Market Trend

The dual factors of volume growth and extended delays tying up capacity remain in place. However, we believe trade growth likely stabilized in Q3 based on the global composite purchasing manager’s index (PMI) which hit 53 in October, the fifteenth straight month of growth. But container demand growth moderated to 2.5% in Q3 year on year, down from double-digit growth rates in H1 2021. Global air cargo volumes, based on cargo tonne kilometers (CTK), increased by 26% in the three months to August compared with 2020, and by 9% compared with 2019. Trade flows continued to be driven by strong demand in the US, especially tech and retail goods, which helped North American container imports from Asia climb 2% in Q3. European container imports from Asia slipped 0.5% in Q3 but were uneven between markets, and delays are continuing. We see further port delays through Q4 which in effect reduce available capacity on the networks.

Demand for logistics services remained strong in Q3 and is likely to continue into Q4 due to high levels of consumer spending and corporate capital expenditure in the US, although sales in Europe plateaued in Q3. But challenges remain with semiconductor shortages and other production bottlenecks impacting attempts to rebuild inventories especially in the US and Europe. The supply side of the logistics industry continued to be disrupted by COVID-19 and capacity shortages: container availability and air capacity remained tight, waiting times for vessels outside of ports remained lengthy, and warehousing capacity continued to be a bottleneck. The result has been equipment shortages and challenged supply chain management services.

Trending Topic

• • Vessel delays are expected to continue to cause capacity shortages. Sea-Intelligence Maritime Analysis says “the effect of vessel delays continues to worsen. Globally, we are now at a point where 12.5% of capacity is effectively removed.” Maersk has lost some vessel positions due to extended delays. Despite all vessels being deployed, effective capacity is severely limited by port congestion. Currently, more than 10% of the global container fleet is waiting for berths to become available. To reduce the impact from the current disruption, Maersk is deploying extra vessels where possible, both to cover some of the lost vessel positions and meet demand but also speed up the flow of empty containers back to Asia. We continue to in-fleet extra containers and invest in new containers.

• Vietnam lifts some COVID restrictions. The Vietnamese government lifted some COVID-19-related restrictions on October 1^st including the need for employers in worst affected provinces to provide accommodation for employees. This requirement will be assessed at a provincial level on a case-by-case basis. Truck drivers crossing different regions are still required to show a negative PCR test. Maersk is monitoring the situation and we expect disruption to manufacturing and logistics to continue primarily as testing and vaccinating workers is taking time. We have seen a significant increase in volumes through North Vietnam as customers shifted production from the South. For Maersk operations in Vietnam, customs are operating normally, but most ports and depots have limited drop-off times due to reduced staffing, while airfreight is experiencing longer transit times due to differing COVID-19 restrictions at other airports.

(Note: The equipment forecast is based on the supply and demand forecast, any increase in demand or supply delay would cause an earlier supply gap)

• Key Market Outlook across trade lanes.

• Japan and Korea: Economic indicators point to a strong year-end peak season after air cargo demand saw another strong month in August with volumes up 7.7% compared with pre-COVID levels. With international travel still severely depressed, there is limited belly hold. Space and supply chain bottlenecks could intensify as businesses continue to ramp up production. Space to China and the US is still critical. Maersk offers customers a consolidated airfreight service.
• Thailand, Singapore, Malaysia: Demand into the US, EU, and China remains strong in Q4 and is expected to be higher than Q4 2020. We see high demand in the industrial, electronics, hi-tech, and auto sectors. Cargo demand will continue to outstrip available airfreight capacity. We offer our customers intermodal connectivity with cargo from Myanmar shipped out of Singapore airport. Bangkok is also a key gateway for customers in the Phnom Penh and Rangoon areas. We have strong feeder/intermodal support in the region.
• Indonesia and Philippines: Strong export demand is expected in the coming months, especially in the garment and electronics sectors, due to Christmas and the New Year. Air capacity will be likely be constrained for the rest of the year. Some airlines are implementing penalty charges for cargo no-shows or date changes. It is strongly recommended to book 2-3 weeks in advance for air cargo shipments to the US and Europe.
• Vietnam, Cambodia and Myanmar: Airfreight capacity from Vietnam is at critical levels with major tech companies launching pre-Xmas production runs and taking most of the available capacity. The situation is exacerbated by airlines switching scheduled flights to ad hoc charters and shippers switching from ocean to airfreight which are expected to worsen the capacity crunch. Maersk offers a charter solutions for our customers and It is strongly recommended to book at least 2 weeks in advance.

• Australia and New Zealand: Import demand is ramping up as we enter the peak season and retailers stock up for the Christmas rush. Australia is still faced with potential industrial action at ports and we continue to provide our customers with the Maersk Connect product to ensure Maersk can provide contingency landside services should we see port omissions.
• Vietnam, Cambodia, Myanmar: Most factories in South Vietnam have restarted production. We anticipate strong demand from Vietnam and Cambodia into US and Europe, although a sudden production surge from reopened factories could cause capacity challenges. Equipment shortages in North Vietnam could ease by the end of October as production normalizes and imports are back on track. Trucking capacity is expected to be under pressure in October as factories rush to meet holiday demand. Equipment availability in Cambodia and Myanmar is tight. Maersk is hoping to add ICR capacity in October and November to provide an additional option to ocean freight. We have also created land-sea solutions from Cambodia to Vung Tau, from North Vietnam to Yantian, and from Myanmar to Laem Chabang to support US exports. We plan to introduce an FCL service by Q1 2022.
• Indonesia and Philippines: Indonesia export demand is trending up for Q4 especially in October and November due to the Christmas peak season. Retail, lifestyle, and FMCG are major contributors to export demand. But capacity is becoming an issue at several ports including Semarang and Belawan. Strong demand from the Philippines is expected in October and November with exports of electronics, tryes  and FMCG to the US and Europe although Maersk expects no increase in vessel capacity.

Major Port Update

• Ports in China are working well with some disruptions from weather, i.e. typhoons affecting South China.
• Ports in South East Asia such as Vietnam (Haiphong, Da Nang, Qui Nhon), Malaysia (Kuantan), and the Philippines (Cebu, Manila, Batangas and Subic) still face feeder capacity bottlenecks and restrictions for new bookings. Port of Tanjung Pelepas is seeing increased congestion.
• Port of Busan has seen an improvement in congestion levels with vessel waiting times forecast to be around 3 days following the implementation of contingency measures.
• Port of Los Angeles and Port of Long Beach continues to be severely congested with +60 vessels waiting at anchorage with lengthy waiting times of 8-17 days and 15 days respectively. All large vessels are limited to 4 gangs in LA, so for large vessels, the waiting time is expected to be 11-20 days in total.
• Port of Seattle continues to struggle with long waiting times of 28 days.
• UK ports are experiencing port congestion and inland moves are heavily affected by driver shortages. We have been working tirelessly to reduce the yard density and as a result, Felixstowe gate has reopened for empty returns as of Friday, Oct 15th noon. However, the situation remains critical and we are reviewing further ocean network actions. Click here to stay updated on Maersk global advisory regarding Felixstowe and current supply chain challenges.

Major ports update (Vessel waiting time indicator)