Latest / Container Bytes: Weekly Ocean & Air Freight Intelligence for Supply Chain Pros / Container Bytes #53: Two-Thirds Red Sea Fleet Restoration, LA Port Watchman Strike Threat, and Unseasonal Ocean Rate Spikes

Transcript

Container Bytes #53: Two-Thirds Red Sea Fleet Restoration, LA Port Watchman Strike Threat, and Unseasonal Ocean Rate Spikes · Container Bytes: Weekly Ocean & Air Freight Intelligence for Supply Chain Pros

• 0:00
  SPEAKER_00: Hi, and welcome back to Container Bite, your 10 minute update on the latest in freight.
• 0:04
  SPEAKER_00: I'm Judia Frwine and I'm joined by Judah Levine, our freight expert.
• 0:07
  SPEAKER_00: Judah, how are you doing?
• 0:09
  SPEAKER_01: Good, how are you?
• 0:10
  SPEAKER_00: Yeah, I'm doing okay.
• 0:11
  SPEAKER_00: Happy to be back.
• 0:12
  SPEAKER_00: Okay, let's kick off.
• 0:13
  SPEAKER_00: Another typhoon has hit the Far East, and more and more container ships are passing back through the Red Sea.
• 0:18
  SPEAKER_00: So are we seeing congestion worsen from this combination?
• 0:22
  SPEAKER_01: So starting with the typhoon, we had Typhoon Champi, which I don't know if I'm pronouncing that right, but it really mostly impacted ports and also airports in Taiwan.
• 0:32
  SPEAKER_01: So it impacted on Friday, and it put some of the nearby major container hubs on the Chinese coast on alert, but didn't really disrupt operations there.
• 0:43
  SPEAKER_01: And then it kind of weakened as it uh continued north and northeast towards uh Japan.
• 0:48
  SPEAKER_01: So, for you know, in terms of operations, yes, it shut down ports in Taiwan, but in terms of hitting the ports in China again, we didn't see that.
• 0:56
  SPEAKER_01: The major Chinese container hubs uh are still continuing to recover from those previous disruptions from storms, as you mentioned.
• 1:03
  SPEAKER_01: And there's certainly a lot of progress, but not completely back to where they are normal just yet.
• 1:09
  SPEAKER_01: So congestion from those storms has been one factor that's been maybe keeping more upward pressure on rates than maybe otherwise would have seen.
• 1:18
  SPEAKER_01: Um the other part that might be a factor, as you mentioned, is the carriers continuing to go back towards the Red Sea.
• 1:25
  SPEAKER_01: Alpha Liner estimates that about two-thirds of total Asia-Europe capacity now is restored, which was really dramatic.
• 1:31
  SPEAKER_01: If we think this started in July, so it's been gradual, but it's really significant at this point and it seems to be moving forward.
• 1:37
  SPEAKER_01: Really, kind of especially of note is that Zim Lines announced that they have resumed a uh Far East US East Coast service together with MSC.
• 1:48
  SPEAKER_01: And this is of note because uh Zim is an Israeli container carrier, and Israel was explicitly targeted or declared by the Houthis that the Obama adapstrators closed them as recently as August.
• 2:02
  SPEAKER_01: There are reports that there have been meetings that the Houthis said they'll refrain from attacking vessels, including Israeli vessels, but this is kind of a big another kind of milestone in the fact that the return might be, you know, it's really taking shape.
• 2:14
  SPEAKER_01: If you have vessels going by the Red Sea instead of going all the way around, they start to arrive earlier than they were meant to, and you can have some vessel bunching.
• 2:20
  SPEAKER_01: So we don't see reports of kind of significant, you know, chaos because this has been gradual, uh, and you have some existing congestion already, so it'd be less noticeable as opposed to starting from you know completely smooth operation.
• 2:32
  SPEAKER_01: So it likely is kind of contributing to some congestion and contributing to the recovery of those congestions from the storm being maybe being less significant than otherwise would have been, but we don't see anything major from that, but it might be one contributor.
• 2:45
  SPEAKER_00: Okay, got it.
• 2:46
  SPEAKER_00: Um a watchman union in LA and Long Beach voted to approve a strike.
• 2:50
  SPEAKER_00: What is this union's role at the ports and what would a strike mean for shippers?
• 2:54
  SPEAKER_01: Right, so watchmen is um it's kind of a separate part of the of the bigger port worker uh union at these at these ports, uh, and their role is to provide different types of security-related services to a lot of the different terminals at these ports at LA and Long Beach.
• 3:09
  SPEAKER_01: So they kind of have a separate uh contract than uh the ILWU, which is the major uh union, and they've been working without a contract or extending their contract since 2025, and it's basically because these there haven't been enough progress in these negotiations that the the union now has voted to uh authorize a strike as early as November 1st.
• 3:32
  SPEAKER_01: Now they're only about 250 workers, only represent about 2% of the overall workforce, but because they provide the specific role and specific service to a lot of the terminals, if they were to strike, it could be very disruptive.
• 3:44
  SPEAKER_01: There's no um indication that the other that the ILW is going to join in the strike, but again, even if they don't, it could be, you know, it could it could significantly disrupt operations there.
• 3:55
  SPEAKER_01: So it's kind of waiting and see what happens as as kind of the deadline approaches.
• 3:59
  SPEAKER_01: There is some existing congestion at LA Long Beach, especially for containers that are moving on by rail.
• 4:06
  SPEAKER_01: So there is congestion there.
• 4:07
  SPEAKER_01: If there were to be a shutdown, certainly a prolonged shutdown, but even just uh a shorter shutdown or not shutdown but disruption because of this um you know role of the watchman, it would kind of stack on top of that.
• 4:18
  SPEAKER_01: We're kind of at the point where you know peak season goods have have come into the port, but there's still some that are waiting to exit the port, especially as we said, because of these rail backlogs.
• 4:27
  SPEAKER_01: So it would be disruptive to some you know importers who are uh have containers that they need for you know for Black Friday and the uh shopping season that starts then, which could be disrupted by a little bit.
• 4:39
  SPEAKER_01: So, you know, a lot of shippers will be hoping this doesn't come to pass.
• 4:42
  SPEAKER_00: Okay, so congestions aside, the span between Golden Week and Lunar New Year is usually a time of low demand and low rates, but it seems not to be the case this year.
• 4:51
  SPEAKER_00: Why do you think that is?
• 4:53
  SPEAKER_01: That's a good question.
• 4:54
  SPEAKER_01: You know, the demand, it seems, is cool on Asia Europe lanes.
• 4:58
  SPEAKER_01: Nonetheless, we see carriers uh scheduling rate increases.
• 5:01
  SPEAKER_01: We've really seen rate increases since the beginning or about mid-October.
• 5:05
  SPEAKER_01: We see carriers scheduling additional increases for November.
• 5:08
  SPEAKER_01: And you know, there is some of the congestion that we can't put aside that is a factor into putting some pressure on rates.
• 5:15
  SPEAKER_01: Carriers are also blanking sailings, but nonetheless we see uh despite that kind of lower demand period and what this this stretch normally looks like or could normally look like, we see rates climbing.
• 5:27
  SPEAKER_01: So Asian North Europe prices climbed 3% last week above$3,500 per container, to the Mediterranean increase 8% above$4,200 per FEU.
• 5:36
  SPEAKER_01: That being said, there are reports from forwarders that carriers are already discounting relative to those rates, and so there's some skepticism that you know, even if uh rate increases are announced, it'll necessarily take as we move into November, that's certainly possible.
• 5:50
  SPEAKER_01: Even so, though, rates are still quite elevated, and let's not forget we have higher fuel costs, and of course, we have this continuing issue with congestion.
• 5:58
  SPEAKER_01: Um, similarly on the Trans-Pacific, you know, I think expectations I certainly expected that we'd start to see rates cooling after Golden Week.
• 6:05
  SPEAKER_01: There um it seems that we're past peak demand finally.
• 6:10
  SPEAKER_01: That started kind of back in May.
• 6:12
  SPEAKER_01: Um, but we're seeing rates stay elevated or continue to increase on these lanes.
• 6:16
  SPEAKER_01: So last week rates increased 3% to the East Coast to about$8,400 per container and 9% to a new high for the year to the East Coast of$10,500 per FEU.
• 6:28
  SPEAKER_01: So these are still really elevated rates.
• 6:31
  SPEAKER_01: How this is continuing to be pushed through is um you know is not entirely clear to me.
• 6:35
  SPEAKER_01: We did see rates increase to the East Coast and start to come down in daily rates this week.
• 6:40
  SPEAKER_01: So they kind of were climbing since you know since mid-last week and have started to come down this week, but they're still kind of net up a couple hundred dollars per container.
• 6:48
  SPEAKER_01: Same thing on this lane though, forwarders are reporting, you know, we're seeing cooling demand, we're seeing space becoming more available, so it's possible that we'll start to see those spot rates come down as well, as this would be kind of the the normal seasonal pattern, but we'll have to wait and see.
• 7:01
  SPEAKER_00: Okay, so ocean should be in slow season, but rates are up for now.
• 7:05
  SPEAKER_00: Air is meant to be at the start of peak season, so what are we seeing for air cargo?
• 7:08
  SPEAKER_00: What's the latest there?
• 7:09
  SPEAKER_01: Yeah, it seems that peak season is kicking in, or peak season demand is kicking in for air cargo on the relevant lanes.
• 7:16
  SPEAKER_01: So rates out of China climbed last week.
• 7:18
  SPEAKER_01: They're up four percent to above seven dollars per kilo to North America, and they were up ten percent um to four dollars and thirty-five cents per kilo to Europe.
• 7:28
  SPEAKER_01: And it seems to be, you know, initially it was maybe some backlog after Golden Week.
• 7:33
  SPEAKER_01: Now we're seeing rates continue to climb, really rebound from a low over the Golden Week period.
• 7:38
  SPEAKER_01: And that seems to show that yes, we're seeing peak season demand kicking in, which makes a lot of sense as we're you know almost into November.
• 7:45
  SPEAKER_01: For some of these lanes, we're starting from an elevated baseline, right?
• 7:48
  SPEAKER_01: Both because of fuel costs, but also because of strong demand, especially from AI-related hardware, these goods being used to build out data centers and things like that.
• 7:57
  SPEAKER_01: So that's kind of uh starting from a strong demand, strong volume perspective on some of these lanes.
• 8:04
  SPEAKER_01: And so we're probably gonna see uh peak season kind of stack on top of that, make it you know somewhat difficult for shippers and other verticals to secure space, and we're certainly seeing rates or at least spot rates elevated because of that as well.
• 8:16
  SPEAKER_01: And you know, we're kind of early in peak season at this point.
• 8:19
  SPEAKER_01: There's certainly a few weeks left, so it's very possible we'll see rates surpass levels we saw last year.
• 8:24
  SPEAKER_01: Again, both because of demand and also because we have this higher you know baseline of fuel costs that are being passed on to shippers.
• 8:30
  SPEAKER_00: All right, interesting.
• 8:30
  SPEAKER_00: All right, thank you, Judy.
• 8:31
  SPEAKER_00: That's all we have time for today.
• 8:33
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• 8:38
  SPEAKER_00: Thank you for listening and have a great day.