion at Southeast Asia ports is causing carriers to expand their transshipment hubs to alternative ports like Abu Dhabi, Mundra, and Colombo. These ports are now seeing a growing congestion issue due to the significant increase in the volumes.

The building congestion issues at Mundra and Nhava Sheva ports are further complicated by bad weather conditions over the past couple of weeks in the region.

Severe weather during recent transits via the Cape of Good Hope has caused delays for many vessels taking this routing.

SAMA

Export market to North America and Oceania are dynamic with space challenges, blank sailings, backlog, price elevations, and surges in cargo demand. Carriers are issuing limited bookings at premium rates.

While Asia–Europe/Mediterranean rates are up trending with a slight improvement in cargo demand, the intra-Asia and LATAM markets are softening so rates are stable to dropping.

Oceania

North America to Oceania

Market conditions from North America remain stable, with space and schedule integrity maintaining availability and regularity.

Europe to Oceania

The Europe to Oceania market is tightened due to ongoing disruption in the Red Sea/Suez Canal. Carriers continue to implement contingency surcharges. This disruption is also impacting transit times with the 14-day transit via the Cape of Good Hope.

Expect to see schedule disruptions continue throughout Q3 and consider forward planning 4–6-weeks in advance.

Asia to Oceania

There have been service suspensions via Asia due to port congestion in transshipment hubs. This demand will be moved to carriers, and the market will most likely be able to absorb this drop in capacity.

Northeast and Southeast Asia capacity continues to tighten following blank sailings and port omissions. Rates remain unstable with the implementation of GRIs and peak season surcharges (PSS) throughout August. Schedule reliability continues to be impacted. Carriers advise blank sailings are connected to schedule recovery.

Northeast Asia is experiencing severe container shortages—overall, this market continues to experience volatile conditions. MSC announced the removal of Capricorn/Kiwi service, which will impact supply from southeast Asia to Australia as well as northeast Asia to Australia WC/NZ. This capacity reduction, along with the removal of larger capacity ships for other higher yielding trade lanes, will create supply chain disruptions and challenging space issues.

Trans-Tasman market

This lane is experiencing ongoing delays along the New Zealand (NZ) coast, affecting schedule integrity. Delays at port have reduced and now range from 0.5–1 day. While schedule reliability is impacted, rates remain stable, space is available, and equipment is readily obtainable.

Coastal shipping

Australian coastal shipping remains strong, without major delays or issues. Aside from 2 – 3 days or irregular port omissions from east to west coast, schedule integrity is stable. Capacity remains out of key ports, with rates holding firm (ex. Brisbane, Sydney, and Melbourne). No equipment issues have been reported from key east coast ports.

Exports from Oceania

Export rates are under pressure with strong load factors creating competition—expect this to continue throughout August. Capacity is tightening from Australia and New Zealand to Europe and the east coast of the United States. Plan to book 5–6 weeks in advance.

New Zealand is in peak produce season, and space is tightening to the United States. Equipment impacted spans both 20' and 40' dry and refrigerated containers.

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