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Asia-US Ocean Rates Up from Suez Canal Diversions, Dropping Air Cargo Rates, and More

This week:

  • Gulf Coast ports to focus on expansion projects for improved container capacities 
  • US chassis demand remains low while providers deal with excess supply 
  • The new year sees a sharp drop in air cargo rates 
  • Continued Suez Canal diversions push Asia-US ocean rates up 
  • California’s zero-emission drayage vehicle rule delayed

Gulf Coast Ports Considered for Expansion This Year Amid Predictions of Modest Growth

The first nine months of 2023 were flat for the Gulf Coast, dropping 0.5% year-over-year with an 11.4% increase in exports, which was evened out by a 7.7% downturn in imports. Through September, though, exports rose by 15.1%, mainly due to a surge in petrochemical volumes, leading to Bayport Container Terminal opening a fifth container berth with additional post-Panamax cranes and the approval of funds for six additional cranes at a coming sixth container berth.

For 2024, Gulf Coast ports are expected to see modest growth, with dropping import volumes offset by slightly more substantial export volumes. Port Houston has plans to award contracts to construct two additional container yards at Bayport, and the port is in the approval process for a $160 million reconstruction of two container yards at Barbours Cut following an expected 1% growth in container volume this year. These projects will also coincide with dredging work around Port Houston and the Port of Mobile, while Mobile will begin a series of projects to lift its annual container handling capacity from 650,000 TEUs to 1.1 million.

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Weak Demand for US Chassis While Supply from Manufacturers Is High

2023 saw the supply and demand for chassis units in the US reach equilibrium after the previous years’ severe equipment shortages and bottlenecks. Many container chassis ordered in 2022 entered the market last year, as well as several new chassis manufacturers such as GG Trailers and Jansteel. The swell in available rail carts has prompted many providers to stack thousands of units rather than leave them idle. However, many truckers, particularly in the Southeast and inland areas, worry that rail providers will be unable to release stacked units fast enough should ocean container traffic pick up.

To lend weight to the worries of truckers, two chassis providers (Pitts Enterprises and CIE Manufacturing) are currently appealing decisions from US Customs and Border Protection (CBP) for the levying of duties on chassis, which could impact chassis availability should demand surge before resolutions are found.

The distribution of imports will largely influence the impact of chassis availability in the next surge of ocean containers. If the East and Gulf Coasts maintain their market share, then inland rail hubs will be better positioned. If the West Coast were to regain its previous market share, then there is a greater chance that equipment would not be ready or well-positioned in time.

Trans-Pacific Air Cargo Rates Dropped Sharply for The New Year

Eastbound air cargo rates from China to the US dropped more than 30% in the last week of December following the end of the fourth-quarter rally and the drop in US e-commerce demand after the end-of-year holiday season.

Analysts report that making market predictions for 2024 is difficult due to the fluctuating market and a movement away from the spot market as shippers look to lock in longer-term contracts with hopes of market normalization. According to Xeneta, the 2024 air cargo market outlook anticipates a growth in demand of 1-2% and a growth of 2-4% in capacity.

Asia-US Ocean Spot Rates Rise Due to Suez Canal Diversions

The ongoing diversions away from the Suez Canal, as well as the Panama Canal, mean many carriers are sending vessels around South Africa’s Cape of Good Hope, which has contributed to the rising spot rates on the Asia-US ocean freight market.

In the two weeks ending December 29, spot rates on the North Asia-US West Coast trade lane rose 39% to $2,612/FEU. Combined with general rate increases (GRIs) from several carriers such as Hapag-Lloyd, CMA CGM, Yang Ming Lines, and others, carriers have announced that Freight-All-Kind (FAK) rates for the first half of January will sit at $2,700/FEU from Asia to the US West Coast.

While most major carriers are following the FAK of $2,700, Cosco Shipping’s FAK rate for January is set at $2,800/FEU, increasing from mid-December’s $2,500/FEU. FAK rates to the US East and Gulf Coasts show slightly more variation. Many carriers issued rates between $3,600 and $3,900/FEU, while Cosco Shipping’s updated rate sat at $4,300/FEU.

California Regulators Delay the Enforcement of Zero-Emission Drayage Vehicle Rule

The California Air Resources Board (CARB) originally set January 1 as the date for enforcing the Advanced Clean Fleets (ACF) rule. The ACF would only allow the registration of zero-emission drayage vehicles to accelerate the transition away from greenhouse gas-producing engines. CARB is now delaying enforcing the rule as it waits for a preemptive waiver from the Environmental Protection Agency (EPA) or until the EPA decides that a waiver is not needed with reference to the Clean Air Act.

Drayage operators need to be aware that all vehicles that are not zero-emission compliant, which they register after January 1, won’t be allowed to operate in California’s ports or rail yards once the rule is enforced. This could take up to nine months, according to industry leaders.

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