Shipping’s Ongoing Themes for This Week: Limited Space and Excessive Freight Costs
From threats to consumer enthusiasm for furniture, to the latest ocean shipping crisis, to predictions of shipping snarls lasting into 2022, to carriers suspending trans-Pacific calls in Oakland, to the addition of more time-critical air services for European shippers, it’s time to dive into the top news for this week’s issue of The Roar.
Wait, why furniture you ask? Because that industry’s problems and challenges are the perfect embodiment of what a lot of markets are experiencing right now. And furniture importers around the world are struggling to keep up with consumer demand as container costs skyrocket and vessel space remains extremely tight, especially on trans-Pacific routes. According to Furniture Today, “some fear carriers’ actions — or inaction when it comes to helping alleviate short supply and moderating costs of service — will eventually smother consumer demand for their goods.”
With the holiday season looming ahead, the recent reports of positive COVID-19 cases emerging in southern China, Southeast Asia, and Taiwan are only making the situation worse for importers. When the Suez Canal blockage brought things to a grinding halt for shipping professionals, no one expected the five-day suspension of inbound container deliveries at the Yantian International Container Terminal that followed shortly after (which has managed to even surpass the damage caused by the Ever Given’s unfortunate mishap).
And based on a recent interview with Dan Maffei, the Federal Maritime Commission’s chairman, these strains on supply chains aren’t going anywhere anytime soon. The real question, however, is: can smaller U.S. importers and exporters survive another year of soaring freight costs and increasing transportation bottlenecks?
More and more carriers are also starting to suspend services at the Port of Oakland as terminal congestion and continuous vessel backlogs, resulting from the port’s labor shortage and loss of one of its four berths, severely impact Oakland’s operations. At least shippers in Europe have additional air freight capacity to help relieve some of the ocean shipping woes on their end.
According to Elliot Carlile, head of commercial air products at Metro Shipping, a lot of European-based forwarders like Metro “are very pleased to learn that both Emirates and Qatar Airways will be operating direct scheduled flights again from next week in Birmingham Airport with decent wide-bodied aircraft that will re-open the inbound capacity.” To learn more about the most recent developments in international shipping, check out the following article highlights:
What’s the Difference Between Shipping Visibility and Supply Chain Transparency?
Many people use the terms visibility and transparency interchangeably; however, it’s important for shipping professionals to understand that there’s a difference between these two popular terms.
While it may seem like we’re splitting hairs, making a clear distinction can go a long way towards a common understanding of what each provides while enabling logistics service providers and shippers to gain the benefits.
Visibility Defined:
Anecdotally speaking, visibility seems to be the slightly more popular of the two terms right now. In the context of shipping, visibility specifically refers to the process of tracking actual shipments and the associated supply data from end to end. To think about it another way, a simplistic example of visibility is knowing container #1 is located HERE, and it contains SKU #2 from Purchase Order #3.
Visibility focuses most on the B2B data and information part of the supply chain with the main goal of increasing operating efficiency. It also optimizes logistics functions like purchase orders, inventory, and transportation management.
It’s then through visibility that transparency is enabled.
Transparency Defined:
Transparency, on the other hand, typically refers to the process of communicating or making available all the visible information to trading partners, customers, stakeholders, and other industry agencies. All of these relevant parties stand to gain from understanding how the sausage is made, so to speak.
Another way to better distinguish between visibility and transparency involves looking at visibility as the basic facts of the situation. It’s the data that helps explain how your supply chain functions from sourcing to delivery and all the movements in between. Transparency, however, is your company’s commitment to sharing that data openly with parties inside and outside of the supply chain.
The two feed off one another (hence the confusion surrounding their meanings) because if your supply chain operations aren’t even visible within your shipping operation, then transparency anywhere outside of it is impossible.
Advantages of Visibility and Transparency
Whatever you call what’s going on, it’s vital that companies have confidence that their materials and products are not only on schedule but live up to organizational standards. This is where transparency particularly comes in handy. It traces supplies from start to finish and proves that logistics partners and suppliers meet lead-time commitments, supply quality products, and comply with regulations.
With the synergies created between visibility and transparency, there are many tangible advantages. First, trust is developed with your customers. By establishing that your supply chain is built to meet its commitments and showing how, customers’ faith in your company’s ability to deliver as promised (and overall relationship) is strengthened.
Every reasonable customer understands that no supply chain is immune from problems, but displaying visibility into what is happening shows your ability to proactively identify and address problems before they snowball into major, costly crises. Increased visibility and transparency minimizes these risks and makes troubleshooting problems much easier.
And lastly, the importance of information accuracy and timeliness can’t be overlooked. These are vital so everyone can use the available real-time information and data to make decisions based on the here-and-now.
Maybe more important than the choice of words, Visibility and Transparency, are the concepts and intent behind them. Both speak to the importance of information being shared freely so that more informed decisions can be made. This distinction as we’ve made it here is just one perspective, tell us if you agree or see things differently!
To learn more about how advanced supply chain technological tools (from Shipment Tracking, to PO Management and Business Intelligence) can enable comprehensive network visibility in addition to eliminating supply chain blind spots, visit Jaguar Freight.
Shipping’s Feeling Hot Hot Hot
In the latest issue of The Weekly Roar, we have the COVID-19 outbreak in Yantian, a new Brexit blow to UK traders, yet another cyberattack victim, the X-Press Pearl’s ongoing drama, and U.S. railroads tightening free time.
But first, if you’ve forgotten how big and dangerous the process of shipping ocean containers is, here is a scary reminder.
There are a few views of the incident with OOCL Durban linked here.
After several reports of positive COVID-19 cases emerged in Yantian last week, conditions at the Yantian International Container Terminal (YICT) are exactly as expected – not good – which is only placing more strain on global supply chains. According to FreightWaves, major ocean liners like Hapag-Lloyd and Maersk are avoiding the port altogether to keep from adding to the severe container congestion.
On top of this new blow, things are getting more complicated with the already touchy European trade/ Brexit situation. Germany recently announced that it would be putting an end to the VAT exemption for products totaling less than €22. Starting next month, customers will have to pay import duties on all goods entering Germany from non-EU countries as the result of recent efforts to eliminate VAT fraud and level the playing field for everyone, based on a recent article published by The Loadstar.
Also, there’s been yet another organized assault on the world’s biggest meat supplier’s servers just weeks after the cybersecurity attack that targeted the operator of the biggest U.S. gasoline pipeline — the Colonial Pipeline Co. According to SupplyChainBrain, JBA SA was forced to shut down its North American and Australian computer networks following the attack, shaking up worldwide food supply chains in the process.
Then, there’s the ongoing X-Press Pearl saga, where a vessel operated by X-Press Feeders has been burning off the coast of Sri Lanka since May 21. And based on local news reports, the ship is being held there along with the Captain, Chief Engineer, and the Second Chief Engineer until investigations are officially concluded.
Finally, we’ll end this week’s update with U.S. Class I railroads’ efforts to narrow the window of free time shippers have as a way to speed up equipment turnaround and alleviate rail ramp congestion. These changes could potentially cause increases in storage or demurrage fees in addition to piling more pressure onto trucking companies.
To learn more about the top stories in international shipping, check out the following links:
We’re NOT Gonna Need A Bigger Boat
From gaps in Biden’s $1.7 trillion infrastructure plan, to gigantism in shipping, to the UK’s ‘clearance on wheels’ shipment status, to IMO autonomous shipping regulation, to choked U.S. air hubs, it’s time for this week’s top international shipping industry updates.
But first, here is an IMPORTANT SERVICE UPDATE regarding a shutdown at the Yantian Terminal in China:
Shippers should be aware that after receiving several recent reports of COVID-19 cases at the Yantian International Container Terminal (YICT), the crucial export gateway in South China announced that it will no longer be accepting laden export containers between May 28, 22:00 and May 30, 23:59. In the meantime, only export boxes arriving within four days of a vessel’s estimated time of arrival will be accepted until June 3.
Note that pickups of imports and empty container returns will continue on as usual during this period. While local health authorities tighten anti-virus safety measures to control these outbreaks, the resulting decline in YICT’s available manpower has only further contributed to the port’s severe congestion and increasing schedule delays. Between May 31 and June 6, YICT will begin accepting laden export containers again under the requirement that the vessel’s ETA falls within a minimum of 3 days. With space and equipment challenges for not only the Port of Yantian but also neighboring ports, ocean shippers with critical orders may want to consider routing alternatives and expect increased shipping rates in the near term.
Jaguar will report any additional information as it becomes available.
Take a look at a recent WSJ Number of the Day. The situation at Yantian notwithstanding, does this mean things are looking up for U.S.-based importers?
Source: Wall Street Journal
Even when the logjam that is international shipping frees itself, shippers in the U.S. look to be facing a long string of infrastructure failures that have almost become the norm, including the Colonial Pipeline cyberattack, the Texas power grid malfunction, and the Hernando De Soto Bridge crack.
According to SupplyChainBrain.com, “the recent failures illustrate just how many ways the patchwork systems can break. Experts say they also illustrate a long-running flaw in the way the U.S. thinks about and pays for infrastructure: The country focuses more on building new things rather than maintaining what it has.”
We found some interesting facts on container shipping’s whirlwind transition toward gigantism, where we’re seeing colossal vessels that have increased 1500% over the past 50 or so years.
While wildly popular right now, it’s important to consider how very few ports have the capacity to accommodate these large ships, and the Suez Canal debacle illustrates just how many structural limitations these immense vessels face — not to mention the sharp uptick in container accidents we’ve been experiencing. As the industry works to figure out how to improve the efficiency of today’s container vessels, it’s also exploring ways to better regulate advancing automation.
Groups like the IMO are actively assessing Maritime Autonomous Surface Ships (otherwise known as MASS) in order to identify if existing regulations can measure up to the wave of digitization that’s sweeping across the globe.
The UK’s ‘clearance on wheels’ claims status is allowing shipping professionals to minimize post-Brexit supply chain delays. For applicants who are considered both an authorized consignee as well as an AEO trader, obtaining the HMRC’s ‘clearance on wheels’ status helps companies avoid having to unload consignments at the end of transits, meaning businesses can clear customs more quickly, according to The Loadstar.
To close out this week’s Roar, we’ll switch sectors for a second and focus on how U.S. imports are overwhelming major air hubs like LAX. The problem has become so bad that many shippers and forwarders are starting to avoid these popular entry points in favor of smaller airports as a way to get out of dealing with the intense congestion increasing consumer demand is causing. If you want to learn more, check out the following links:
Sustainable Shipping Is the Industry’s Hottest New Trend
In this week’s Roar, we’ve got China-Europe freight trains helping the fight against COVID-19, rapidly increasing ocean shipping delays, the industry’s impending peak season, efforts to cut supply chain waste, and the rise of sustainable aviation fuel.
First, there’s something interesting happening with the China-Europe freight trains located in the Lianyungang, Jiangsu province. They are not only providing safe and reliable international transportation, but they’re also helping the global fight against the coronavirus pandemic. According to China Daily, they carried 3 million doses of the vaccine in March of this year alone in addition to transporting 45,408 TEUs to Europe throughout 2020. – Click to read the full article.
With ocean liners running later than ever and average delays surpassing six days, the relief these trains provide is definitely appreciated. Given the fact that “only about 40% of container ships globally were on time arriving at ports in March” when more than 70% of ships arrived on time over the last two years, it’s no wonder retailers and manufacturers are struggling so much to keep up with growing demand. – Click to read the full article. – Click to read the full article.
That being said, it’s important to start prepping for the Christmas season now if you want to get your inventory-to-sales ratios up to speed to better manage the import boom and avoid premium charges. Take a look at FreightWaves’ SONAR Inbound Ocean TEUs Volume Index to see just how slammed American ports already are with new records being set almost every week (Click to read the full article):
One sector that could especially stand to benefit from advanced preparation and increased efficiency is the grocery industry. According to Supply Chain Dive, “stores waste more than 80 billion pounds of food (roughly 40% of our food supply) every year due to administrative mistakes, breakage, spoilage, theft, and other losses. Annually, it costs the grocery industry more than $50 billion in lost profits.” This waste, otherwise known as shrink, takes away food from those in need, severely impacts the environment, and takes a major toll on food prices, which is why many industry leaders are promoting zero shrink initiatives – Click to read the full article.
The zero shrink movement is one of many steps international shipping professionals are taking to achieve more sustainable supply chain operations. Another recent example includes Air France-KLM’s first flight capitalizing on sustainable aviation fuel, or SAF. By using old cooking oil from local sources, the biofuel represents a positive step in the right direction toward the country’s upcoming requirement that “aircraft must use at least 1% SAF by next year for all flights originating in France.” – Click to read the full article.
To learn more about this week’s top stories, check out the following article highlights:
“We were just about to fix that, you know!”
Let’s lead off The Weekly Roar with two recent articles posted on the Jaguar Blog. Both are on our favorite topic of Logistics Technology, and both center on the recent appearance of Jaguar Freight CEO Simon Kaye on a JOC.com webcast hosted by Eric Johnson.
Click the title below to access the articles, which include select video highlights from the webcast.
Article: Perspectives on the ‘New Frontier in Global Logistics Technology’ with the JOC
Article: What’s a ‘Tech-Enabled’ Forwarder, and Why Does It Matter to Shippers?
On to the news and a quote that states the painfully obvious from the FMC:
Umm, yeah.
Sarcasm aside, there is clearly some need for action, and the current crises may finally be the push the system needs. The first step will hopefully be the FMC finally taking action to set up an already planned shipper committee whose goal is to advise the agency on the “competitiveness, reliability, integrity, and fairness of the international ocean freight delivery system.” The idea and authorization for the committee came prior to the pandemic, but the supply chain effects that have unraveled over the last year created what Maffei referred to as a “systematic crisis.” – Read the full article here.
In news related to one of the industry’s other top stories of the year, Egyptian President Abdel Fattah al-Sisi, announced plans for the expansion of a portion of the Suez Canal within the next 24-months. “Sisi said that, while further expansion to the canal had been under consideration, the grounding of the 440-metre Ever Given container ship on March 23 highlighted the urgency of the plans.” – Read the full article here.
With strong U.S. demand for many commodities and fears of inflation, the Biden administration is performing a tariff review according to the top White House economist. And, there appears to be bi-partisan support for relief. – Read the full article here.
There appear to be some systematic changes happening in Air Freight. “Cargo is now one-third of airline business,” said IATA chief economist Brian Pearce. “It used to be significant, but not the most important part of the business.” The industry is reporting high revenues and yields as demand remains strong and space is hard to come by even though there’s 20% more capacity than pre-coronavirus. – Read the full article here.
Maersk is targeting a “soft landing” for rates according to its CEO, Soren Skou. But that carrier still expects rates to “normalize at a level about historical” in 2022. But, given all the other predictions about things returning to normal by this spring or summer we’ll take a wait-and-see approach before believing anything! – Read the full article here.
Finally, things may be settling (a least a little) when it comes to Brexit and U.K. trade. It’s been reported for the first time (going back to 1997) trade volume between the U.K. and the rest of the world exceeded that with the E.U. The last year has been anything but normal for European trade for obvious reasons, so it’ll be interesting if this trend holds or not going into the second half of 2021. – Read the full article here.
To read more about this week’s most important international shipping news, check out the links below:
Shipping Just Can’t Catch a Break From Imports
From a $2.6B investment in new containers, to import demand on the rise yet again, to carriers cracking down on trans-Pacific contracts, to a post-Brexit Britain buried under paperwork, to global air cargo demand outperforming pre-COVID levels, we’re back with another round of the latest stories in international shipping. To start this update off, we have a container-leasing company that recently ordered 890,000 TEUs of new containers it expects to see by July of this year.
With a total value of $2.6B, Triton’s lofty purchase is just one of the many investments companies are making to expand their fleets and meet increased consumer demand for goods. Speaking of demand, if you thought import volumes were on the decline, then you may be in for some disappointment.
According to FreightWaves’ SONAR ocean bookings data, “the current index indicates the likely level of U.S. imports later this month and in June, as departing ships arrive at American shores. The forward data for bookings due to depart from all destinations to the U.S. shows a new all-time high will be set next week. The index has continued to climb since mid-May 2020.”
Global air cargo market demand is also on the up and up, marking a 4.4% increase this past March in comparison to pre-COVID levels recorded in March 2019. While airfreight capacity hasn’t managed to reach pre-COVID levels yet, it’s also showing signs of recovery with a 5.6% MoM increase in global capacity between February and March. So, what does this all mean for trans-Pacific contract negotiations?
Given how volatile today’s ocean shipping environment has become, many shippers are shifting the focus from price to capacity in order to secure space, while many carriers are significantly lowering the amount of free time they’re allotting to customers. Across the pond, the DDC FPO’s (a global provider of business process outsourcing solutions for the freight transport and logistics industry) recent report titled, Brand New Britain: What Post-Brexit Really Means for Businesses, revealed that “nearly 70% [of respondents] expect their operations to be negatively affected for more than 12 months.”
To follow up on any of this week’s most important international shipping news, check out the links below:
What’s a ‘Tech-Enabled’ Forwarder, and Why Does It Matter to Shippers?
Many freight forwarders classify themselves as “tech-enabled,” but what does this term actually mean? Even though the term’s connotation is clear, the extent a forwarder is using technology can vary wildly – both in terms of its capabilities and effectiveness.
Also clear is the intent of technology regarding the potential benefits to any forwarder’s shipper customer, which typically means gaining more operating efficiency and improving service. But, having technology does not guarantee either of those outcomes.
In other words, the presence of technology and claiming to be “tech-enabled” does not complete the story. Much like a stool, freight forwarding operations require three areas of support to remain balanced, with the second and third legs being execution and customer service in addition to technology. While technology is a major part of the solution, it’s not the end-all, be-all. Shippers evaluating a forwarder’s claims of being tech-enabled need to consider all three things equally.
First Leg – The Technology
A discussion of freight forwarding technology needs to start with an explanation of what the tech can do. Technology is about driving efficiency and accuracy through automation and other forms of digitization. Here are some examples of what shippers should expect from their forwarder’s technology:
- Document automation and accessibility
- Full supply chain visibility and tracking
- PO management capabilities
- Communication as part of the permanent record
- Actionable analytics and BI
- Easy and agnostic integrations
- Enhanced forecasting
- Increased customer satisfaction and retention
On a fundamental level, digital freight forwarders leverage industry-leading software solutions to eliminate time-consuming manual processes, increasing productivity and improving communication.
As a side note, Jaguar Freight CEO Simon Kaye recently spoke on the topic of shippers and technology. The following clip was taken from his discussion with Eric Johnson from JOC as a panelist on the webcast titled The New Frontier in Global Logistics: Linking Customer Expectations to Customer Promise. Se can see his comments here.
Second Leg – The Execution
Even though it’s important, all of the data and information that are associated with the shipping function are worthless if the shipment is not executed as the company needs it to be.
Global shipping requires forwarders with strong carrier relationships and processes to pick-up and delivery the freight while navigating all the customs, paperwork, and regulations along the way. These types of networks are built over years and decades, and not created overnight by building a new website. While technology helps and we all hope the industry gets there someday, there is no such thing as a no-touch international shipment in any sense these days.
Also, from the JOC webcast, Simon shared his thoughts on Execution.
Third Leg – Customer Service
Because shipping is still largely a boots-on-the-ground business in terms of carrier relationships and experience, it means communication and customer service are as important as they ever were.
Problems still happen that require experience and follow-up to get resolved. Making an extra call to get space on a ship or finding a drayman to cover an urgent order going to your warehouse are examples of how forwarders back up their technology with customer service. Faster resolution to billing and paperwork problems and OS&D issues are other ways forwarders provide value that technology may improve but do not eliminate.
All this is not to say that technology is not vital to the global freight business. It definitely is. The point is that shippers need to look past the label of any given forwarder being “tech-enabled” to understand what their technology really offers and if the right support is there for execution and customer service too.
So, when any forwarder mentions their technology, it’s important to identify the ones that are actually providing real incremental value. To learn more about how Jaguar Freight pairs exceptional customer service with powerful, proven technology and a wide range of logistics expertise, visit www.jaguarfreight.com.
P.S. If you liked to access a recording of the JOC webcast, you can find it here.
Happy Birthday To Container Shipping!
With MSC’s recent launch of a global electronic bill of lading, containers falling overboard everywhere you turn, EU’s approval of the post-Brexit trade treaty, container shipping turning 65, and the mess that is O’Hare airport, we’ve got a lot of ground to cover in this week’s global freight updates.
But first, let us toot our own horn as Jaguar Freight is proud to be receiving the Global Supply Chain Award at the World Trade Week NYC. The World Trade Week NYC is an active network of more than 70 organizations in the New York metro region working together to underscore the importance of international trade, logistics and port operations to the region’s economy and to use their collective expertise to help the region’s businesses grow through international trade.
The new electronic bill of lading, or eBL, MSC introduced follows the success of the pilot programs the carrier has been running since 2019. The digitized solution is designed to allow shippers and other links in the supply chain to more easily receive and send out a bill of lading online. The ultimate goal is the elimination of untimely and costly disruptions, in addition to (hopefully) driving industry-wide standardization.
Rates and congestion aside, ocean vessels seem to be seriously struggling with keeping containers on board because we’re currently experiencing the largest spike in accidents than we’ve seen in seven years. According to Claims Journal, “more than 3,000 boxes dropped into the sea last year, and more than 1,000 have fallen overboard so far in 2021,” and these lost boxes are creating some major bottlenecks for many retailers and manufacturers.
Also trending this week is the official end of the post-Brexit trade deal. Last Tuesday, European lawmakers overwhelmingly agreed to continue free trade between the EU and UK without tariffs and quotas, marking the last step in a lengthy process to provide more stability within the strained relationship and ensure future cooperation. This breakthrough came shortly after the shipping container industry reached its 65th birthday.
From the first sailing of a converted WWII tanker that occurred on April 26, 1956, to the pandemic-driven environment we are in today, container ships have proven to be vital in facilitating global trade — accounting for transporting an estimated 45 percent of total global trade according to the United Nations Conference on Trade and Development. And that number isn’t likely to grow any smaller given how tight air freight capacity has been since COVID-19 first emerged.
The Chicago O’Hare International Airport, for example, is so congested right now that agents are actually having to rent out warehouses to store cargo overflow. Some importers are so exasperated with the situation at this key U.S. hub that they’ve just decided to skip the overcrowded airport altogether in favor of neighboring facilities with significantly less freight traffic.
To learn more about this week’s leading issues, check out the following article highlights:
Cum si, cum sa
True to form, the week’s news includes many of the same challenges we’ve been dealing with the past few months. There were not a lot of new positive developments, but not too many new negatives either.
One notable exception is the labor strive in Montreal which is coming to a head. On Friday, the longshoremen at the Port of Montreal announced an indefinite strike beginning Monday, April 26 at 7am. This is an escalation of a partial strike that began less than two weeks ago. The union, which represents over 1,100 longshoremen, said the full strike comes in response to the MEA changing its regular schedules.
In other global shipping news, there’s been some progress in the Port of L.A.’s intense cargo bottlenecks. Unfortunately, much of that traffic has shifted up north to Oakland where, as of last Friday, “25 container carriers were waiting to enter the Port of Oakland at anchor in San Francisco Bay and in a holding area offshore, up from 21 at the beginning of the week and little changed from a month earlier… Outside the adjacent ports of Los Angeles and Long Beach, the queue was 21 ships long, also about the same as in mid-March.”
A topic that’s still weighing heavy on UK supply chains is Brexit. While there has been some notable growth in Britain’s construction sector, smaller businesses definitely have some concerns regarding Brexit’s role in causing major delays for trading construction materials, which has resulted in a spike in these materials’ prices that only larger companies have been able to afford.
Another key issue that’s been building up for a while is the shipping industry’s goal to reduce maritime carbon emissions. According to JOC.com, BIMCO, the International Chamber of Shipping, and the World Shipping Council (WSC) recently just submitted a proposal to the IMO last week “asking it to start talks for adopting industrywide ‘market-based measures’ (MBMs) to reduce carbon dioxide emissions” as a way to speed up the process.
Lastly Vivo, who ranked fifth globally based on mobile phone shipment volume, is currently under fire — quite literally — for causing a pallet fire at Hong Kong airport last weekend. According to The Loadstar, an increasing number of airlines are starting to ban “all Vivo products containing lithium batteries (ion and metal) for direct or indirect carriage … as a precautionary temporary measure until further notice.”
To learn more about how this congestion could last throughout the entire summer or to read up on any of the other issues we’ve touched on here, check out the following links:
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.
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.
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.”
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:
