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Equipment influx coming for stressed chassis market
Relief is coming to the tight U.S. chassis supply that has been a contributing factor in port and rail congestion for well over a year. Significant additional capacity is coming into the NY-NJ market as multiple manufacturers ramp up new production and refurbishment capacity.
This follows a year when new capacity was very limited following a 221% duty imposed on Chinese imports in the spring of 2021. Within a few months of the tariff, the flow of new chassis into the U.S. essentially stopped.
One source of additional supply is refurbishment. Companies are making major investment in refurbishing old chassis. Another new source is trailer manufacturers who are converting production lines to chassis output.
There are two “major new participants” that have recently come into the U.S. market. One is the U.S. subsidiary of Panus, which is ramping up capacity to 12,000 units per year into the U.S. market within a year or two. Another is Brazil-based Randon, which is the largest semi-trailer manufacturer in Latin America that recently purchased NJ-based Hercules.
New production capacity that has come online is between 50,000 to 90,000 new units per year. 90,000 is the ultimate extent of capacity and 50,000 is a more realistic number of units that will be produced.
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Uncertainty pushing trans-Pacific contract talks back
Spot rates are tumbling and cargo volume are expected to fall from record highs. Therefore, most trans-Pacific carriers and their customers are waiting until late this year or early next year for the market clarity needed to begin serious discussions on 2023-24 service contracts.
That wait-and-see strategy contrasts sharply with last year. Last year, large U.S. retailers began to lock in space in the over-subscribed eastbound trans-Pacific early in the fall and carriers reduced MQCs for their customers.
Importers in those 2022-23 service contracts agreed to rates between $6,000 and $8,000 per FEU from Asia to the West Coast. In many cases, they signed deals that extended beyond the 12-month duration that had been the norm for years prior to the pandemic.
The average spot rate from Shanghai to LA was $4,782 per FEU as of September 8, down 14% from the previous week and 59% from the same week a year ago. With spot rates $2,000 to $4,000 lower than their 2022-23 contract rates, many importers are now booking shipments under the current spot rate.
Importers, especially big-box retailers, are currently analyzing their anticipated cargo volumes for the coming year. Because a large proportion of their imports are redundant from year to year, they should be ready to begin their first round of contract discussions with carriers in late fall.
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Typhoon closes Qingdao and Dalian ports
Shippers face more disruption and vessel delays as Chinese authorities closed the ports of Qingdao and Dalian Tuesday ahead of the arrival of Typhoon Muifa. The storm has steadily moved north along China’s east coast after battering Shanghai and Ningbo Wednesday.
Maersk confirmed both Qingdai and Dalian ports had shut, with inbound pilot services suspended and vessels ordered to leave port to ride out the storm.
The closure of the northeast ports coincided with the reopening of Shanghai and Ningbo Thursday after both ports closed the day before due to the storm. Ningbo terminals restarted port operations at midday, while the Shanghai terminals resumed full regular operations in the evening.
Muifa has already led to vessel delays, with THE Alliance postponing to the weekend the departure of vessels operating Asia-Europe services from Shanghai and Ningbo. Heavy rain from the storm caused flooding in Ningbo, disrupting road transportation in the area. No major incidents were reported in Shanghai.
Freight forwarders warned that shippers could face weeks of delays due to back-to-back typhoons. Additionally, carriers are blanking sailings ahead of China’s week-long National Day holiday from October 1st.
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About O’Neill Logistics
O’Neill Logistics is a leading 3PL with operations in Rancho Cucamonga, CA; Savannah, GA; and Newark/Monroe, NJ. We service many verticals including Garments, Fashion Accessories, Footwear, Furniture, Home Goods, & Electronics. Additionally, we offer omni-channel distribution and all value-added services. Lastly, we focus on retail “drop shipment” fulfillment and item-level fulfillment services with same-day service offerings.
O’Neill Logistics has over 2 million square feet of state-of-the-art facilities. Additionally, we offer dray services to support the warehouses and provide distribution to retailers and wholesalers. Our reliable 3PL platform combines sophisticated technology with robust, flexible processing designs and speed-to-market gateway models.
Lastly, we aim to simplify your supply chain. We deliver exceptional service and can optimize your operational performance. Therefore, we aim to build, protect and foster strong business partnerships.