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:
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.
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:
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:
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.
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:
In the first Weekly Roar of what’s going to be a great new year:
The EU continues to wheel-and-deal, wariness remains for some persistent global supply chain roadblocks, blockchain continues its uphill fight for relevancy, why rail is cool again, and the obligatory international doom and gloom (with a little positive thrown in.)
It’s 2021, so let’s go!
With Brexit checked off the to-do list (sort of), the European Union has struck a trade deal with China. There is a lot of opposition to it, however, both internally within Europe and from the U.S. Notable is that China edged out the U.S. as the EU’s largest trading partner with $590B in two-way trade in 2020 based on the latest figures.
The pandemic is easily the top news story impacting supply chains in 2020, and will continue to be in 2021. But, other issues and opportunities exist as well. A tough global economic outlook, as well as political unrest in many regions mean this year will be anything but easy. But, new technologies, such as 5G, seem poised to start fulfilling their promise.
Speaking of technology and potential… for the first time in a while, there’s been mention of blockchain in the news. It’s not good news, unfortunately, especially for those holding out hope a blockchain-related technology would find its place in the supply chain. A long-standing concern for many tradeable tokens has been if the U.S. Securities and Exchange Commission would flex its muscle, and it’s recently done so with one of the more well-known shipping related offerings. It appears that for the time being, blockchain will continue facing the criticism of being a solution in search of a problem – at least as it relates to shipping.
The underappreciated workhorses of global supply chains are the railroads. And in the U.S., rail is seeing a resurgenc
e, thanks in large part to the growth of e-commerce.
And finally, as much as we want to just make it go away, the rate, congestion, and capacity challenges remain around much of the world. We’ve got JOC’s 2021 outlook for the air cargo marketplace with a little bit of positive news from some California ports.
For more details on all of these topics, see the articles below. And, Happy New Year!
This week’s global freight updates mark the last critical events of this year as we start to officially countdown to 2021. With a Brexit deal done, relief for hundreds of stranded truck drivers, ocean freight madness, soaring airfreight rates, unpredictable freight costs, strong container spot rates, and megamax boxships we’ve got a lot in store for you.
The big news in Europe is a draft EU-UK Trade and Cooperation Agreement is in place with 0 tariffs and quotas on goods shipped (a.k.a the Good.)
And it appears freight madness like this is only going to spill over into 2021, according to The Loadstar’s recent supply chain radar analysis. While many believe that the pandemic-induced disruptions of 2020 have completely altered the industry as we knew it, some anticipate a swift recovery for maritime trade in 2021 in the form of 4.8% growth. One question that’s on everyone’s mind though is: How will the current elevated spot rates end up affecting next year’s contract service negotiations?
As for the airfreight sector, rates from China to the U.S. have reached $8.02 per kilogram, spiking 58% (a.k.a the Bad) over the last couple of months despite the fact that demand was down by more than 6% YoY in October. With the release of the new COVID-19 vaccine, some expect air cargo demand to increase by 2% YoY, which could potentially raise rates even more over the next six months.
After a new variation of COVID-19 was discovered in the U.K., other nations began closing their borders to the country, at one point leaving more than 1,500 trucks (a.k.a. the Ugly) stuck in empty ports and airports across Britain. Depending on travel restrictions, some fear the strict coronavirus precautions could produce major supply chain disruptions and even lead to food shortages throughout Europe. There appeared to be some improvement in the situation in the past few days, fortunately, but a backlog persists.
To wrap up the last freight updates of the year, we’ll end on Hapag-Lloyd’s $1B investment in six massive LNG container vessels that individually hold 23,500+ TEU container capacity. The carrier will receive these eco-friendly, modernized ships as early as April 2021 and plans to use them to gain a competitive advantage on Europe-Far East routes.
On that note, we hope you enjoyed our Weekly Roars, check out the article highlights below to read more. Happy Holidays!
EU carbon charges, UK port congestion, surging container freight rates, a whirlwind peak season, the South African Airways lockout, and the new U.S. Transportation Secretary, oh my! We’ve got a lot to unpack in this week’s global freight updates.
Let’s dive in by starting with the European Commission’s plans to make big changes in the shipping carbon market.
As of right now, the Commission remains undecided on whether or not it will include international trips in its ambitious emissions trading scheme plans. Many in the sector, however, are protesting what they believe to be an overreach on the Commission’s part to regulate the industry as it works toward its goal to reduce net emissions by at least 55% over the next 9 years.
Next up, we’ve got the port chaos that’s currently wreaking havoc on UK supply chains for 45% of manufacturers. With the severe strain caused by the impact of leading issues like COVID-19 and Brexit, the nation’s factories are reporting steep rises in lead times and stockpiled goods.
The UK certainly isn’t the only one struggling to overcome massive transportation complications though. Countries around the world are scrambling to manage the distribution of the new coronavirus vaccine alongside the huge spikes in e-commerce imports primarily from China. And the U.S.-China trade war is only making matters worse.
Some ocean shipping lines have even refused to transport U.S. exports in an effort to prioritize taking back empty containers to China. Not to mention the fact that spot rates are continuing to soar everywhere, especially for Asia-North Europe lanes receiving quotes up to $5,000 per TEU.
And airfreight doesn’t have it any easier either. For instance, after declaring bankruptcy and then being forced to ground many flights last year, South African Airways recently put a temporary lockout into effect against 383 pilots due to reluctance over the airline’s new employment terms.
Last, but not least, U.S. President-elect Joe Biden has officially nominated Pete Buttigieg, former mayor of South Bend, Indiana, to lead the country’s Transportation Department. To learn more, check out the following article highlights:
As we prepare to say good riddance to 2020 and leap into 2021, there are still no dull moments for many parts of the shipping industry. Year-end, peak season, Brexit, and the impact of the pandemic are all (hopefully) coming to a head. We’ll know if this means calmer seas in 2021 soon enough.
In this week’s global freight updates, we’ve got record-level spot rates, port chaos, a commodities slump, thousands of stranded seafarers, outrageous air freight prices, and rising market tension.
According to Sea-Intelligence Maritime Analysis, 2021 base contract rates for Asia-Europe shippers are expected to increase by 23 percent as a result of a surge in spot rates. With freight prices sitting at $2,091 per TEU, unwavering demand, and severe capacity contraints, the tension between shippers and carriers is only growing.
These conditions paired with the impending end of Brexit recently forced Honda to shut down its entire UK plant because of the country’s overwhelming amount of bottlenecks and transportation delays. Britain isn’t the only country experiencing some major setbacks, however. Africa’s exports to China have fallen by 23.6 percent YoY due to COVID-19’s impact on the nation’s economy and a drop in commodity prices.
Because of travel restrictions, the cornavirus has also left roughly 400,000 shipping and transportation workers stranded on ships for over a year and a half. While agencies like the U.N.’s International Labour Organization are working tirelessly to get these people home, crew changes ultimately can’t happen without additional support from countries around the world.
Ocean container shipping isn’t the only sector that’s facing some serious coronavirus-related issues though. As shippers race to secure air freight capacity for medical equipment like dry ice to transport the new vaccines, some airlines are quoting up to 20 times more than the average going rate for this time of year. Despite all of these struggles, one thing that’s for sure is that there’s never a dull moment in this business.
Check out the article highlights below to learn more:
Worried about recent cyber-attacks? Can’t find containers? Concerned over the Panama Canal’s congestion? Frustrated with rate increases and carrier service? Want to learn more about canceled flights to LA? Dreading the post-Brexit logistics nightmare? Don’t worry. We’ve got the inside info to help you better understand the most pressing issues the shipping industry is facing right now, and there’s no shortage of them!
To start off, here are some ocean container stats we believe are pretty telling for the Port of Long Beach’s 2020 operations provided by Cathy Roberson, President of Logistics Trends & Insights LLC:
“For the July-September period, loaded inbound TEUs to the Port of Long Beach increased 22.6% YoY.
According to USA Trade Online data, some of the biggest YoY gains in terms of volumes (Kg) for Asian import commodities, based on harmonized 2-digit codes, to the Port of Long Beach were:
Miscellaneous chemical products up 404.4%
Tobacco up 368.9%
Wadding, felt, specialty yarn, twine, ropes up 247.8%
Food industry residues and waste 279.5%
Arms & ammunition, parts and accessories 207.2%”
Next up, we’ve got Acronis’ new in-depth review on the risk of cyber threats in the supply chain, which includes detailed analytics on ransomware spikes, 2021 cybersecurity trends, key takeaways, and more. This report makes it clear that ransomware attacks will increase, especially against remote employees; however, traditional solutions won’t be able to provide sufficient protection against advancing malware tactics.
And, the struggle to find containers continues. From the article we’ve included below: “All carriers report severe shortages of the popular 40ft high-cubes (HCs) at their depots, and there has also been a run on 40ft standard boxes – even 20ft containers are sometimes showing as unavailable.”
Not only do we have to deal with rising threats to data security and a container shortage, but we’ve also been facing some pretty major transit delays in the Panama Canal as COVID strikes again and shippers without reservations fight for limited capacity. Adding to that, rates and surcharges on trades from Shanghai to the U.S. West Coast, Australia, West Africa, the East Coast of South America, and Singapore are at all-time highs while carrier service levels have fallen to all-time lows.
And COVID isn’t only impacting ocean freight. According to Loadstar, Air China and China Southern have canceled all flights to LA until Dec. 10 because of the city’s recent coronavirus outbreak, with expectations of other airlines following suit. Last, but not least, we’ll end on the U.K.’s fear of Brexit’s potential to create a domino effect of severe supply chain bottlenecks across the country’s ports and highways. All in all, the industry appears to be right on track to reach its boiling point, but with insight like this on your side, you’ll have a much better chance of preparing your company to take on these challenges.
Check out the article highlights below to learn more:
Whether you’re interested in ocean freight rates, the race to return empties, cargo rollover ratios, the state of airfreight, international trade deals, or Brexit’s role in logistics (and really, who isn’t?) we’ve got it all.
It looks like ocean freight rates are finally settling down, according to the CEO of Maersk, Soren Skou.
“Global supply chains had quite a lot of bottlenecks and they have driven up prices,” he said in a Bloomberg Television interview on Wednesday, describing the whiplash effect of a steep decline in seaborne cargo in the second quarter followed by a sharp rebound.
This news offers a lot of hope for the many shippers on the other side of the pricing equation that have been dealing with unusually high costs for this time of year, especially on trans-Pacific lanes. While rates appear to be evening out, container volumes are only piling up at the Port of New York and New Jersey.
As trucking demand continues to increase, drivers are having to spend at least three hours just to return an empty container to a different terminal. The sheer amount of congestion at major U.S. ports is causing drivers to run out of time before they’ve even had a chance to touch an import load, resulting in detention charges that are spinning wildly out of control. The increases in cargo rollovers over the month of October serve as further proof that ocean container capacity has simply reached its limit.
Airfreight hasn’t had much luck escaping the whiplash that is 2020 either. Earlier in March when airlines were grounding passenger planes due to a shocking drop in revenue, the sector experienced a 44 percent YoY decrease in cargo capacity. Then came the scramble to transport PPE as quickly as possible, which produced a shift from typical passenger planes to cargo-only flights.
To sum up, with concerns surrounding the ability of supply chains to effectively manage Brexit and the recent formation of the world’s largest trade pact, it’s safe to say that 2020 is not quite done leaving its mark.
In this week’s international freight updates, we’re covering everything from the shortage of shipping containers, to the transition from ocean to air and rail, to research on supply chain risk management, to El Paso’s new role in trade, to the concerns surrounding COVID vaccine distribution, to efforts to limit detention and demurrage at key U.S. ports. Well, that was a mouthful. There’s clearly a lot going on, so let’s get to it.
Here’s our timely take on the most important issues that are currently affecting the day-to-day lives of logistics professionals everywhere around the globe:
We’re sure you’re already aware of the major container capacity crunch that’s going on in the ocean freight marketplace. While demand remains strong and volumes soar, shippers are pleading with authorities to help them as carriers focus on backhaul empties and rates on less popular lanes climb. Thanks to Chinese regulators discouraging any further rate increases, however, prices on China-U.S. lanes have continued to stay relatively untouched for over two months.
These equipment shortages are even impacting China-Europe rail capacity due to those who are jumping ship as a result of canceled sailings and rising air freight rates. According to JOC, “Rail demand is being driven by shippers balking at the sky-high air freight rates on Asia-Europe with most of the long-haul passenger fleet — source of half the available capacity on the route — still grounded. And unexpectedly high and ongoing peak season demand on the ocean trades is limiting Asia-Europe container shipping space.” Let’s also not forget about the significant disruptions many, especially those managing pharmaceuticals, will face once companies start distributing COVID-19 vaccines.
With their complex cold chain storage and transportation requirements, industry leaders are striving to proactively improve shipping visibility and efficiency by developing strategies that will address critical logistics gaps and stressors. Even if you aren’t directly dealing with these pharma problems, it’s probably a good idea to start reevaluating your shipping reliability and risk management based on the findings of a recent report on manufacturing costs in a post-pandemic world.
A topic every shipper hates is detention and demurrage and it turns out some shippers have finally decided enough is enough. A coalition has gotten the attention of the FMC and the situation at several U.S. ports is being investigated.
Last, but certainly not least, El Paso well-positioned as a key trade portal between the U.S. and Mexico. With a focus on improving logistics infrastructure, many large industry players are making big investments in the area. There is a lot going on at the border.
Want to go straight to the source? We understand. Check out the article highlights below:
Hello! This is the news and information you can use to get your Monday off to a strong start and have a great week.
What’s happening NOW:
From the Transpacific container crunch, to an inventory ratio roller coaster, to allegations of ignored U.S. exports, to the release of a zero-emission shipping blueprint, there’s A LOT going on.
Here are the highlights in the news that could be impacting your international shipping operation.
As Chinese exports and consumer demand in the U.S. continue to surge, the resulting lack of capacity has doubled the cost of leasing and purchasing new containers. With longer waits, added equipment fees, and some major port congestion, managing this year’s peak season will be no easy feat. When you factor in the FMC’s reports of U.S. shippers claiming that carriers are prioritizing container returns over their exports in order to profit off of high rates, it appears the market is left with a pretty serious imbalance.
The airfreight market is showing consistent improvement after a challenging early part of the year. Volume is down for September according to the latest figures available from the IATA.
Retail inventories haven’t had much luck with stability, either. According to the U.S. Census Bureau, the total business inventory-to-sales ratio recently reached a new low after hitting a record-high earlier this year in April, leaving retailers struggling to streamline their inventory flow in the wake of the coronavirus. Given these pandemic-induced struggles, many are wary of what’s in store for shipping as we head into 2021.
Despite a call for caution, more than 120 shipping giants are working towards decarbonizing the industry, while the impending U.S. Maritime Administrator nominee offers a similar opportunity for reducing global shipping’s carbon emissions. Such environmental initiatives help provide a brief glimmer of hope amid all of the chaotic disruption the industry is currently facing.
With a COVID-19 vaccine likely on the horizon, the massive work now begins for the global supply chain to get it distributed. It’ll perhaps be the biggest, most important, and difficult GLOBAL supply chain challenge, ever!
Here’s a more in-depth breakdown of this week’s curated content:
NAFTA’s terms provided for the elimination of most tariffs on products traded among Canada, Mexico, and the United States.
On one side, many anti-NAFTA critics highlight that NAFTA has allowed the U.S. to outsource far too much employment to Mexico, where labor wages are traditionally lower than both the U.S. and Canada. Pro-NAFTA critics argue the increase in outsourced labor was expected, and that the US would take the opportunity to further its’ workers technical abilities and productivity.
The competition with China’s low-cost manufacturing sector continues to be a contributing factor of the varying levels of success and failures of NAFTA over the past two decades. NAFTA is not the only free trade agreement affected by China’s incessant ability to provide low cost labor. Virtually all free trade agreements are affected by China’s labor force.
In the face of a Donald Trump inauguration, the question now shifts to how anti-trade rhetoric will interrupt NAFTA and other free trade agreements. The creation of NAFTA escalated globalization, the inverse will surely be true should subsequent trade agreements be terminated or tramatically amended..
Shipping and logistics are woven throughout nearly every industry that globalization affects. Whether you’re a cosmetics retailer or toy manufacturer, getting your goods from point A to point B is imperative for the survival of your business. Globalization, powered by free trade agreements, is guided by the inclination of the federal administration to pursue free trade with partner countries.
At this point only speculation is relevant; with a new administration on the horizon, a new day in the age of globalization is upon us, how far the anti-trade rhetoric will be taken is yet to be determined. Virtually all industries can expect to be impacted by changes to the currently implemented NAFTA, TPP, and other trade agreements with the U.S. The only question remaining is, to what degree?
At Jaguar Freight, we pride ourselves in being able to provide you and your team with exceptional freight forwarding services. Our team is dedicated to pioneering the next stages in freight forwarding and logistics.
The election of Donald Trump as president elect has thas caught the world off guard. The shipping industry is particularly feeling the effects of America’s decision to elect Donald Trump, as the realities of his campaign promises involving anti-trade rhetoric and protectionism begin to materialize.
Few details were provided in Trump’s 100 day plan regarding trade policies, but the situation has the potential to become alarming, as ship operators are dealing with the worst down-cycle in 30 years. His overall protectionist, anti-globalization stance, has the potential to be detrimental to the industry as a whole, however, as always the devil is in the details and it depends on what is actually passed into law.
TPP and Trump
Donald Trump has repeatedly criticized the Trans-Pacific Partnership, a trade agreement to lower or eliminate tariffs between the U.S. and 11 other countries. Overall, TPP’s goals is to: promote economic growth; support the creation and retention of jobs; enhance innovation, productivity and competitiveness; raise living standards; reduce poverty in the signatories’ countries; and promote transparency, good governance, and enhanced labor and environmental protections.
The controversy surrounding the benefits and drawbacks of TPP is based on conflicting studies. Critics of the TPP, such as Senator Bernie Sanders, argue that trade agreements like the TPP “have ended up devastating working families and enriching large corporations.”
President Obama has argued “if we don’t pass this agreement—if America doesn’t write those rules—then countries like China will.” According to the Congressional Research Service, “many Asian policymakers—correctly or not—could interpret a failure of TPP in the United States as a symbol of declining U.S. interest in the region and inability to assert leadership… failure to conclude TPP could, in effect, allow China to shape regional rules of commerce and diplomacy through its own trade and investment initiatives, potentially creating regional rules and norms less beneficial for U.S. interests.”
Moving Forward in January
As the day president elect Donald Trump is inaugurated moves closer, industry analysts are concerned on how extreme Trump’s new administration will push their protectionist policies, and if major trading partners, such as a China, will do the same.
The U.S. has the responsibility to uphold global standards, and be a leader in the shipping realm. The world’s largest operators will be counting on the U.S. to pull them out of the looming crisis, as growth prospects in the U.S. are stronger than in Europe and most of Asia.
One of the the greatest risks to the shipping industry would be if Trump disrupts the agreements already in place, and instills new protectionist agreements, prohibiting or limiting trade with countries we have already been trading with. The risk is in the inevitable ripple effect of other countries taking similar actions.
Stay on top of the latest news in transportation logistics and supply chain management, visit our website or blog. Custom transportation solutions for a global community. The support of a dedicated team, with intuitive technology, that’s what Jaguar delivers.
Resources: https://fas.org/sgp/crs/row/R44278.pdf, http://www.cnbc.com/2016/09/27/wto-cuts-2016-world-trade-growth-forecast-to-17.html
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Introducing a weekly LCL ocean freight service from Antwerp, Belgium to New York by Jaguar Freight.
We’re more comfortable with global freight movement than anyone in the industry.
Sit back and rest assured knowing you will get:
Shipping History of Antwerp, Belgium
The port of Antwerp has a particularly rich history. Ever since the Middle Ages ships laden with cargo and passengers have found their way up the river Scheldt to Antwerp. After the “Golden Century” in which Antwerp grew into a prosperous international port, the closure of the Scheldt in 1585 represented a new low in the history of the port. It would be nearly 300 years until the toll on the Scheldt could be finally redeemed in 1863 and the river became fully open to commercial traffic once more. The “port on the river” began to flourish in the decades that followed. After the Second World War, the Marshall Plan and the Belgian government’s Ten Year Plan brought hitherto unseen growth: the volume of the docks doubled and the port expanded along the Right bank of the Scheldt right up to the Dutch border.
Late 18th century – 19th century
Napoleon Bonaparte brings sweeping changes and the Scheldt is once more opened to shipping. He sees Antwerp as “a pistol pointed at the heart of England” and decides to build new docks and shipyards. The first dock, “Le petit bassin,” is built in 1811 and “Le grand bassin” follows in 1813. These are later renamed the Bonaparte dock and the Willem dock respectively. Between 1816 and 1829 the port experiences average annual growth of 4.5%. Thanks to the industrial revolution and new technologies the port forges trading links with Africa, America and Asia. At that time Antwerp is larger than the ports of Rotterdam and Amsterdam together.
Arrival of the giants
With the arrival of the MSC Beatrice, the largest container ship in the world at the time with a capacity of 14,000 TEU (14,000 twenty-foot containers) a whole series of records are smashed. The arrival ceremony symbolises important progress for the port of Antwerp. Container carriers are rapidly increasing in size, and Antwerp is doing everything necessary to accommodate these leviathans.
Currently
According to the current forecasts, Antwerp will need to have new container handling capacity by 2020-2021. And so the Port Authority is already making preparations for a large new tidal dock with accompanying terminal capacity on the Left bank of the Scheldt. The Saeftinghe Development Area covering more than 1,000 hectares has been earmarked for this dock along with surrounding sites for logistics, transhipment and industry. Construction of the Saeftinghe Development Area will be carried out in phases.
Our newest expansion to Antwerp is an example of how we are growing as the industry grows and changes. At Jaguar Freight, we pride ourselves in being able to provide you and your team with exceptional freight forwarding services.
Source: Port of Antwerp
Keeping abreast of current worldwide economic conditions and forecasting are essential traits for businesses involved in far-reaching shipping and operations. In the wake of the Hanjin bankruptcy, what changes have arisen, and how will they affect global supply chain management? Given that international shipping is the powerhouse behind multinational economics, what are the broader, more pervasive results of this dynamic shift in the industry?
What Happened
On August 31st of this year, Hanjin Shipping, a South Korean company with over 200 cargo ships, suddenly declared bankruptcy, stranding 90 of those ships, holding $14 billion in cargo. As the seventh largest shipping company on the planet, this is being seen by many analysts as a bellwether, the first in a series of financial dominos to fall. The causes of the failure of Hanjin range from numerous EU bailouts, the collapse of the Chinese economic bubble, to as far as the US student loan debt crisis. All these factors and more weakened global market confidence and, as investors pulled back, businesses like Hanjin were left without enough capital to continue to operate.
Short Term Effects
The first concern of the worldwide shipping industry is to finance the stranded ships so they can be docked and offloaded. The primary merchandise involved is appliances and technology, but even those items can suffer depreciation if they sit in transit too long. Given the upcoming holiday season, supply chain management systems are actively seeking other logistics solutions and workarounds to move products from production to the hands of retailers and consumers.
Long Range Results
It seems facetious to call the $14 billion in stranded merchandise minor but, compared to the more encompassing losses the industry can expect, the $14 billion dollar loss is just that. This is not an isolated incident. The G20 countries have long been warned of the potential for disaster from the failure of any of a number of financial sectors; but the consistent global expansion for years seemed to belie that truth. When Hanjin applied for financial assistance at the final crucial moment, they exposed a long-standing lack of economic soundness that had gone at the very least undetected, if not outright ignored, for years. The impact of the fall of Hanjin will be felt far beyond the shipping and retail industries. It has been the first to fail, but is unlikely to be the last. Of the 12 shipping companies, 11 have published major losses in the last quarter. As a result, many of them have created alliances to shore up resources. However, with 90% of the world’s goods traveling by ship, any weakness is certain to have widespread and nefarious effects on consumer confidence, banking rates, and even international relations.
To stay abreast of the latest news in transportation logistics and supply chain management, visit our website or blog.
Force what?
Force majeure is a common clause in contracts that essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as a war, strike, riot, crime, or an event described by the legal term act of God (hurricane, flood, earthquake, volcanic eruption, etc.), prevents one or both parties from fulfilling their obligations under the contract. In practice, most force majeure clauses do not excuse a party’s non-performance entirely, but only suspend it for the duration of the force majeure.
Hanjin’s Bankruptcy
The typical carrier bill of lading contains a clause stating even if the carrier declared force majeure, the carrier is entitled to collect all the freight charges due. You can quickly imagine the messiness paying third parties rather than Hanjin directly is going to cause should the bankruptcy trustee come to collect.
Hanjin will be declaring force majeure with respect to its contractual obligations to provide transportation services. It is possible that Hanjin will exercise the provisions of the “Hindrance” clause in its bill of lading to declare that the transportation services have been terminated, that it is entitled to full freight, and that the merchant now needs to make any necessary arrangements to complete the transportation services to destination.
Consequently, whether or not any of its vessels are seized, it may well be that arrangements will need to be made to make sure that goods in Hanjin’s possession or control are released and then moved to final destination.
How are US Ports dealing with Hanjin’s loads?
On the West Coast, terminal operators in Los Angeles and Long Beach are unloading all of the containers from the vessels. Containers that do not belong to Hanjin are processed according to normal procedures and terminals are holding onto import loads in Hanjin containers and will deliver the containers to truckers only if the beneficial cargo owners pay the terminal cargo-handling charges upfront. The terminals are not accepting Hanjin export loads and empty containers.
At the Northwest Seaport Alliance of Seattle and Tacoma, Terminal 46 is now accepting import containers, but is not accepting export loads and empties. Olympic Container Terminal in Tacoma is not accepting any Hanjin deliveries for now and the Husky Terminal is not accepting exports or empties, but is unloading imports and is encouraging truckers to bring their own chassis.
In Vancouver, Global Container Terminal said it will no longer receive Hanjin ships.
On the East Coast, the largest terminal in the Port of New York and New Jersey, Maher Terminals, has made no statement on if, or how much, shippers must pay to get Hanjin containers. Maher is the only New York-New Jersey terminal that receives Hanjin ships, and APM Terminals, Port Newark Container Terminal, and Global Container Terminals didn’t disclose how they are handling Hanjin containers.
Philadelphia reported no impact from Hanjin ships or containers. Boston does not receive Hanjin ships.
Baltimore, Ports America Chesapeake, which operates the Seagirt Terminal in Baltimore didn’t disclose how it’s handling already received Hanjin containers. The terminal did say it will not accept any inbound Hanjin cargo, and they will continue receiving but not delivering Hanjin empty containers.
At the Port of Virginia, Hanjin export containers may be picked-up at the terminals by the original shipper only with authorization from Hanjin.
The South Carolina Ports Authority has waived the non-vessel delivery fee for export loads out-gated and all import loads discharged on or after September 1 will be placed on hold until such time as all SCPA charges are settled.
The Georgia Ports Authority, which oversees the second-largest port on the East Coast, Savannah, wasn’t available to comment, nor was Port Miami. The Port of Jacksonville said it does not have any calls from Hanjin or other CKYHE Alliance members.
Along the Gulf Coast, Houston is holding containers until they receive $100 to cover the Port of Houston Authority’s terminal throughput charges, which are separate from stevedoring costs.
Stay tuned to our Blog for more information on the status of this dynamic shift in our industry. Jaguar Freight is a freight forwarder providing custom transportation solutions for a global community. The support of a dedicated team, with intuitive technology, that’s what Jaguar delivers.
Sources: LexSage, Hugh Finerty
As you probably already know, Hanjin Shipping filed for bankruptcy protection Aug. 31, 2016, after months of trying to raise liquidity and restructure its debt, triggering a mad scramble by shippers to locate and gain control of their containers.
This unfortunately means the inevitable increase in the cost of a wide range of goods, such as, furniture, clothing, food both frozen and fresh. The fundamental nature of economics is the driver behind the price spikes; as demand increases, supply becomes elusive yet competitive, causing freight costs to balloon.
As the the seventh largest container carrier in the world, Hanjin’s doubtful future is a pivotal moment in the shipping industry. Carriers have announced they will hike container freight rates by as much as 50 percent beginning next month as retailers scramble to secure shipping ahead of the peak year-end holiday season. $14 billion worth of cargo has been stranded, leaving many shippers struggling to find replacements.
What else is driving costs?
Port fees. Hanjin would normally pay the fees for port usage and container handling as part of its freight services. Cargo shippers have been forced to pay thousands of dollars in fees to terminal owners and truckers to reclaim their goods from Hanjin ships to prevent perishable foods from spoiling and to avoid losing sales because goods are not available when customers want them.
Is this going to last?
Not exactly, yes, but no. While billions of dollars were left stranded at sea following the bankruptcy announcement, the shipping industry is beginning to recoup. Industry analysts expect the freight increases to be short-lived as more shipping capacity comes online.
Retail markets specifically will most likely see a dip in profits this quarter, if they are to avoid drastically increasing the price of goods to the consumer. To maintain competitivity, the cost fluctuations will hit profit margins for the majority of retailers.
Container freight charges have been exponential since May, and could continue to push forward during these next few tumultuous months. With holiday season approaching, it’s not too late to get your goods to market for the holiday season, but you may need to accelerate some of your previously agreed shipping schedules. The average cost to move goods in 40-foot containers from the U.S. West Coast to Asia was quoted at $1,700 this month, up from $788 in May.
As a professional freight forwarder, our main goal is to ensure your total satisfaction. Contact us if you’d like to talk more about how Hanjin’s demise is potentially affecting your business. At Jaguar, we deliver excellence, so you can.
