What You Gonna Do When the SCA Comes for You?
In this week’s global freight updates, we’ve got a vessel under arrest, underlying causes for U.S. port congestion, solid increases in import prices, a partial strike at Eastern Canada’s biggest port, and the ongoing, pandemic-induced container crisis. Up first, let’s dive into the latest news in the Ever Given saga which is the Suez Canal Authority’s (SCA) formal arrest of the vessel that can’t seem to stay out of trouble.
After an Egyptian judge officially released a court order allowing the SCA to seize the Ever Given last week, the SCA has announced that it will continue to hold the ship in Egypt until its $916M compensation claim is paid in full, causing quite the stir amongst the ship’s managers and insurers. As a result, the vessel’s charterer, Evergreen, is launching its own investigation against the scope of the claim and court order while also urging all of the parties involved to try and reach a settlement agreement in an attempt to free the trapped freight as soon as possible.
Over in the U.S., severe cargo delays stemming from the current container crunch keep plaguing the LA-LB ports with the blame largely falling on the rise in pandemic-induced demand for physical goods. However, these problems existed well before the COVID-19 breakout. According to JOC.com, “huge cost increases, limited ability to automate terminals, chronic avoidable disruption during contract negotiations, and far lower productivity and working hours compared with ports in Asia and elsewhere around the world are at the core of the issue.”
While industry leaders work to fix these problems, U.S. import prices are rising higher and higher because of the limitations these supply chain constraints are placing on the pent-up demand that’s being financed by fiscal stimulus checks and sustained by increased access to coronavirus vaccines. Based on Reuters’ data, “import prices rose 1.2% last month after advancing 1.3% in February. The fifth straight monthly gain lifted the year-on-year increase to 6.9%, the largest rise since January 2012. Import prices rose 3.1% on a year-on-year basis in February.”
And the cherry on top of all of this is the partial strike at the Port of Montreal that was scheduled to start this past Wednesday. Not only will this strike further escalate the port congestion across North America (given the projected 30% drop in the port’s capacity), but it will also most likely add to the already lengthy waits and soaring shipping costs logistics professionals are encountering worldwide. At one point in time, transporting a standard 40-foot container from China used to average around $1,000, but now that there’s an ongoing container crisis, some shippers and forwarders are having to pay in excess of $10,000 for the same exact space.
To learn more about how these issues are similarly affecting European ports or to get the details of the other top stories for this week, check out the following article highlights:
We’re Nowhere Near Out of the Thick of It Yet
From uncertainty surrounding Ever Given’s impending insurance claim; to the mounting traffic jam of cargo vessels; to the necessity of supply chain fluidity; to dealing with post-Brexit change; to stormy air cargo markets, it seems like the only guarantee in shipping is that the current market volatility is here to stay — at least for now.
And, although an article regarding the Suez Canal situation from Lloyd’s List states, “It’s still too early to assess the size of the likely claim on the International Group pool,” other, more immediate impacts are moving fast through global ocean shipping networks. To see what we mean, check out the update from one of our Asian-based partners:
Please kindly note that the space situation, especially on the USEC/GULF loop, will be significantly limited throughout April and May.
*** Since a total of 5 voyages from SEA to USEC were blanked during March alone, all space on USEC/GULF has been overbooked until the end of April.
*** The Ever Given incident will cause even more blanked sailings during weeks 16 and 17. Two weeks ago some carriers, including MSC, MSK, CMA, ONE, COSCO, etc., were already forced to outright cancel FAK bookings.
*** Considering the impending low water levels of the Panama Canal, some carriers (such as COSCO and YML) have announced new weight limitations too — around 8 tons per TEU including container tare — for shipments traveling through the canal starting last week (week 14).
*** Carriers are also expecting to face heavy equipment shortages, given that the inventory of more than half of the leading ocean liners will be depleted over the next couple of weeks. This will essentially produce a domino effect of more and more carriers limiting or even rejecting bookings to most IPI points in order to ensure most MVs will be phased in and out in time before Day 5.
Like we said, we’re nowhere near out of the thick of it yet.
Meanwhile, the congestion at the Ports of LA/ Long Beach persists and the additional capacity coming online later this year may not be enough.
To read more about this international shipping news, as well the latest on Brexit’s lingering effect on supply chains and what’s happening with air cargo, click the article highlights below.
But first, make sure to read the most recent news detailing our new, innovative trade finance solution.
Jaguar Freight Expands Suite of Services with Innovative Trade Finance Solution
FOR IMMEDIATE RELEASE: April 8, 2021 (Valley Stream, NY, USA):
Jaguar Freight, a leading global freight forwarder and U.S-based NVOCC, together with King Trade Capital, the largest purchase order finance company in the U.S., have announced the addition of a new trade and purchase order finance solution to Jaguar’s portfolio of services.
“By providing access to purchase order and trade finance as a part of Jaguar Freight’s suite of services, including our best-in-class logistics technology, customers can now extend their business reach and maximize their sales opportunities with fewer limits,” said Jaguar Freight’s CEO Simon Kaye.
The inclusion of trade finance means importers now have access to a turnkey supply chain partner in Jaguar Freight. Customers can now take advantage of new purchase order and supply chain financing opportunities and ensure a more seamless delivery to market.
“Jaguar Freight has been a trusted freight forwarder for a number of King Trade’s clients over the years,” said King Trade Capital’s Managing Partner, Edward King. “The expanded relationship with Jaguar will mean that King Trade can introduce Jaguar’s innovative systems and technology to more companies in need of freight forwarding services.”
Through the partnership, customers will benefit from this unique blend of trade and purchase order finance solutions between Jaguar Freight and King Trade Capital by gaining better control over their supply chain operations and improving their bottom line.
About Jaguar Freight
Jaguar Freight is a licensed freight forwarder and NVOCC and an expert in global supply chain logistics. Founded in 1993 in New York and London, Jaguar Freight has set itself apart by developing and serving customers with state-of-the-art technology expertise that transforms logistics and shipping services into world-class supply chain solutions.
Visit: www.jaguarfreight.com
E-mail: trodriguez@jaguarfreight.com
Phone: 516-239-1900
About King Trade Capital
For almost 30 years, King Trade Capital, or “KTC,” has helped good companies grow their sales and profits by providing PO and supply chain finance solutions. KTC is operated by its founder and its entrepreneurial team that understand the financial needs of operating and growing a business. As pioneers in purchase-order financing and non-bank trade finance, King Trade Capital has developed the expertise and unrivaled financial capacity to help companies become more prosperous by providing stable and unique PO and supply chain finance solutions.
Visit: www.kingtradecapital.com
E-mail: bprust@kingtradecapital.com
Phone: (214)-368-5100
And the Suez Canal Hits Just Keep on Coming
This week’s global freight updates have brought us a saturated airfreight market, the Suez Canal continuation, containers holding millions of dollars’ worth of goods idling off the LA coast, a potential for U.S. ports to receive major federal funding, and UK SMEs’ inability to absorb higher post-Brexit shipping costs.
After finally clearing the Suez Canal, shippers hoping to avoid this latest hit to the supply chain sector by turning to air better have a backup plan. Unless you want to “pay a premium for expedited service — on top of rates that typically are eight times greater than those for ocean shipping,” it’s looking like your options are pretty limited with demand outpacing capacity across all markets.
It’s still a little too early to tell how Ever Green’s misfortune will impact ports, especially in Europe, but experts predict that after a short lull in terminal operations, many will be on the receiving end of some intense congestion depending on when the cleared ships arrive at their destinations. Some sailings could get blanked if ships start arriving late given the already strained capacity, which doesn’t exactly help the incredibly low carrier schedule reliability we’ve been dealing with in recent months.
As for the ships holding millions of dollars’ worth of goods waiting for dock space at LA-LB ports, it seems like the situation hasn’t improved much for U.S. importers due to reduced capacity, a lack of labor, and pandemic-induced demand. According to the Pacific Merchant Shipping Association, “more than a quarter of imported containers at those gateways had to wait more than five days for handling once they reached the dock” in the last month alone.
With this congestion clogging most major U.S. ports, it’s become clear that the nation’s existing infrastructure could use a little (if not a lot of) TLC. When you take into account how far behind other trading nations like China the country appears to be in terms of its port and maritime framework, it makes more sense as to why the American Association of Port Authorities feels that “over the next five years, U.S. ports need $5 billion in federal funding toward water navigational projects; $20 billion for landside investments such as piers, wharves, and intermodal connections; and $4 billion for port security.”
Meanwhile over in the UK, SMEs are getting the short end of the stick when it comes to post-Brexit shipping costs and regulations. “January salmon sales, for example, plummeted 98% year on year, with beef exports only marginally less drastic, down 91%, and whisky down 63%,” based on data provided by the Food and Drink Federation. To learn more, check out the following article highlights:
Suez Canal Blockage Shows Extent of Shipping Struggles
Think you had a bad day at the office, well just imagine the week the Captain of The Ever Given has had! But hey, sometimes we just have to laugh otherwise we’ll cry, and this meme .gif we found on Reddit.com definitely does the trick! We promise it’s worth a watch.
But, back to the real news… With the backlog of vessels in one of the world’s busiest waterways, a range of new blocktrain and LCL services between China and Europe, the fresh spike in U.S. retail spending, a potential strike brewing at the Port of Montreal, and the prolonged labor crisis at sea, it’s important shippers are staying up to date on the latest events impacting international shipping.
Cargo ships are at an important decision point regarding the blockage in the Suez Canal, which is costing an estimated $400MM per hour. With no definite resolution to the problem in sight, the decision will need to be made whether or not to circumnavigate all of Africa to the south to avoid the traffic jam.
In direct response to a significant increase in demand for rail services resulting from excessive air freight rates and lengthy ocean transit times, “forwarders are spreading their services across the three China-Europe trade lanes — the northern corridor through Russia, the middle corridor via Kazakhstan and Russia, and the southern corridor via Uzbekistan and Turkey,” according to JOC.com. Even though volumes continue to surge throughout these adjusted routes, cargo flow is definitely improving, with minimal levels of congestion and network bottlenecks.
As for the U.S. import boom, the worst is not yet over given the recent round of stimulus checks. For those who thought the situation would return back to normal after this quarter, extreme rate hikes and sustained consumer demand reveal an entirely different story, placing a lot of pressure on shippers to figure out how they can get their transportation strategies up to speed.
A strike at the Port of Montreal is looming, as the government looks to continue negotiations to prevent a work stoppage. The main issues in dispute are work schedules, work-family-life balance, the right to disconnect, and disciplinary measures.
Last, but not least, roughly 200,000 seafarers remain stranded on vessels well past what’s considered a safe period of time, based on worldwide industry standards. With stringent COVID-19 border regulations and untimely quarantines on the line, many companies are desperately trying to avoid costly, time-consuming crew changes to the detriment of these essential maritime workers.
To learn more, check out the following links and give our latest blog, “How the Pandemic Has Shaped Today’s Supply Chains,” a read. Also, tune in tomorrow at 2 PM to hear our CEO, Simon Kaye, share his thoughts on “The New Frontier in Global Logistics Technology: Linking Customer Expectations to Customer Promise” – a webinar hosted by JOC.com.
It’s Time for EIS Hikes and U.S. Import Spikes
The impact of tough market conditions is continuing. From increasing Equipment Imbalance Surcharges, to warnings of import spikes across the U.S., to warehouses that are too full, to post-Brexit container logjams, to modal shifts, we’re here to deliver this week’s most pressing news in international shipping. At the top of the list is approaching carrier Equipment Imbalance Surcharges (EIS) and General Rate Increases (GRI) scheduled to hit approximately a month from now.
According to AJOT, for example, MSC announced that “effective April 12th, 2021 an EIS will be applicable for all REEFER cargo ex. AUSTRALIA and NEW ZEALAND to USA & CANADA: USD 200 per 20’ Reefer and USD 400 per 40’ Reefer.” And for those hoping to see port congestion ease throughout the ports of Los Angeles and Long Beach, “anticipating record sales in 2021, retailers expect U.S. containerized exports will increase 20 percent or more each month through June,” based on JOC.com’s data.
This means that while conditions aren’t expected to get worse, we definitely won’t see any real improvements until well after this summer given the sheer strength of sustained consumer demand. Supply Chain Dive released information supporting this expectation as well, citing the availability of vaccinations and the recent stimulus checks as two primary contributors.
The anticipated boost in consumer spending is also projected to impact other major ports across the country. According to figures from S&P Global Market Intelligence’s Panjiva, “overall U.S. seaborne imports in February were up more than 29% YoY and up 20% compared to the same month in 2019.”
Supply chain delays are forcing many retailers to rethink their inventory management strategy and the result is warehouse space is becoming very tight. A big reason why is that many companies are building inventory to help smooth the problems further upstream in their supply chains. And, the negative impact of port congestion is starting to show up on companies’ bottom lines.
Over in the UK, ports are facing similar container congestion and trade disruption as leading gateway terminals struggle to handle increased traffic resulting from major pileups of complex post-Brexit cross-Channel shipments. With these freight delays in ocean shipping and the insanely high freight rates in air, shippers and forwarders are having to get more creative in how they source and transport their goods in order to find a reasonable balance between price and transit time.
Whether that involves turning to multimodal consolidation routing solutions or sticking to local manufacturing options and skipping China altogether is ultimately up to what logistics professionals value within their own supply chain processes. To learn more about how these industry updates are potentially affecting your operations, check out the following links:
How the Pandemic Has Shaped Today’s Supply Chains
If you were to describe the way the world has changed over the past year to your pre-pandemic self, it would probably sound like something straight out of a bad sci-fi movie. From the moment COVID-19 entered the scene, it has been one disruption after another — especially for those of us tasked with figuring out how to keep supply chains running smoothly in the midst of all this chaos.
The global economy started to decline almost immediately at the outset, governments began imposing trade restrictions, and demand became volatile. The cracks within many companies’ manufacturing and transportation processes quickly surfaced as well. Now, the pressure is on as companies scramble to readjust their strategies to mitigate risks and maintain the flow of goods while dealing with severely volatile rates, capacity constraints, service failures, and extended manufacturing lead times.
But onward we must go. Here are a few of the ways the industry is adapting to keep itself afloat in the pandemic’s wake:
Work from Anywhere (WFA) Model
Over the years, the evolution of technology made the WFA business model possible well before COVID-19 came into the picture; however, no one really knew how people would perform outside of an office setting. Many businesses were too concerned about all of the unknowns surrounding WFA’s influence on things like communication, efficiency, and data security to make the transition.
That all changed when the pandemic lockdowns made it a necessity rather than a choice. Despite being forced into it, most companies have come to realize how beneficial the WFA model actually is from improving employee engagement, to reducing property costs, to increasing workforce retention. For shippers, the importance of having tech-enabled logistics partners became a must-have overnight.
E-commerce Explosion
Just as the pandemic accelerated the WFA trend, it also accelerated the move from shopping in brick-and-mortar stores to primarily purchasing goods online, permanently altering the retailing landscape. The domino effect of this rapid explosion in e-commerce sales not only triggered a huge jump from intermodal and truckload shipments to parcel and LTL, but it also caused a shift from B2B to B2C deliveries.
Ocean liners, in turn, are having to race to reposition empties across Asia-Pacific trade lanes to overcome severe capacity constraints and meet e-commerce demand, while shippers bear the weight of excessive freight rates.
The New On-Demand Mentality
Given the unprecedented (sorry, we had to) market uncertainty, more and more shippers are also working to preserve their cash flow by shifting away from a traditional high-volume, low-frequency inventory strategy. Instead of trying to predict erratic consumer spending patterns, some manufacturers have decided to stop ordering larger volumes of a product that they then have to store in favor of ordering smaller volumes at a more frequent rate.
As a result, their transportation partners have had to up the agility of their processes, specifically in regard to the last mile, to keep pace with these leaner inventories. At the same time, the inverse is also true for other companies.
Some importers are ordering in larger quantities out of the usual seasonality to stockpile goods in the U.S. as a way to ensure they have sufficient quantities to meet the ever-increasing demand. The result has been high demand and higher costs for warehouse space and drayage services. Again, the technology provided by freight forwarders and other logistics providers is key to making this shift possible.
Long-Term Impact
Competition for shippers of all types was tough before the pandemic, but it’s only going to get more intense from here. Plus the expectation of faster and cheaper deliveries that existed before the pandemic is only going to increase too. This means supply chain professionals are going to have to get imaginative with how they use their resources.
Long-term success requires finding that balance between increasing the efficiency and resiliency of your logistics operations (without breaking the bank) while also maintaining a competitive edge with your customers. In order to step up to the challenge, it’s important for companies to take the time and energy now to identify and understand the weaknesses within their own supply chain operations.
After you’ve thoroughly picked your processes apart, then you can use your new outlook to take further action, whether that involves diversifying your supply base, upgrading your logistics partners, capitalizing on innovative technology trends, or even reevaluating the types of products you offer.
The underlying theme of all your decisions should be focused on nimbleness and agility. If the past year has taught us anything, it’s that things can change quickly. Shippers and their supply chain partners need to be better positioned to respond accordingly.
Resetting your supply chain is not something you have to do all on your own though. Visit Jaguar Freight to learn more about how our proven expertise and industry-leading software can better prepare your supply chain for a post-pandemic world.
Here’s Why Air Cargo Demand Is on the Rise and Some Ocean Exports Aren’t Making the Cut
The goal of The Weekly Roar is to help supply chain professionals like you stay up-to-date because we all work in an industry that’s in constant flux. When ocean shippers are moving to air, 25+% of trucks leaving the UK for EU are empty, senators are calling on the FMC to back exporters, and exporters are taking unusual steps to ease the container shortage, it’s just another average post-pandemic week for us.
Here’s what you need to keep up to speed:
With ocean shipping lead times growing out of control for shippers due to the ongoing capacity crunch, some companies are turning to air in order to avoid the bottlenecks. As a result of this transition, the rise in demand for air cargo is now placing more pressure on limited belly capacity and elevating spot rates as well, causing some carriers to start investing in additional freighters as a way to expand available freight space.
As for Brexit’s impact on shipping over in the UK, “empty lorries leaving the UK accounted for 26% of all truck movements into the EU, with total loaded haulage exports down 47% last month, compared with last year,” according to the Road Haulage Association. If you factor in the steep drop in demand for UK goods, the effects of the new rigid and lengthy import process aren’t looking too good for exporters in the UK.
Back in the U.S., exporters aren’t having much luck either, with many senators reaching out to the FMC to take the necessary actions that will prevent carriers from prioritizing higher-value cargo to maximize their own profits. Meanwhile, government officials in other areas like China and South Korea are taking serious steps to try and prevent their exports from suffering the same fate.
Unsurprisingly, the pandemic has its place in all of this, too. Simon Heaney, senior manager of container research at Drewry Shipping Consultants Ltd., believes “the best thing governments can do is ensure rapid and effective vaccination of their populations so that landside logistics labor capacity and productivity can be restored to pre-pandemic levels.”
To learn more, check out the following article highlights. But first, get an exclusive look at our most recent blog on “How PO Management Software Can Turn the Lights on in Your Supply Chain.”
Where Do Global Supply Chains Go From Here?
From lingering supply chain woes, to the Port of LA’s new vaccination site, to price hikes in air cargo, to moving forward in transportation management, to the UK’s new freeports, there’s a lot to discuss for this week’s global freight update. So, let’s get started.
Unfortunately, solving the container crisis requires more than simply throwing more boxes into the equation, which is why the FMC is cracking down on marine terminal operators and ocean carriers as well as encouraging more collaboration within the industry. If we don’t start focusing on solutions now though, elevated shipping costs are only going to go up from here and possibly even last well into 2022.
In an attempt to boost labor and ease the intense port congestion in Southern California, the International Longshore and Warehouse Union has partnered with local employers to launch a new vaccination site at the Port of Los Angeles. According to Jim McKenna, president of the Pacific Maritime Association, port authorities were aiming to vaccinate 7,000 dockworkers by the end of last week.
As container volumes continue to flood crucial U.S. gateways, the toll COVID-19 is taking on skilled equipment operators is only further escalating the situation at hand. Many are struggling to get their orders in on time while also having to pay high premiums that are eating away at their already slim margins.
Meanwhile, the air freight marketplace is seeing rising fuel prices combined with increasing airline surcharges show how, regardless of the mode, shippers are doing a lot of the heavy lifting when it comes to footing the bill. With ocean shipping maxed out and other sectors not too far behind, it’s becoming more and more apparent how much room for improvement there really is in transportation management.
On a more positive note, UK Chancellor Rishi Sunak has recently revealed the locations of eight new freeports, or free trade zones. Local authorities hope these areas will help simplify the current shipping situation, lower customs costs, and ultimately stimulate the country’s post-Brexit economy.
To learn more about this week’s leading headlines, check out the following international shipping industry highlights:
How PO Management Software Can Turn the Lights on in Your Supply Chain
In our highly connected digital world, supply chain visibility involves more than just your standard track and trace technology. While once considered ‘cutting-edge,’ the ability to know the physical location of freight should be a given for any shipper of any size. Today, when progressive shippers think about terms like visibility and transparency, their expectations include having a view of their entire supply chain, from sourcing to manufacturing to final delivery, irrespective of the number of suppliers or logistic providers.
The importance of visibility to a large extent is about problem avoidance and mitigation. Companies can’t wait for problems to snowball through their supply chain operations, because by the time they’ve been identified, it’s often too late. The extra costs and disruptions have already occurred whether you realize it or not. If you want to avoid delivery challenges before they make their way downstream, you’ll need a way to increase transparency further upstream prior to when the shipping process even begins.
Solving the Supply Chain Puzzle To Prevent Late Deliveries and Extra Logistics Costs
A key step in the supply chain where these types of problems can be addressed relates to how Purchase Orders (PO) are managed. Paper-based PO processes and primarily manual workflows can leave most supply chains vulnerable to problems that only really manifest themselves during shipping.
Identifying when production delays and orders shipping incomplete or late will impact transportation plans is exceptionally difficult, especially when sourcing and manufacturing are happening overseas. To be successful, shippers have to adopt tools that are sophisticated enough to handle the complexity of global supply chains. This is where tech-enabled PO management is a critical piece of the supply chain puzzle.
The best digital PO management solutions will automate and align a company’s manufacturing and shipping operations from end to end by allowing issues to be addressed upstream before they have a chance to become issues downstream. This eliminates the need to manually mine through fields of data to identify problems.
In other words, close alignment between a company’s PO management processes, supplier manufacturing schedules, and the shipping function creates a win-win-win situation.
There are several important and quantifiable benefits of tech-enabled PO management including:
• Expedited shipping expenses lowered by 15-20%
• Extraneous email traffic reduced by more than 80% almost instantly
• Overall freight costs decreased by 20%+
Additional supply chain efficiencies:
• Improved transportation budgeting with better control over costs and accuracy
• More optimized title transfer and inventory management
• Integrated cross-functional collaboration and more accessible data
• Standardized PO processes
• Improved vendor relations
• Data-enabled score carding
Purchasing and procurement professionals have a lot on their plate, from ensuring contractual compliance to overseeing vendor communication. Unfortunately, the chances of experiencing delays with your purchase order requests are a lot higher when you’re forced to wait around for phone calls and email responses, or you’re having to wade through various outlets to pull data on specific assets. And, like it or not, keeping the shipping department ‘in the loop’ can often slip down the priority ladder.
Running a Tighter Ship
With a centralized web-based PO management software system that corrals all communication, companies also lower the risks associated with miscommunication and error-filled POs. Also, by having an intuitive traffic-light filtering system, users will be able to quickly focus on addressing the real issues rather than data-trawling to try and find them. The key to effectively solving these challenges is visibility throughout the entire supply chain.
While some ERPs claim to do PO management, none of them do it very well. It’s important for shippers to find a solution that can help them lower costs, optimize supply chain performance, and gain a competitive edge. And remember: the alignment of PO management, shipping department, and all stakeholders is the key to a synchronized supply chain.
To learn more about a collaborative online PO management platform that provides immediate visibility and opportunities for continuous improvement with an innovative carrier-agnostic approach, visit Jaguar Freight.
Have the Major Supply Chain Events of the Past Year Become Normalized?
It’s cliche, but we have to ask. Is this the new normal?
In this week’s global freight updates, we’ve got hidden post-Brexit costs, shippers on the prowl for boxes, the current state of ocean freight – in pictures, CMA CGM branching out, and plunging air cargo rates.
According to The Loadstar, EU consumers are starting to become “more reluctant to order UK brands due to longer transit times and additional costs linked to duty and VAT.” Despite attempts to avoid disruptions, the uncertainty surrounding these costs and the complexity of the reverse logistics process are causing many problems for the country’s apparel brands.
“Every picture tells a story, don’t it.” – Rod Stewart. The song lyric fits when it comes to ocean shipping, too. Instead of repeating the same old story – in words – we’ll do it in pictures. As pretty as big, colorful pictures of ships and containers can be, this is a situation that is not easing. At last report, there were almost 90 container ships anchored outside of U.S. ports waiting for unloading.
As for the current container crunch, some shippers have had enough of the elevated freight rates and overwhelming bottlenecks and are now looking into outright buying the containers themselves. With FEUs up 500% in some areas, many are left questioning whether or not demand will remain strong if these costs are put on consumers.
Next up on the list is CMA CGM’s new in-house cargo airline. The carrier’s first flight is officially scheduled to depart from its home base at Liege Airpot on March 8, giving the industry giant and its subsidiaries yet another leg up in the game. While companies like CMA CGM are working on ramping up capacity, air cargo rates from Shanghai to North America are down 62 percent from last week, according to the TAC Index.
This drop doesn’t exactly paint the full picture, however, given that rates are still up 90 percent on the trans-Pacific in comparison to this same time last year. And factors like limited capacity will likely keep them that way for the rest of the year at the very least.
To learn more about these issues, check out the following article highlights:
What’s the Latest in Ocean and Air?
Things in the international shipping industry are as hectic as ever, but there are some positive signs with air cargo volume decreasing worldwide, forwarders negotiating rates for UNICEF’s vaccine distribution, video evidence of California’s box-ship traffic jam emerging, and container lines ordering new vessels to keep up with demand.
Over in the ocean shipping sector, the U.S. Coast Guard’s latest video footage showing the pileup of container ships anchored across California’s San Pedro Bay revealed just how intense the congestion has become due to unavailable capacity, labor limitations, and increasing delays. While major carriers have been profiting despite these setbacks, they’ve been using their newfound capital to invest in more than $10 billion of container ship new-build contracts as a way to replace aging ships and potentially raise contract rates. Based on data compiled by Bloomberg, “The number of container ships on order rose by 23 to 201 last week, the biggest weekly gain in two years.”
According to The STAT Trade Times, both air cargo volume and capacity declined by 1 percent worldwide between this week and last. The news source went on to state that “on a regional level, origin Africa did best with a volume increase of 6 percent week-over-week, while business from Europe showed the largest decrease (-4 percent).”
After 16 airlines recently committed to support UNICEF’s COVID-19 vaccination program, many are wondering how other air cargo will fare once the vaccines start receiving scheduling priority. With the pricing power left in the hands of 6 forwarders, there are a lot of remaining unknowns surrounding UNICEF’s efforts to secure more reliable, cost-effective capacity.
And that doesn’t even begin to cover the other important events that made headlines this week, like post-Brexit trade barriers, Maersk’s plan to deploy the first zero-carbon container ship, and the IMO’s World Maritime Theme for 2021.
Check out the following article highlights to learn more:
The Aftermath of Brexit on Supply Chains
Britain’s decision to leave the European Union (EU) back in 2016 set off a series of events that have impacted supply chains ever since, and now seem to be reaching their peak as companies learn to live in the post-Brexit world. Now that the transition period has come and gone, many companies are still struggling to adapt to the absence of the added trade perks that come with being an EU member.
In an attempt to avoid the harsher realities of failing to form a new agreement, the United Kingdom (UK) brokered the Trade and Cooperation Agreement (TCA) with the EU on Dec. 24 at what was effectively the fifty-ninth minute of the last hour. Although any deal was better than no deal, new challenges like longer delivery times and more extensive export documentation have shown how businesses in the transportation industry need to start rethinking what supply chain efficiency means in the aftermath of Brexit.
Here are some of the surprising and not so surprising outcomes of the new border control practices we’ve noticed since the UK’s exit at the end of last year:
- Delivery Delays
Manufacturers were hit hard by the overwhelming and costly customs declarations, health checks, and certifications Brexit introduced. Exporters in the food and beverage sector are particularly struggling to get their perishable products to buyers in time while they’re still fresh because it’s simply taking too long to complete the paperwork process.
Despite the efforts companies are making to find a solution for these delays, “about a fifth of small and medium-sized businesses that export to the EU have temporarily halted sales,” according to Reuters. Some food producers are even avoiding the process altogether and going directly to other markets.
- Higher Logistics Costs
With surges in taxes, tariffs, and additional customs fees, it’s becoming increasingly expensive for logistics service providers to bring goods into the country. Lofty tariffs, for example, are forcing firms to switch up their sourcing strategies. Rising trucking costs are pushing customers to EU competitors, while stricter COVID-19 testing requirements are removing the incentive for drivers to accept shipments coming from the island.
Trade with Ireland is also on the rocks as gaps start to emerge throughout retail supply chains, and they may only get worse once the three-month grace period for supermarkets in Northern Ireland ends. Some “Northern Irish logistics groups have warned that prices are rising as trailers return from Britain empty, without a return load to cover the cost,” based on Reuters’ findings.
- Rules of Origin Complications
A lot of traders were under the impression that trading with the EU post-Brexit simply involved filling out some forms, so the new rules of origin requirements came as a surprise to many companies. Although the government released 60 pages worth of guidance on the subject, some believe that the information failed to help forwarders and shippers in light of the current capacity shortage and marketplace conditions.
The UK has responded to these complaints by defending its Border Operating Model and stressing the other ways it has been offering support for companies — e.g., export helplines, trade advisers, policy exports, and the Brexit Business Taskforce. Many in the industry, however, have expressed frustration over when the publication was released since it went public a mere 6 months before the transition period came to a close and any deal was made.
What’s Next?
If the delays and inconsistent pay continue to keep EU drivers from coming to the UK, the driver shortage could very likely turn into a serious capacity crunch, which would only place more pressure on spot rates and European supply chains. The risk of spoiled produce is also leading shippers to hold on to their goods instead of moving them, which could increase congestion in warehouses. These disruptions will hopefully ease up over time as the industry adjusts to the new changes, but there are still quite a few bumps in the road ahead that need to be addressed before goods start flowing freely again between these two trading partners.
Will Things Get Better in the Spring?
With no letup in sight for the COVID-fueled cargo boom, large ocean container lines are raking in the profits, while shippers struggle to manage the overwhelming demand surge.
It’s interesting to look at the breakdown of revenue and costs for a carrier like Maersk (see chart). And, based on the Maersk Q4 2020 key performance indicators, the carrier has successfully kept operating costs under control through all the market volatility of the past 12 months. According to Freightwaves, “Maersk reported ocean revenues of $8.26 billion for Q4 2020, up 15.5% compared to Q4 2019. Revenue growth was driven by a 3.2% increase in volume, but primarily, by a 17.7% spike in freight rates.”
This marks yet another record quarter for the carrier, and if market conditions continue to follow the current trends, the industry giant expects to end the first quarter of 2021 on an even better note. Despite all of the present uncertainty, Maersk’s CFO Patrick Jany believes spot rates and container volumes should start to ease up in Q2 2021 — hopefully alleviating some of the intense port congestion and container shortages we’ve been experiencing.
But even with that optimism, shipping delays persist and even some Christmas deliveries still have not been made.
As everyone impatiently waits for contract season to arrive, many are working on their strategies for upcoming carrier contract negotiations in an attempt to address the significant supply chain stressors causing chaos at ports everywhere. One crucial move shippers should look out for, especially those involved in Trans-Pacific trade, is the efforts carriers plan on making to reduce contracted free time.
This could mean shippers will have to make some serious adjustments to cut down on the time it takes to return containers, or this could mean that shippers will have to accept higher per diem charges, depending on how negotiations shake out ultimately. As companies prepare to negotiate terms to optimize equipment flow and enforce preventive measures, many industry leaders are also fighting to mitigate the pandemic-driven dockworker shortage by pleading with U.S. regulators for better access to vaccines. Without that critical classification of “front-line worker,” some cargo terminals may have to shut down operations temporarily at the rate that employees are getting sick right now.
To learn more about these issues and other key events going on in the international shipping industry, including electronic BOL’s, an air cargo update, and news about Vietnam’s market-resilience against the pandemic, check out the following highlights:
The Supply Chain Stress Continues!
In this week’s global freight updates, we’ve got harbor truck disputes, increasing congestion and delays, shipping container accidents, and more. As pandemic-driven import volumes continue to overwhelm ports worldwide, the resulting supply chain stressors are exposing the cracks underneath the surface and further escalating detention and demurrage charges in the trucking industry.
Despite efforts on the FMC’s part to ensure that carriers aren’t taking advantage of the current situation, the organization’s inability to legally create new regulation has allowed most supply chain stakeholders to essentially ignore the FMC’s guidelines. And the process of disputing these charges is pretty time-consuming as well, with little hope for trucking companies coming out on top. These fees are only going to increase as port congestion intensifies and dwell times grow longer.
The ports of Los Angeles and Long Beach are displaying just how much of an impact the current container crisis is having on the international shipping industry. According to The Loadstar, some of the 41 ships (as of the article’s publication date) at anchorage could be forced to wait up to two weeks for a berth, which equates to roughly 336,500 TEU of idled capacity. Port authorities are now strongly advising carriers to avoid contributing even more traffic to this port lockdown chaos by pushing them toward other gateways in the Pacific Northwest.
As if these conditions aren’t stressful enough, let’s tack on the problematic shipping accidents that have been piling up over the last couple of months. Based on the Wall Street Journal’s recent take on this issue, also known as “parametric rolling,” the sheer size of today’s ships combined with the weight of stacks and stacks of boxes have both ultimately decreased the stability of ocean vessels, which is why we’re seeing a spike in the number of container losses.
To learn more about these events as well as this week’s other top stories, like Brexit trade disruptions, air charter contract extensions, and Jeff Bezos’ impending replacement, check out the article highlights below:
JOC Analysis: Forwarders Face Technology Investment Crossroads in 2021
We get it. The freight forwarding industry is not exactly known for being tech-savvy; however, that’s about to change. As a result of increasing competition from emerging e-commerce platforms, tech startups, and even large ocean carriers, investing in new logistics technology has fast transitioned from a want to a need for the entire shipping industry.
The decision of whether or not companies should embrace the recent wave of digitization is no longer being questioned. With this newfound awareness, however, comes a new dilemma: what approach should companies take with new technologies? The answer to this question depends on what a forwarder wants to accomplish with their investment.
According to a recent article published on JOC.com, there are several different routes forwarders can take. One approach can be to focus on technologies that enhance front-end processes to reduce your sales costs and expand your market reach. Another can be to focus on optimizing your back-end operations to eliminate any inefficiencies.
In the past, the popular choice was often to try and automate workflows behind the scenes, but then, it started becoming more about simplifying applications for consumers. Now, the marketplace has cycled back to a back-end focus, with the key differences being ease of integration and simplified interfaces.
There is also the buy vs. build debate. On this topic, the article’s author, JOC’s Senior Technology Editor, Eric Johnson, mentioned Jaguar Freight specifically.
“Individual forwarders and non-vessel-operating common carriers (NVOs) are tackling the mandate to be more technologically proficient head-on … New York-based Jaguar Freight is using a mix of in-house-developed systems and off-the-shelf software to build a framework that helps it attract and retain customers.”
But, not every company is ready to tackle it all at the same time. When asked, Jaguar CEO Simon Kaye recalls that after founding the company in 1993 he very quickly realized freight forwarding is an information business as much as it is a logistics business. So over the last 25+ years, Jaguar has been focused on developing technology to improve the user experience internally as well as for its customers and partners. Regardless of the specific approach, every company needs to maximize the value of technology and create the best possible customer experience.
To learn more about one company that is doing just that, visit Jaguar Freight; click here to read the full article from JOC.
The fight for shipping containers continues!
Shippers are stuck between a rock and a hard place right now. And the only ones getting their freight on ships are those that can still reach their wallets.
As shipment delays grow out of control and shipping costs skyrocket, the critical lack of ocean containers is forcing companies to pay premium prices after waiting weeks to get their hands on the necessary equipment. Spot rates from Asia to the U.S. West Coast are up 145 percent YoY, while rates from Asia to North Europe are up 264 percent YoY, and at the center of the problem lies carriers’ aggressive return of empties back East.
Some companies are reporting that 3 out of 4 of the containers coming from the U.S to Asia have nothing in them, and the U.S. isn’t the only one experiencing this issue. Ocean carrier schedule reliability is also at an all-time low, which likely won’t change any time soon if demand remains the same and the resulting bottlenecks keep clogging up trans-Pacific routes. According to JOC, the average delay for late vessels on the West Coast reached 7.99 days in December, while on-time performance fell by 70.9 percent YoY.
Many regulators are already well aware of the situation due to the increasing number of shipper complaints lodged against low service levels and excessively high freight rates. Some hope that the current repositioning of containers will eventually lead to a turning point, especially with the Chinese New Year approaching soon. No one expected consumer spending patterns to take off like they did, and this pandemic-induced spike in demand revealed just how many inefficiencies were lurking beneath the surface.
Similar to the decline in ocean freight capacity, air cargo capacity has also dropped by 16 percent over the last two weeks in comparison to this same time last year. Despite the growth trans-Pacific trade lanes have shown, other crucial routes around the globe are still struggling to support the sustained influx of cargo demand.
To read more on topics like 17-foot wave woes and problematic box spills, check out the following article highlights:
Ocean Freight: Let’s Talk About the Elephant in the Room
In this week’s global freight updates, we’re bringing readers an ocean freight-heavy report that provides views and news on the current situation, including spikes in rolled cargo, record-level imports, a potential ocean freight rate cap, a challenging shipping container market, and more.
Right now, it’s hard for shippers to even get cargo onto ships. 75 percent of the 20 transshipment ports Ocean Insights surveyed experienced an increase in rates of rolled cargo in December, with an overall 37 percent MoM increase as well. According to Sea-Intelligence, blanked sailings are anticipated to make up between 13 and 11 percent of overall capacity in the third and fourth week of this month, respectively. Carriers are making efforts to add vessels to their networks, however, as a way to combat these issues, so capacity is projected to rise by 21 percent and 34 percent YoY for those same weeks.
According to a recent JOC article, U.S. imports from Asia reached an all-time December high, indicating that the surge in container volumes that’s been overwhelming U.S. ports since June shows no signs of slowing in the near future.
With 1.626 million TEU on the books last month, we’re seeing a 29.9 percent YoY increase in container volumes between December 2020 and December 2019. This also marks the third-highest monthly volume of 2020, which totaled 16.6 million TEU overall. Because of the strong demand for PPE, medical supplies, and e-commerce merchandise, intermodal traffic and port congestion were also a lot more intense in the eastbound trans-Pacific than they normally would be for this time of year.
As for the regulatory measures that are being taken, China’s Ministry of Commerce and the U.S. Federal Maritime Commission are both keeping a close eye on FAK market conditions. There’s even been talk that the former may be looking to start enforcing some antitrust measures to help control container shipping’s excessive rates and equipment shortages.
This help could not come any sooner though because there are essentially no TEUs available to anyone unless they’re willing to pay three times the typical going rate just to get their goods out of the ports of Los Angeles and Long Beach. And those who refuse to pay FEU prices for TEU containers are just getting rolled over and over until air freight becomes their only option, while the number of empties returning to China is up 55 percent YoY. With global demand significantly outpacing equipment availability, added surcharges are only serving to kick shippers and their logistics service partners while they’re down.
To learn more about these ongoing problems and the other top stories of this week, check out the following article highlights:
A big shoutout from the JOC!
In a field where competition is killer and you’re up against advancing e-commerce platforms and various tech startups, the key to surviving lies in investing in new forms of automation.
According to JOC’s Senior Technology Editor, Eric Johnson,
“Individual forwarders and non-vessel-operating common carriers (NVOs) are tackling the mandate to be more technologically proficient head-on … New York-based Jaguar Freight is using a mix of in-house-developed systems and off-the-shelf software to build a framework that helps it attract and retain customers.”
Not only are we happy to receive this shoutout, but we’re also excited to see how far the industry has come as a whole in its embrace of digitization.
Shoutouts aside, here’s what else we’ve found that’s noteworthy this week:
As we encounter cargo-ship charters equating to $350,000 per day, saving on shipping costs is now arguably more important than ever, so it’s no wonder companies are hopping on board the tech train. Not to mention the fact that supply chain risks seem to be amplifying as ocean carrier networks grow smaller and smaller.
With global container capacity and port congestion the most prominent issues facing the ocean shipping industry, one initiative that will theoretically ease some of them for Europe – the Silk Road – is seeing some success. But, it’s not without its own challenges.
And European-based exporters are getting the worst of things between the tight conditions in Asia lanes and Brexit continues to cause problems for the region. With increasing equipment imbalance surcharges, added security checks, complex documentation, and new taxes, the costs of transporting U.K. goods are at an all-time high. According to Bloomberg, the additional fees that are being placed on “flight trucks” can reach up to 3,000 pounds.
To learn more, check out our article highlights below, and click the last link to view some important dates you should keep in mind for upcoming key trade events in 2021.
Global Freight Updates Delivered To You!
With short-term freight snags, limitations against EU regulators, U.K. lockdowns, an avg. of 30 vessels at anchor waiting at the Ports of LA/ Long Beach all last week, increasing supply chain debt, decreasing blanked sailings, and a tight air cargo market 2021 is already off to a rocky start for supply chain all over the globe.
It’s been over a week since public officials finalized the Brexit trade deal otherwise known as the European Union-United Kingdom Trade and Cooperation Agreement. Because of the last-minute nature of the deal, many European manufacturers (especially those in the automotive sector) were given very little notice to adapt their processes to the deal’s lengthier documentation requirements. As border delays continue to get out of hand, the U.K. remains the only country to offer a 6-month grace period.
Unfortunately, the European Commission is pretty limited when it comes to what it can do right now. These limitations are also affecting the organization’s ability to respond to the complaints shippers are lodging against carriers who are violating their shipping contracts. And demand for goods like exercise equipment shows no sign of slowing amid Europe’s recent coronavirus lockdowns and the unprecedented lack of blanked sailings for the Chinese New Year, which is only pushing up shipping rates.
Speaking of high rates, epic delays are continuing for the Ports of LA/Long Beach. And the premiums paid by importers in the Asia/ U.S. trades are unprecedented. From JOC.com:
Spot rates in Asia-North America trade are about $4,000 per FEU to the West Coast and $5,000 per FEU to the East Coast, although carriers and freight forwarders say importers are paying as much as $6,000 per FEU to the West Coast and $8,000 per FEU to the East Coast when the cost of premium equipment and space guarantees are added to the base freight rate.
Shipping demand and rates aren’t the only things in the industry that are spiking, however. According to Bloomberg, bad supply chain loans equating to 25.5 billion euros, or $31.3 billion, are on the rise due to the European Banking Authority cracking down on lenders in the region. Since larger companies typically pay their bills late, the new standard stating that receivables booked on a firm’s balance sheet will be considered past due after 30 days poses a pretty big problem for many businesses.
On a more positive note, what has been a pretty tight market for air freight seems to be finally improving as various airline carriers continue to add more capacity to their fleets. To learn more, check out our article highlights below:
