Container shortages, capacity constraints, higher shipping costs, and ongoing impacts of the global pandemic all placed new challenges in front of ocean shippers last year.
Those roadblocks have yet to be removed in 2021, although some early signs of relief are beginning to surface. The problem is that the shortage—among other forces—is driving shipping rates up across many routes at a time when global organizations are trying to realign their supply chains after a rough year in 2020.
Here are five trends that all shippers should be keeping an eye on as they plan their ocean freight movement in 2021:
The container shortage is still in full force, but it may be easing somewhat. In late-January, Maritime Executive and other media outlets said that new analysis by Container xChange reveals a “positive trend in availability,” and that the container leasing platform was expecting Chinese New Year to be a turning point in the persistent container shortage. Container xChange expects the equipment situation to remain stable in the coming weeks. This month, Container xChange expects the Container Availability Index to settle at around 0.35 for standard 20-foot containers and 0.38 for standard 40-foot containers. “An index of 0.5 describes a balanced market, below 0.5 a shortage of containers,” Container xChange told Maritime Executive.
It’s a seller’s market out there right now. CNBC says the pandemic combined with an uneven global economic recovery are driving up ocean rates right now. “Industry watchers said desperate companies wait weeks for containers and pay premium rates to get them, causing shipping costs to skyrocket,” CNBC points out, noting that spot ocean freight rates in December were 264% higher for the Asia to North Europe route, compared with one year earlier. For the route from Asia to the West Coast of the U.S., rates are up 145% year over year. Comparing that to March 2020’s prices, CNBC says freight rates from China to the U.S. and Europe have increased by 300%, with spot rates now $6,000 per container (compared with the “normal” price of $1,200). Shippers should keep close tabs on these rate hikes, and seek out alternate routes, carriers, and/or timeframes that help them avoid the highest-cost options.
Some ports are busier than others. According to Forbes, ports like Long Beach/Los Angeles in California are reporting record volume right now, with December volume up 23% over a year ago, the second busiest December on record. “On the East Coast, key ports like Charleston, SC and Savannah, GA are also reporting huge spikes in business although they are generally not as severe as on the West Coast,” Forbes adds. “The capacity issues are similar elsewhere in the world with 8% of European importers reporting delays by the end of last year, up from less than 2% the previous year.”
The supply-demand imbalance may continue for most of the year. For ocean shipping, the global supply and demand graph for 2021 reveals imbalance in favor of the demand of about 3 – 3.5%. In other words, rate levels aren’t likely to retreat significantly over the next months, but will instead remain stable (or even increase). With the container deficit reaching critical levels in Europe, for example, carriers have announced booking stops/cancellation of spot bookings even for base ports. “The battle for equipment is pushing up the rates,” says DB Schenker, which recommends using the most accurate forecasts possible for allocation planning.
Experienced logistics partners are proving their value. Navigating the current ocean shipping environment isn’t easy, but a seasoned logistics partner can mean the difference between affordable capacity and on-time shipments or disappointed customers and cost overruns. DB Schenker’s ocean experts offer priority product on all main trades, guarantee loading within a fixed window of time, and provide alternate routing possibilities to ensure cargo is lifted from port of loading. “We have access to volumes on all alliances and support volumes planning through consultation services (allocation match based on customer forecast),” says Peter Nordstrom, Executive Vice President Ocean Services, Americas Region, DB Schenker, “and cargo storage or cargo-in-transit options that help shippers avoid costly tariffs.”
Keep these key points in mind as you lay out your ocean shipping plan for the remainder of the year, and be sure to leave some wiggle room for other trends that may emerge as we progress further into 2021. During unprecedented times like these, good preparation combined with flexibility can go a long way in helping you to successfully navigate the obstacles.
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