Report highlights resilient Asia-Pacific markets

Dimerco’s latest freight report for April and May points to robust resilience across air and ocean freight markets amid global economic fluctuations and regional challenges.

In March, the global economy saw a modest uptick in its expansion for the fifth consecutive month. This momentum was seen in both manufacturing output and services activity, which surged at a faster pace.

Reflecting this trend, the Global PMI Composite Output Index climbed to 52.3, a slight improvement from February’s 52.1. However, this growth came with a catch: a surge in price inflation, largely fueled by escalating prices and charges in the service sector.

With the U.S. inflation rate surpassing expectations in March, reaching 3.5 per cent year-over-year for headline inflation and 3.8 per cent year-over-year for core inflation, market sentiments have adjusted. Expectations for interest rate cuts by the U.S. FED have been revised downwards from previously anticipated six to three or possibly even fewer. As a result, speculation arises regarding a potential delay in the anticipated interest rate cuts, possibly shifting from June to October or November if inflationary pressures persist

Air freight market

According to Kathy Liu, vice-president of global sales and marketing at Dimerco Express Group, “The global market has largely remained stable, except for disruptions stemming from the crisis in the Middle East affecting trade routes from Asia to Europe. Over the past few months, there has been a noticeable increase in European cargo opting for sea-air service through Dubai. However, the recent heavy rainfall in Dubai has caused setbacks in these operations. Particularly noteworthy is the surge in demand for air capacity, exceeding 50 per cent, driven by eCommerce and e-cigarette in China, particularly in the southern regions. In addition, TEMU has initiated sea/air routes via Taiwan, Japan, and Korea into the U.S., altering traditional trade patterns. Consequently, freight rates from these alternative routes are now exceeding those from mainland China—an unusual occurrence.”

Toronto air exports

Direct options to Asia-Pac from YYZ are limited, with gateways including YVR, HKG, ICN, TPE, and various ports in the U.S. Similarly, there are limited direct options to Europe from YYZ, with more services available to hub cities such as FRA, CDG, MXP, MAD, and ZRH. Rates to both Asia Pacific and Europe are currently normal.

Vancouver air exports

Eva Air and China Airlines operate daily flights from YVR. Cathay offers daily flights to HKG. Air China has one flight to PEK on Saturdays. Air Canada provides daily service to HKG and on Tuesdays, Thursdays, Fridays, and Sundays to PVG. There is no terminal congestion with air imports.

Ocean freight market

Maintained In March, the delivery of new container ships surged, with 41 vessels delivered totaling a capacity of 260,000 TEUs. Ship types were of varying sizes, including MGX, NPX, 8-5 KTEU, and BKX. An additional two ships, totaling 20,900 TEUs, were delivered in April. Despite this influx, the increase in idle fleet was modest, rising from 0.7 to 0.9 per cent by March. According to Hapag Lloyd’s redirection of tonnage around the Cape of Good Hope, which requires an additional capacity of five to nine per cent, has effectively addressed carriers’ over-tonnage issues, maintaining the supply-demand equilibrium.

A pre-Labour Holiday rush in cargo shipments in China has allowed all long-haul carriers to announce a General Rate Increases (GRI) for the second half of April. On the other hand, carriers’ plans to withdraw more than 30 per cent of the overall market tonnage supply in week 21 have been disclosed, prompting blank sailings by major alliances like THE, OA, and 2M.

According to Alvin Fuh, special assistant to the CEO at Dimerco Express Group, “The disparity between ideal rates sought by Beneficial Cargo Owners (BCOs) and carriers this year is causing a significant gap, potentially slowing down service contract renewals compared to previous years. As negotiations unfold, carriers are poised to hold the upper hand, particularly in Q3 and Q4 of 2024 and Q1 of 2025, over the service contract owners either in long-term-fixed-rate or FAK-floating-rate terms.

“Situations such as potential disruptions in the Red Sea, a looming strike at U.S. East Coast and Gulf Coast ports by ILA in October and November, and the U.S. presidential election in November are expected to keep FAK floating rates elevated. This scenario may limit carriers’ ability to accommodate lower-fixed-rate bookings if rates fall below their viability threshold, urging BCOs to seek solutions from reputable Non-Vessel Operating Common Carriers (NVOCCs) for assured space and rate stability.”

North American ocean market

Several major U.S. retailers have recently finalized their service contracts with Ocean Carriers for Transpacific Eastbound shipments, agreeing to rates approximately 12 to 17 per cent higher than last year. Of particular note is the significant increase in rates to the U.S. East Coast, with an increment of around USD$800-$1,000 compared to last year. The surge in import volume to the U.S. during the first three months of 2024 is beginning to show early signs of potential port congestion. While the Ports of LA and Long Beach are not currently reporting any vessel dwells, the rail dwell time has risen from 4.7 days in January to 6.3 days in February.

Similarly, the Port of Vancouver has been grappling with rail backlogs since earlier this year. Whether this volume increase indicates an inventory recovery or a strong remainder of 2024 is unclear.

Port of Vancouver

Port of Vancouver congestion is at two to four days, while port capacity remains stable across all terminals in Vancouver. Fuel Surcharge (FSC) is an additional 32 per cent on base charge. Vessel discharge times have returned to typical levels, however, Vancouver rail terminal and Prince Rupert rail terminal dwell times are currently extended to approximately  seven to 10 days, due to a shortage in railcar supply.

Dwell times at West Coast ports, including Vancouver and Prince Rupert, are longer than usual. It is recommended to use ERS service, as dwell times at ports are currently averaging two to three weeks.

Toronto ocean exports

Rate and capacity are stable for both Asia-Pacific and Europe routes, and for ocean imports, the port is currently congested with delays in operations.