It’s going to be a red-hot summer in the ocean container freight industry, and that’s not necessarily a good thing for shippers and LSPs.
Bloomberg reports that the price of a 40-foot container hit a 10-year high of $4,403 for freight traveling from Shanghai to Los Angeles. Lanes in the Atlantic aren’t far behind, with the cost of a 40-foot container from Rotterdam to New York reaching $3,500 last week.
Recent government stimulus payments, along with increasing COVID-19 vaccination numbers, mean that more consumers are spending money on more stuff, fueling an import boom is unlikely to dissipate soon. Meanwhile the continued fallout of incidents like the Suez Canal blockage and a record number of containers lost at sea haven’t done anything to help alleviate the ongoing constraint in capacity for vessels and containers.
Because goods are moving so fast, shippers aren’t able to build up their inventories, and are instead selling products as quickly as they’re made. Looking ahead through May and beyond, rates are continuing to skyrocket, with offers exceeding $10,000 and sometimes reaching beyond $15,000, according to Bloomberg.
Though experts expect things to return to more normal levels eventually, it might not happen until 2022. Until then, LSPs will have to rely on processes and technology that can help them quickly and confidently book and allocate freight in order to secure what capacity they can for shippers.
While the global rise in imports has caused headaches for many ports and terminals, some have risen to the challenge better than others.
According to the Container Port Performance Index (CPPI), a new benchmark introduced by the World Bank and IHS Markit, several Asian ports are outpacing their peers. The index, which measures total port hours per ship call and workload achieved, indicates that Japan’s Yokohama is the most efficient port on the planet, with King Abdullah Port in Saudi Arabia and China’s Quingdao rounding out the top three. At 10th place, Spain’s Algeciras was the top port in Europe, while Lazaro Cardenas in Mexico was the most efficient port in Latin America at 25. The only North American port to make the CPPI’s top-50 was the Port of Halifax in Canada.
For perspective on what efficiency looks like, the JOC reports it takes about 1.1 minutes to load or unload a container in Yokohama, and more than three times as long in a less efficient port in Africa.
While all attention is focused on the boom times for ocean container shipping, it’s hard times for tanker ship owners who can’t find enough volume to make ends meet.
FreightWaves dives into the tanker industry, where rates have remained at or near all-time lows throughout the year. Some shipowners are staying afloat on cash reserves, preventing the types of bankruptcies or financial hardships the industry has faced in past down cycles. However, uncertainty about where the market will go in the future has some shipowners looking to sell off some of their vessels, according to the report.
When a giant ship gets stuck in a canal, it captures the whole world’s attention. But for many who work in the logistics industry, these incidents are more than just an unusual story -- they represent the type of disruption that is difficult to prepare for yet highly impactful to their business. Especially when the products they move have a limited shelf life.
In its May issue, Food Logistics editor-in-chief Marina Mayer interviews Slync’s VP of global customer success, Nikolaus Sievers on the effect these disruptions have on carriers and shippers and the ways industry leaders can work to mitigate them with technology.
In the in-depth interview, Sievers and Mayer explore how bottlenecks at ports and at sea are a shared risk among various parties in the supply chain, and how a lack of standardization among carriers puts more pressure on shippers and LSPs to make sense of information and act upon constant and unexpected changes to their shipments.
“Where the physical nature of supply chains cannot be changed or avoided, the key is how parties such as carriers manage their information,” Sievers says in the interview. “Connected information and close collaboration with partners and customers is key. This is an area in which carriers have much room for improvement. Schedule data for instance is oftentimes managed in disparate legacy systems. Carrier’s fleet management teams are not well connected with the booking management systems. This causes time lags and inaccuracies, which is fatal in situations such as the one caused by EVER GIVEN.”
Read the full interview here for more perspective on how the industry can work to overcome these complex challenges.
It can be said that in today’s supply chain, external factors can have an outsized effect on what happens within the enterprise. And there are few ways to illustrate this better than in the automotive manufacturing industry, where the rise of frequent, disruptive events, paired with a shrinking number of suppliers, is thought to be changing the long-held principles of its leading brands.
The Wall Street Journal highlights this effect in a recent article that explores how long-standing just-in-time manufacturing practices have become fragile in an age where everything from COVID-19 to freak snow storms and emerging competition are affecting global supply chains. In the face of so much external volatility, even companies like Toyota, which practically invented lean manufacturing, are asking their suppliers to beef up inventory to help overcome unexpected disruptions.
While the article doesn’t go directly into the implications for logistics, these shifts in procurement practices and sourcing could also change demand patterns for logistics services and the bulk movement of freight.
Thanks for stopping by, folks! Happy Friday! Don’t forget to check out last week’s news and come back next week for the following Friday Five logistics news roundup!