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Market Advisory

US WEST AND EAST COAST PORT CONGESTION UPDATE – November 5, 2018

TOC LOGISTICS INTERNATIONAL INC. offers this update to the ocean market at US West and East Coast ports:

TOC Logistics has been advised by our contract carriers at LA/LGB and New Jersey ports of severe congestion occurring over the last few weeks and expected to continue and worsen leading up to January 1, 2019 when the next round of full tariff applications on China imports is implemented.

Dray carriers in LA/LGB are experiencing 8 hour wait times, causing them to only be able to perform one container turn per day/shift. Dray carriers are starting to explore increased wait time rates and bonuses to retain drivers and avoid losing them to other jobs.

Dray carriers in New Jersey  have reported consistent 2-mile long lines entering the port for drops and pickups.  While they haven’t addressed what the time factor is that this creates, we believe the wait times to be similar here as well.

TOC Logistics needs to prepare our customers, with this announcement, of the possible economic effect and likely service delays we are all going to experience leading up to January 1, 2019.

Actual rate increases or surcharges are not published by anyone as of this writing; however, our customers may be assured that TOC Logistics will make such announcements immediately when that happens.

As always, we greatly appreciate the privilege of serving you.

 

URGENT OCEAN MARKET UDPATE – October 31, 2018

TOC LOGISTICS INTERNATIONAL INC. here offers an ocean market update with information on the concerning water levels in the German inland waterways and rivers. Because of an extremely long and dry summer, with a lack of rain in the past six months, the water levels in the rivers fell to historic lows. Pictures showing the low water levels are below.

Low Water Surcharges

As a result of the low water level, the barge (inland vessels) can only load 15%-20% of their capacity, in an effort to avoid running aground; meaning 80-85% of the containers assigned to barge/inland waterway routings are sitting at inland waterway ports and not moving anywhere.

  • Impact: 50% of all containers leave the ports of Antwerp & Rotterdam by barge. These containers are now searching for new routes. Because of this, the capacity of the road carriers, as well as the rail carriers are overwhelmed. Finding available trucks or railcars will be extremely difficult, and all rates (truck drays, FTL’s and rail moves) are skyrocketing.

 

Congestions in Antwerp & Rotterdam

Because of the low water on the German inland waterways, the ocean carriers are having trouble getting import freight, coming from Asia, out of the terminals in Rotterdam & Antwerp. The terminals are over 100% capacity and are overloaded.  Terminals are moving slowly and extra time is being taken because containers are being buried under the continued onslaught of arriving containers, and making it difficult to find and maneuver containers to truck or rail terminals for delivery or transfer. It is taking 2x-3x longer to load trucks and trains. Because of this, there will be extreme congestions in the ports of Rotterdam & Antwerp.

  • Impact: Rates for alternate transportation, like truck and rail, will be rising because of the congestions in the port of Rotterdam & Antwerp.

 

Empty Container Supply

Due to the low water situation and the congestion in the ports of Rotterdam & Antwerp, the supply of empty containers at inland CY’s (container yards) is critical. The primary reason for this is that loaded containers are now stuck in the ports. With carriers not being able to get containers to their recipients, this means they are not being unloaded, and empties are not being positioned at the inland CY’s and made available for exports.  Shipping empty containers to the inland CY’s is not happening because all available truck/railcar capacity is focused on getting full-containers out of the seaports. Empty containers may only become available from the seaports, and not inland CYs very soon.

With the potential for only obtaining empty containers from seaports, and the reduced capacity and availability of trucks/drivers to recover them, the costs for ocean exports from the European Union to North America is likely to spike in the coming days until such time as the rainy season starts and the rivers fill back up.

TOC Logistics International Inc will be publishing an emergency congestion surcharge, in line with the announcements by steamship lines and trucking companies, within the next few days. These charges will ONLY apply if applied to TOC by EU carriers; and will likely be ad hoc, or situational, in nature. We do not expect this to be an across the board rate hike, but only as it happens.  Meaning, it might apply one week, but not the next.

We have no other choice but to warn of a semi-Force Majeure situation loosely related to weather.

Emergency Congestion Surcharges will be provided to the financial stakeholders at our clients within the next few days; but, again, will only apply situationally and not across the board or continuously.

 

Please do not hesitate to reach out to our team with any questions.

Thank you for allowing TOC Logistics International Inc. to serve you.

OCEAN MARKET UPDATE – PIER PASS 2.0 IMPLEMENTATION: November 19, 2018

TOC LOGISTICS INTERNATIONAL INC. here offers an ocean market update pertaining to new PierPass Peak/Off-Peak container surcharges and terminal operations:

A flat TMF (Traffic Mitigation Fee), per TEU (Twenty Foot Equivalent Unit) is being imposed on all import containers during BOTH traditional peak and off-peak periods at the LA/LGB west coast ports/terminals, effective November 19, 2018.

The previous TMF per TEU during PEAK times (day shift) of $72.09 will be reduced to $31.52 per TEU ($63.04 for 40’ containers) and will now be applicable to ALL import containers during both PEAK and OFF-PEAK (day and evening shifts).  Appointment requirements will not change, however will expand to more terminals.

There is no change to the types of containers being assessed the TMF; the following items, however, will continue to be exempt:

  • Empty containers
  • Rail intermodal containers
  • Transshipped containers (cargo that arrives at the Port of Los Angeles or Long Beach on one vessel and leaves on a second vessel without entering U.S. commerce)
  • Domestic cargo
  • Bare chassis

All ocean importers will now be experiencing the TMF regardless of when containers are pulled from the terminals.

For more detailed information directly from PierPass, please see the links here for FAQ’s from the original April 2018 announcement October 2018 announcement and official Pier Pass press release:

https://www.pierpass.org/wp-content/uploads/2018/10/QA-on-New-OffPeak-Program_10-11-18.pdf

www.pierpass.org/wp-content/uploads/2018/04/QA-on-New-OffPeak-Program_4-16-18.pdf

https://www.pierpass.org/about/extended-gates-review-process/

As always, we thank you for the pleasure of serving you.

 

US Customs Fees Increase: October 1, 2018 

TOC LOGISTICS INTERNATIONAL INC. would like to offer this US Customs fee application update:

Merchandise Processing Fee (MPF):
MPF is a statutory fee assessed by Customs on most US Customs entries.

October 1, 2018, the Merchandise Processing Fee will increase; applied to the following entry types:

  • Minimum MPF for formal entries will increase from $25.67 per entry to $26.22 per entry.
  • Maximum MPF for formal entries will increase from $497.99 per entry to $508.70 per entry.
  • Minimum MPF for informal entries will increase from $2.05 to $2.10 per entry.

The MPF rate of 0.3464% does not change. For additional details see: https://csms.cbp.gov/viewmssg.asp?Recid=23668 

TOC Logistics is happy to support your efforts to realize and document the impact of this increase. Do not hesitate to contact TOC’s Customs Brokerage Department.

Thank you for allowing TOC Logistics to serve you.

TransPacific Ocean Market Update: September 20, 2018

We have been informed by our carriers that the congestion and overbooking situation in Asia for the TransPac Eastbound lanes is going to get much worse over the next month, at least.

TOC has had reports from our carriers that several strings are so overbooked that there will likely be some double rolls occurring , meaning an automatic roll of at least 2 vessels.  This is an extreme measure that is very rarely necessary.

What are the factors that have led to such actions?

There  are a number of factors impacting this:

  1. Back-to-back typhoons in Asia
  2. Severe draft restrictions out of Shanghai; (meaning only shallow draft vessels are getting berth spots)
  3. Using multiple terminals in Shanghai. Carriers being forced to switch between different berth locations due to ongoing construction. It’s difficult to move the cargo from one terminal to the next when vessels keep calling different berthing locations.
  4. Extremely high volumes out of Korea and North China.
  5. All this added to the previous congestion caused by early and high-volume bookings from manufacturers and buyers trying to get goods onto US soil prior to tariffs being implemented.

We urge you, our customers, to immediately engage your planners, buyers, suppliers and TOC service representative(s) to put a contingency plan in place to deal with these imminent disruptions to all our supply chains.

Thank you for allowing TOC Logistics International Inc. to serve you.

 

OCEAN MARKET ANNOUNCEMENT – August 2, 2018

A capacity crisis has built up and reached critical mass in the TransPacific Eastbound ocean trade.  See the bullet facts following:
  • Currently, the ocean “spot rate” market is running $1,500-2,000.00 HIGHER than most contracted rates.
  • Vessel operators, in collusion with the “alliance members” have been systematically reducing available capacity on the TP routes for many months; including using “blank” sailing strategies and even suspending or outright eliminating entire strings, permanently.  7%+ of the TransPacific capacity has been removed from service in the last 60 days.
  • This is causing significant “roll” risk to the NVOCC’s and BCO’s alike.
  • Alliances and vessel operators are subjectively reducing contracted allocations, in order to open up capacity to the “spot rate” market where they are achieving higher than contracted rates.
  • BCO’s (Beneficial Cargo Owners) & NVOCC’s (Non-Vessel Operating Common Carriers/Forwarders) who have not fully utilized their allocations in any given month are having their allocations reduced or removed to accommodate the higher margin “spot rate” market.
  • Allocations for contracted rates are NOT being increased for anyone right now.
  • GRI’s and PSS have been announced early and anyone not accepting them are at risk of being rolled for the higher margin “spot rate” containers.
  • The new China Import tariffs that are set to apply over the next two months are also causing huge increases in container volumes for importers increasing their PO release numbers to hurry the product into the US before the tariffs hit.
All of the above is creating pressure on the ocean supply chain that has not been seen previously;  with the global economy currently increasing demand for containers, while at the same time alliances systematically removing capacity, we find ourselves in a situation of “pay to play” in order to keep containers moving and sailing on intended vessels.

 

In the same way passenger airlines purposely overbook in order make sure planes are “full”, the ocean alliances find themselves in this position right now with all vessels being +100% booked, and able to choose what containers load or roll.  In this scenario, alliance members are able to load the higher rated, higher margin containers ahead of the lower rated/margin containers.

 

TOC Logistics International Inc. must engage our TransPacific clients in serious Peak Season Surcharge discussion for their specific lanes where vessel operators are refusing to load containers under contracted rates without a PSS, and where vessel operators are refusing to allow bookings outside of contracted allocation counts.  Whether TOC Logistics is your provider or not, it is imperative that you engage your provider ASAP to make appropriate arrangements to minimize the impact to your supply chains.

 

We encourage you to search all market publications and ocean news outlets to see for yourself the serious nature of the TransPacific situation.   We look forward to working with each of our clients to review and negotiate the right resolution for them.

OCEAN MARKET ANNOUNCEMENT – MAY 31, 2018

TOC Logistics International Inc. offers the following ocean market announcement:

In light of significant fuel cost increases, the top ocean carriers of the world are announcing Emergency Bunker Surcharges.  This is in addition to any normal quarterly fluctuations.  TOC traditionally maintains ocean rates to be inclusive of standard Bunker Adjustment Factor (BAF), however this surcharge is an emergency surcharge implemented outside of normal contractual terms.

We do not yet know if these surcharges will be implemented in full, if they will be able to be mitigated, or waived entirely.  Much depends on the trajectory of the oil price over the next 3 weeks, but the carriers are very aggressive to recoup losses so it is safe to assume some level of Emergency Bunker will be implemented.

As of this message, primary TOC carriers have announced following:

CMA – July 1 2018 effective date.  $55/TEU (press release attached)
MSC – June 21 2018 effective date. $100/TEU (official notice attached)
Hapag – No official announcement however one is expected at similar levels in the coming days.

In accordance with FMC regulations, TOC is providing its customers with 30 days’ notice of implementation of an Emergency Bunker Surcharge of $100/TEU effective July 1, 2018, for all FCL shipments to or from United States and Mexico.

We will negotiate this charge with our carriers, and implementation will be a pass through cost of whatever the final amounts are.

The final Emergency Bunker Fee amount will be communicated to each client once mitigation conversations are completed and further reflected in the updated client Negotiated Rate Agreements (NRA’s) which will be provided prior to July 1, 2018.

We thank you for allowing TOC Logistics to serve you.

 

May 24,2018

TOC LOGISTICS INTERNATIONAL INC offers the following ocean market update:

The National Coordination Committee for the six port workers federations in INDIA has called for a nationwide, one-day, strike on May 28, 2018.  Followed immediately by an indefinite strike beginning May 30, 2018.

Worker demands have gone unattended by the Ministry of Shipping and attempts of resolution between the competing entities have proven unsuccessful.

The following major ports in India are expected to be affected:

  1. Jawaharlal Nehru Port (Nhava Sheva)
  2. Mumbai Port
  3. Chennai Port
  4. Tuticorin Port
  5. Kolkata Port
  6. Cochin Port
  7. Vishakhapatnam Port
  8. New Mangalore Port
  9. Mormugao Port
  10. Paradip Port
  11. Kandla Port
  12. Ennore Port
  13. Port Blair Port

TOC strongly encourages our customers to take immediate action to review your supplier release schedules and seek counsel with your operations agent or Account Manager to explore alternative modes of bringing your product in or out of INDIA.


 

U.S. Truck Capacity Situation Causing Severe Problems for Supply Chain Community

March 12, 2018: US Trucking and Container Drayage Market Update

The US Trucking capacity and pricing struggle continues; affected modes beyond traditional trucking are intermodal, and container drayage.

The previous updates from February 5, 2018 and February 23, 2018 (below) are still valid and offer a realistic progression of the situation leading up to today’s update.

The latest tactic taken by vessel operators, whether they are handling “door” moves or not, is to boost their revenues by reevaluating accessorial charge application.

As of this writing, 2 vessel carriers have announced a reduction of free time at origin loading, or destination unloading from 2 hours down to 1 hour; and an increase from $75.00/hr up to $125.00/hr.  TOC must adjust our application of free/wait time for all moves controlled by vessel operators to the same.

This is added to our announcement from February 23rd, advising that all vessel operators are now charging demurrage without exception.

This article from the Journal of Commerce, while lengthy, is the best commentary on the spread of the US Trucking industry situation and the modes being affected, so far.  The scariest statement in this article is the estimate that 50% of the container dray drivers in the US are looking to convert to long-haul, over-the-road, jobs; further exacerbating the already traumatic situation at the container ports.

Please remember that in today’s market, long validity rate contracts DO NOT guarantee capacity.  Spot quoting to obtain capacity is at its highest level ever, in our opinion.  The inland and ocean port dray situation is not better, and pundits claim will not level out until sometime in 2019.

We urge you, our customer, to stay in close contact with your Account Manager and/or Operations Specialist, to all be on the same page about your hot shipments/releases and the associated additional costs to meet your delivery or production expectations.  TOC’s procurement efforts are non-stop and we will provide the best cost and capacity availability possible, to meet your service demands.

February 23, 2018 

TOC LOGISTICS INTERNATIONAL INC offers this supplemental market update from our previous notice of under capacity and shortage of drivers in the US Trucking and Drayage Market;

The snowball effect resulting from the following current conditions, has reached critical mass:

  • Heavy gate congestion
  • A chronic lack of truck power (reduction of available drivers due to eLog enforcement)
  • A near zero availability of chassis’ at major ports and inland CY’s
  • Bunching of inbound trains ( including trains being held indefinitely at switching yards, due to no space to receive them at the next stop )
  • Lack of available railcars for ocean containers at inland ports
  • Increased container volumes, both import and export
  • Heavy snowfall and loss of yard storage

Vessel operators are now claiming FORCE MAJEUR in major ports and refusing to provide origin/destination “door” moves, leaving the NVOCC, Forwarders and, yes, even the BCO’s, to fend for themselves to get containers either delivered to the port or delivered to the end customer.

Vessel operators who have not claimed FORCE MAJEUR, have announced a line item increase to contracts of at least $300 per container to continue managing “door” moves under their existing contracts.

Further, because of the lack of availability of equipment, “dwell times” ( the number of days it takes for a container to be pulled from the port ) have risen, nationally, to 7-10 days; this is particularly important to understand because there are TWO surcharges at risk of being applied with this increased dwell time:

  1. Free days at the port hover around 5 days nationally; thus an extended dwell time causes port storage to kick in;
  2. Demurrage ( the number of days the container is away from the port before being returned ) has an industry standard of only 2-3 days, thus the extended dwell times and lack of actual equipment for either the delivery or empty return is now triggering per day demurrage charges.

Regarding demurrage charges, until now, these charges could be waived or greatly reduced so as not to affect the supply chain spend to volume customers; but now, in order to manage the increased costs of the current under-capacity market, vessel operators are applying demurrage without exception.

TOC Logistics International Inc must officially announce here that all demurrage charges by the vessel operators, NOT caused by negligence of TOC Logistics, will be passed on to our clients via a demurrage line item charge on invoices generated AFTER March 15, 2018.  Since these demurrage charges are unable to be forecasted, TOC Logistics recognizes the need to increase our attention to each client’s container reality and make every effort to provide advance warnings of additional charges; but we must state that this will not be a perfect solution or outcome and we will make appropriate notices as we are made aware.

The supply chain conditions today are not just challenging, but truly critical, and surviving this will be very expensive for ALL of us.  Please endeavor to stay closely engaged with your TOC Account Manager and/or Operations Representative to collaborate together on maintaining as smooth a supply chain as humanly possible.

 

February 5, 2018

TOC Logistics International, Inc. regrets to inform that the truck capacity situation in the United States is creating a severe problem to the supply chain community.

Our team received a letter from the 3rd largest vessel operator stating, “The US trucking industry is facing a growing shortage of qualified drivers in both the international and domestic markets. The shortage is having a dramatic effect on our ability to deliver freight in a timely and effective manner.” The vessel operator is experiencing a significant increase in service delays as a direct result of the current trucking situation in the United States.

This letter that we received in evidence of what the rest of the vessel operators and the NVOCC industry is facing.

This same vessel operator that sent us the above letter had also reached out to our team asking if we could handle dray moves for containers that were not TOC’s. This is proof that the situation is not just affecting long-haul FTL providers, but also port dray carriers. While there are many factors at play, the eLog regulations are playing a huge role.

The new US eLog requirements, which were enforced beginning December 18, 2017, have truly caused capacity reduction. In regards to the container dray carriers, the simple facts are:

  • Before December 18, 2017, dray drivers could handle up to five “turns” per day using manipulative log practices.
  • Since December 18, 2017, dray drivers who stick to strict hours of operation (11 hours per day), can now only do a maximum of three turns per day (based on average of 3 hours per turn).
  • Without reducing the number of drivers or equipment, the above results in a 40% reduction in capacity.
  • For longer dray runs, if a driver could previously do 2 turns per day, he might only now be able to do one. This alone will significantly drive up the price of the jobs, as it represents a 50% pay cut to the dray company/driver that must somehow be recouped.

Some of the impacts to NVOCC operations are:

  • A last-minute lack of drivers available to bring “empties” to a loading site
  • Lack of drivers available to deliver containers to ports to meet cut-offs
  • Drivers cancelling on one job in order to take a higher-paying job

TOC Logistics is committed to finding and having alternative options in place in order to keep our programs running on-time. However, should the capacity situation become a regular detriment to operations at current rate levels, all supply chain users must be prepared for expected rate increases.

Also, please note this article which details the troubles that some of the largest companies in the U.S. are facing when it comes to keeping their supply chains going, some of which includes paying DOUBLE the contracted rates for certain critical lanes.

The impact for 2018 supply chains is not yet fully realized or understood, but costs are sure to increase rather than stay static. Contracting long-rate validities does not guarantee capacity, which means “out of gauge” services will become more prevalent in order to keep supply chains moving.

We offer this market update for your information and benefit.