Due to the prevalence of port congestion and box shortages in Europe and the United States, freight volumes on the European and American routes will remain high.
Industry insiders predict that shipments from Asia to Europe will continue into the third quarter, and delays in US and European ports will continue to be the main bottleneck in the supply chain.
The National Retail Federation (hereinafter referred to as NRF, The National Retail Federation) predicts that this year's retail spending and consumer demand may further soar, the increase may be as high as 8.2%. According to NRF data, due to the substantial increase in demand, container throughput will increase by 23% in the first half of the year.
Consultant Jon Monroe pointed out, “Given that many importers are struggling with low inventories, replenishing inventory in order to meet their volume may be the key driving force for this year’s growth. Therefore, the question that everyone needs to face is how to deal with another possible occurrence. A turbulent year?"
Monroe said that most cargo owners (BCO) now intend to end contract negotiations and try to plan for expected market fluctuations, which may mean that contract requirements have not been met, soaring freight rates and shipping schedule reliability have been put on hold again.
Monroe made some suggestions for companies facing supply chain disruptions this year, including finding alternative delivery ports for imported goods other than Los Angeles and Long Beach, while optimizing warehouse efficiency while free time is reduced.
According to the table below, it is currently estimated that the "new normal" delivery time for goods arriving on the West Coast of the United States is currently expected plus 4 to 5 weeks.
The estimated delivery time (cargo is delivered via DC) is an additional 4 weeks for LA-LB port (an additional week this year)
The current situation of European cargo owners is similar to that of the United States. Port congestion is still the main problem, and the shortage of containers has exacerbated these difficulties. Especially in the United Kingdom, due to the problem of the space for storing empty containers, there has been a significant increase in delays in container delivery. Brexit has also had a certain impact.
According to data from Container xChange, “the trade interruption and continued congestion after Brexit are causing serious container accumulation in British ports.” said Dr. Johannes Schlingmeier, CEO of xChange, when the CAx index exceeds 0.5, it indicates that more containers are imported than exported. The index "increased significantly last year, with 40-foot containers rising from 0.71 to 0.86, and 20-foot containers rising from an average of 0.72 to 0.85."
Schlingmeier said, “The British ports are full of empty containers. If this problem becomes too serious, you may see additional charges for new (arriving) containers next.”
Container xChange stated that the link between Brexit and CAx is that as the United Kingdom leaves the European Union, British ports (mainly the Port of Felixstowe, but also the ports of Liverpool and Southampton) are facing severe congestion. British companies have become a problem, and some shipping companies have increased surcharges.
"To make matters worse, some shipping companies are currently unloading at EU ports such as Hamburg, Rotterdam and Antwerp to avoid congestion at British ports. As a result, the CAx values of these ports have increased in the past few weeks," Schlingmeier explained. And added a reminder that CAx will further monitor the number of containers entering and leaving the port. Four or five months ago, shipping companies waited for return goods at European ports for two months, and now they are "carrying back to Asia with empty containers full."
Clarkson predicts that the volume of seaborne trade this year will exceed the level of 2019
Clarkson Research Services acknowledged that major uncertainties still exist, but it is expected that the global seaborne trade for the whole year of 2021 is not only expected to return to the level of 2019, but also expected to be this level.
Clarkson predicts that this year's seaborne trade volume will increase by 4.2% to 12 billion tons, which is 0.5% higher than the level in 2019. Clarkson estimated in a recent weekly report that in 2020, global seaborne trade will fall -3.6% for the whole year to 11.5 billion tons. In the first few weeks of 2021, most non-tank shipping industries will show high utilization rates and high rates.
The International Monetary Fund (IMF) predicts that the global economy will grow by 5.5% this year. Following a 3.5% drop last year, the economy in 2021 will grow by 1.8% over 2019. Looking at emerging economies and developed economies separately, only emerging economies will return to the level of 2019 this year. The IMF expects that emerging economies will grow by 6.3% and will fall by 2.4% in 2020. On the other hand, advanced economies are expected to grow by 4.3%, which is lower than the 4.9% decline in 2020.
A report from the Baltic International Chamber of Shipping (BIMCO) at the end of last month pointed out that the recovery in 2021 will not bring good news to everyone. The exact speed of the recovery will depend on the development of the epidemic and changes in travel restrictions and other containment measures.
The prosperous situation of the container shipping market will continue for a longer period of time. The profit of the shipping company in the first quarter of this year is expected to increase to several times that of the fourth quarter of last year, and the profit in the second quarter will be equal to or higher than that of the first quarter.
After the Spring Festival, the congestion problem of European and American ports has not been relieved as expected. Instead, it has spread everywhere. Major international ports such as Los Angeles, Oakland, Rotterdam, Hamburg, Felice Du, Liverpool, and Le Havre continued to be congested. Singapore is not immune. Although the current shortage of containers has improved, it is estimated that as the volume begins to increase at the end of March, it will return to the original situation in April.
Jeremy Nixon, CEO of ONE, pointed out that Asian terminals currently operate 24 hours a day, while berths on the west coast of the United States work 112 hours a week, container terminals work 88-90 hours a week, and land operations are limited to daytime. Therefore, the current situation of the trans-Pacific route is unlikely to improve in the short term.
On the whole, the off-season of the shipping market after the Spring Festival this year is not weak. The number of days for seasonal correction of freight rates before and after New Year's Eve is between 50 and 64 days. The rate of freight rate decline is between 17% and 27%. After the festival, only 3.8% is revised, which is still obvious. Less than historical convention.
Looking forward to the market outlook, analysis institutions are optimistic about the market performance this year. Drewry predicts that the global container shipping demand growth rate will reach 10.9% in 2021, which is much higher than the 4.5% growth rate of supply.
The Danish shipping consulting agency Sea-Intelligence also estimates that the surge in freight rates may continue until the spring of 2022, and the freight rates for the US line may increase by another 25%.
Sea-Intelligence's research report pointed out that the current US retail industry inventory is still at a historical low, and the relative inventory level has been the lowest in 28 years. This is undoubtedly good news for the shipping company. As long as the sales situation is normal, the US retail industry needs to be in Continue to replenish inventory in the next few months.
Executives of CH Robinson, the world's leading third-party logistics service provider, pointed out that global road, sea and air cargo congestion is likely to continue into next year and continue to increase transportation costs.
Although there is still room for increase in freight rates, the various operating costs of container shipping companies are also increasing significantly. Port congestion has reduced ship turnover by 20% to 30%, and container ship rents have soared, which has doubled in the past year. In addition, the price of marine fuel oil has increased by 60% since November last year, and the difficulty in crew dispatch caused by the epidemic has also increased labor costs by about 20%.
Consolidation company believes that starting from May this year, the long-term freight rate of the western US route has started from US$3,000, which is several times higher than that of last year’s US$1,400. Therefore, as long as the freight rates of the European and Southeast Asian routes are stable, the company’s profit in the second quarter may be The first quarter is equivalent. If it is a consolidator that starts to substantially increase US flights in mid-March, there is still a chance that the second quarter will make more profits than the first quarter.
The spot freight rates for containers from Asia to Europe and from Asia to the United States fell further from record highs last week. However, it is expected to remain high for a period of time.
There has been a sharp drop during the Chinese Lunar New Year holiday, but the rate is expected to remain high
Jeremy Nixon, CEO of Japanese liner company Ocean Network Express (ONE), believes that the freight market will not stabilize before the middle of this year.
The Lowe's Daily said that in the absence of a sharp decline in traditional freight volumes after the Chinese New Year, the spot freight rates for Asia-Europe and Trans-Pacific trade are still at historical highs; the spot exchange rate flexibility during the Spring Festival shows that the factors that support price increases are still Need to be alleviated. Cargo backlogs, port congestion, equipment shortages and continued high throughput mean shippers are still being charged premiums on the main trade routes.
The Drewry Composite Index shows that although it has fallen 2.2% in the past week, it is still 232.6% higher than a year ago. The year-to-date WCI average composite index assessed by Drewry is US$5,231 per 40-foot container, which is US$3539 higher than the five-year average of US$1,692 per 40-foot container.
The Drewry Composite Container Index fell 2.2% (US$117) to US$5121.04 per 40-foot container.
The freight from Shanghai to Rotterdam dropped by US$286, reaching US$8188/FEU;
The freight from Shanghai to Los Angeles dropped by 130 USD, reaching 4,261 USD/FEU;
The freight rate of the 40-foot container from Shanghai to Genoa fell by US$106 to US$8,505;
The freight from Shanghai to New York rose by 23 dollars to reach 6,651 dollars/FEU.
Drewry expects rates to stabilize relatively this week.
The Ningbo Export Container Freight Index (NCFI) released by the Ningbo Shipping Exchange closed at 2152.91 points, down 4.1% from 2245.32 points last week. Among the 21 routes, the freight index of 5 routes increased, and the freight index of 16 routes decreased. Among the major ports along the "Maritime Silk Road", the freight index of 17 ports fell.
The freight rate of the European-German route dropped as a whole, 3.9% lower than the previous week's European route; the eastern route dropped 4.2%; and the western route dropped 4.9%. While the North American route remained high, the US East route rose 2.5% from last week; the US West route rose 0.2% from last week.
European-German route: In view of the fact that the transportation demand is still recovering after the holiday, the goods hoarded before the holiday have basically been shipped, and the booking price of the European-German route has dropped overall. According to Freightos' recent Baltic Index (FBX), the price of 40-foot containers from Asia to Northern Europe fell 4% a week to US$8004; according to FBX data, in the Far East to Europe transaction, the spot freight rate was as high as US$8,306. /FEU, but fell by US$432 over the weekend to US$7,874/FEU (daily index).
But for Mediterranean ports , the average price dropped by only US$37 last week to US$7,926 per 40 feet.
Moreover, many shippers are still obliged to pay additional fees to ensure the availability of containers, and for British ports, a "port fee" of US$2,000 is usually added. A year ago, the FBX index showed that the freight rates per 40 feet in the Nordic and Mediterranean regions were US$1,533 and US$2,130 respectively.
Lory Cheung, an overseas marketing expert at China-based MRF International Forwarding, said that shipping companies must “do everything they can to seize every opportunity” because the shipping market will eventually return to normal. He pointed out: "At present, carriers seem to be more willing to sign long-term contracts with BCO rather than freight forwarders," which shows that shipping companies are working hard to lock the contract price at the highest possible level to avoid the impact of spot market fluctuations.
In fact, the high inflation rate in current transactions is forcing shippers to cancel orders for low-value products. A British non-vessel carrier (NVOCC) stated that he has noticed that a garden furniture importer’s bookings from China have dropped by a third this year.
North American routes: The market's freight volume has recovered faster than in previous years, and the route's loading rate remains high. According to the Freeghtos Baltic Index, since the end of February, freight rates outside of Asia have decreased, and the spot freight rate for Pacific Eastbound transactions has dropped from a high of US$4922/FEU on February 26 to US$4197 on March 4. /FEU. However, by March 5, the spot freight rate soared again to US$4,709/FEU. At the same time, in the Trans-Pacific region, the West Coast portion of FBX in the United States fell 11% last week to $4,369 per 40 feet. Freightos expects this decline to be temporary, given the strong demand for trade.
The FBX index for US East Coast ports fell 3% to $5659/FEU.
Freightos research director Judah Levine said: "Although the rates are falling, they may remain very high for a period of time." "As the US retail inventory level is still very low, it may take until the end of this year to restore normal inventory."
According to the latest data from the signal platform of the Port of Los Angeles, the volume of inbound containers this week reached 175,300 TEU, an increase of 505.56% over the same period last year. There are 17 container ships berthing at anchorages, and 10 container ships waiting to be anchored outside the port, with an average waiting time of 7.5 days.
Last week, even if the freight rates of the two major trade routes from China to the United States and Europe fell, at least 35 to 40 ships were anchored on the west coast of the United States due to congestion in US ports continuing to spread to ports outside North America. More than twenty container ships waited for two weeks to berth. These container ships were loaded with exercise bikes, electronics and other highly sought-after imported goods. Los Angeles Port Director Gene Seroka said at a recent board meeting: "The backlog is expected to continue until midsummer."
Congestion in Southern California, dozens of container ships waiting to berth
Jon Monroe of Worldwide Logistics said that the traffic congestion in the Los Angeles/Long Beach area was mainly caused by the layoff of more than 700 skilled dock workers due to Covid-19 infection. "Due to the complexity of the operating models of multiple terminals in Southern California ports, this situation is more difficult to resolve quickly. Of course, in addition to this, 45% to 50% of imported goods in the United States are transported through the ports of Los Angeles and Long Beach." He added , The shipping terminal has insufficient storage space, the truck queue at the terminal is also very long, and the chassis continues to be short.
At the same time, Jon Monroe of Jon Monroe Consulting in Washington State suggested that there is evidence that the strong momentum of trade may be maintained until the Chinese New Year in 2022.
The market is unprecedentedly strong, which is bad news for shippers who are struggling to sign new annual contracts from Asia to the United States. "Many people I have spoken to have stated that this will be a fast negotiation," Jon Monroe said. "The question this year is more about'how to ship the product?' rather than'how much is the cost?'"
At present, there is a 40% unbalanced gap in containers in North America. This means that for every 10 containers that arrive, only 4 return, and 6 remain at the arrival port. The average monthly trade between China and the United States is 900,000 TEU, and there is indeed a huge absolute imbalance in containers. In addition, according to the data of consulting company Descartes Datamyne, the current shipment volume is at the highest level in history. In the first quarter of this year, sales increased by 23.3% over the same period last year.
The container shipping crisis has affected various business areas in different ways. For example, the transportation of high-value commodities such as mechanical engineering products, electronic products and computer equipment will be less affected. But for other types of goods, especially the textile industry in Asia, the increase in transportation costs has brought more serious consequences. Exporters claim that the sharp increase in freight rates has led to the closure of many low-profit textile mills. Delays and container shortages are pushing up freight rates. In Asia, delivery delays can be up to several weeks, forcing many companies to negotiate price increases with buyers.
When goods are transferred around the world, they rarely go from departure to destination locations in one step. In fact, they may switch between air, ocean, land, and rail carriers before they reach their destination.
Freight forwarders do the work of organizing, planning, and optimizing global trade routes and logistics solutions to facilitate the movement and storage of those goods. They rely on an expansive network of transport vehicles, warehouses, and intermodal points to streamline the movement of goods and cargo across the whole world.
Freight forwarders and logistics companies gather information from shippers, warehousers, truckers, and more to plan the route cargo will take. When they need to incorporate a shipment, an optimized route is already available and ready to utilize.
International Freight Forwarding Services
International freight forwarding services helps ensure an uninterrupted supply chain for international shipping partners. International logistics include foreign customs, duties, regulations, and fees, that are constantly changing and being updated.
It is important for freight forwarders and logistics companies to carefully handle such processes and stay up to date on issues related to global transport. These things can change from day-to-day, and shippers should be aware of cost fluctuations, new regulations, or procedures at both destinations and departure points.
Cost
A shipping company handles transportation services for you, but an industry-leading freight forwarder can help you optimize your time and money. Freight forwarders incorporate your supply chain into an existing and strong network of shipments.
Asiana USA provides door-to-door transportation and logistics services that are meant to reduce overall costs. Our advanced and integrated shipping network allows us to optimize the movement of goods around the United States and the world.
Services
Freight forwarding services include tracking inland transportation, document preparation, warehousing, negotiating fees, insurance, cargo consolidation, and shipping. These services greatly improve shipping for the shipper, receiver, and freight forwarding company.
Ideally, you should seek a partner who can perform all of these services. If you use more than one or all of these services, this will optimize your supply chain and shipping experience overall.
Mode of Transport
The best freight forwarding service providers make use of all modes of travel. Optimizing shipping routes using land, rail ocean, and air freight allows for an extended network of travel to and from multiple intermodal drayage points.
Drayage shipping means that cargo is moved between major intermodal points using high-volume transport such as a ship or train. Then, smaller vehicles will move them to the cargo to its final destination.
Trucks are an efficient way to move cargo and single containers between drayage points. While long-haul trucking has often been used to transport containers long distances, this practice is being replaced by drayage trucking, and other modes of transport are used for longer transport.
This is a safer alternative and more efficient, as truckers can make multiple trips daily. Additionally, truck companies have been incorporating new technology to further optimize the trucking experience, such as automatic transmissions and multiple cameras.
Rail transport is a far more efficient way to move multiple containers long distances. Instead of one driver per truck per container, a train can move over 200 double-stacked containers, use far less energy, and require far less personnel to operate.
It’s a safer, more effective way to move large goods long distances. Using one train where 100 trucks would have been needed also creates less pollution.
Air freight is used for more time-sensitive shipments. As transporting cargo by air poses weight and size restrictions, it is better used for smaller cargo. Due to high demand and higher fuel costs, air travel may be less suitable for heavy supply chains.
However, when cargo needs to travel far overnight, air freight can usually be the best option. Other situations where air freight is preferable is if you are shipping perishable, sensitive or hazardous items where special handling is required.
The majority of shipping occurs via the ocean. Ships carry large container loads and optimize shipping routes between major global trade ports. Transporting large amounts of cargo between major ports all over the world by ship allows for the rest of the shipping industry to flourish.
Over 11 million containers arrive yearly at different ports in the United States, many of which continue their journey by land to different parts of the country.
Final Thoughts
Choose a freight forwarding service that helps your business perform better by optimizing your supply chain, reducing your shipping costs, and deals with complicated international paperwork for you.TJ China Freight provides the best solution and the timely feedback for all kinds of shipment from every city in China by sea, by air and by railway, and we can provide the competitive price based on the best service, meanwhile we can also provide the other best service, including customs clearance, pick up & delivery service, shipping to Amazon FBA, warehousing & Distribution, cargo insurance, container loading supervision and Express,In a Word, everything you want to ship from China, TJ China Freight can always help.
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German logistics giant Rhenus continues to start crazy "acquisitions"! Following the acquisition of the LOXX Group last month, Rhenus, the harvester in the international freight forwarding market, has taken another move, bringing BLG Logistics Group, a well-known local freight forwarding company in Germany, under its umbrella.
Rhenus Group is a leading logistics service provider in Germany, with operations all over the world, with an annual turnover of 5.5 billion euros. Rhenus has operations in 750 regions around the world and has 33,000 employees. The Rhenus Group provides solutions for different areas in the entire supply chain; including multimodal transportation, warehousing, customs clearance and innovative value-added services.
BLG hopes to focus on its contract, automobile and container businesses, and sell BLG International Forwarding's international freight business to Rhenus. Since 2018, Rhenus has acquired almost all regions of the world; Rhenus will provide its service network for the rest of BLG's business .
Rhenus will take over BLG’s 9 air and sea freight stations in April and integrate these stations with approximately 100 employees into its network of 12 branches in Germany. This new business will enable the company to handle more traffic through its LCL hub in Hilden and the air cargo hub in Frankfurt.
Rhenus said the company also plans to expand its food business, trade fairs and event logistics operations. "In the past few years, we have paved the way for the continuous expansion of air and ocean freight," said Stefan Schwind, general manager of air and ocean freight at Rhenus Germany.
"Due to the addition of business sites, employees and business activities, we are consolidating our network in the German aviation and maritime sectors. We also hope to develop new business areas, such as the use of refrigerated containers to transport food, and in trade fairs and event logistics. Activities."
BLG said it will retain its freight forwarding business in Bremen, focusing on land and sea transportation of heavy and project cargo. Board member Jens Wollesen said: "Even if we no longer have representatives throughout Germany in freight forwarding, we will continue to provide a wide range of international services in our contract, automotive and container sectors."
Last month, Rhenus stated that it would take over the LTL and FTL cross-border specialist LOXX Group and established five business sites in Germany and Poland to strengthen its business in Germany and Europe.
In the past two years, Rhenus has made frantic acquisitions. From Germany, Italy, the United Kingdom to Canada to South Africa and the United States, all freight forwarding companies that Rhenus favors have been acquired.
Recent "acquisition list":
In November 2018, it acquired German freight forwarding SBL;
Acquired the Italian logistics company Cesped in December 2018;
Acquired British freight forwarding Core Management logistics in January 2019;
Acquired Rodair, a Canadian freight forwarder, in early March 2019;
Acquired World Net Logistics, a well-known freight forwarder in South Africa at the end of March 2019;
Acquired LOXX Group in January 2021;
Acquired BLG Logistics Group's freight forwarding in January 2021.
Dominic Hyde, Vice President Crēdo On Demand at Peli BioThermal, discusses the developing trends in freight that have come about as a result of the COVID-19 pandemic.
Previous predications in pharmaceutical transportation trends, highlighting declining air passenger numbers and increasing air freight demand, have all been propelled by the pandemic. Coronavirus continues to cause worldwide disruption and is anticipated to impact industry throughout 2021 and beyond.
Pandemic response - preighters take off
Pre-pandemic passenger numbers were already on the downturn. However, the crisis has significantly accelerated that trend and the crisis capacity crunch came as the number of passenger flights plummeted. The ensuing scramble to transport pandemic payloads saw the deployment of hundreds of passenger planes as freighters, known as ‘preighters’.
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Pioneering Portuguese charter operator Hi Fly led this trend, being the first to convert an A380 for freight by removing the majority of seats
Pioneering Portuguese charter operator Hi Fly led this trend, being the first to convert an A380 for freight by removing the majority of seats to provide more cargo capacity. Despite the sector seeing the grounding of hundreds of passenger planes, earlier than had been initially forecast, which led to a reduction in the availability of cargo space, we’ve seen more planes undergo such conversions.
However, the ongoing drastic downturn in travel means the loss of a lot of capacity in passenger aircraft, and while freighter aircraft are still present and working hard, fleet growth takes time, so there will be a slower response to replacing some of the capacity lost from the passenger side of the industry.
Large widebody aircraft – grounded or retired
Before COVID-19, it was predicted that airlines would cut flights from schedules, mothball larger aircraft, decline production options, and look to utilise smaller, more efficient aircraft – whether for environmental or economic reasons. All those decisions have now been massively accelerated. The forecast to park some of the larger, widebody aircraft has been brought forward significantly due to the COVID-19 crisis, and its ongoing impact has meant the majority of all 747 freighter aircraft have or are being retired. The A380, which Airbus had previously announced it would stop deliveries of in 2021, has also been retired across the board by numerous airlines.
Increasingly, airlines are grounding their A380s in favour of more modern, smaller jets that can fly more efficiently than their four-engine aviation counterparts.
What we will continue to see is a lot more interest in leaner aircraft, such as the A220, the Canadian Bombardier aircraft produced by Airbus in North America.
Sea change in modes of transport
There will be ongoing developments in the sea freight sector too, which has an estimated 17 million TEUs (Twenty-foot Equivalent Unit) serviceable globally, of which six million containers are routinely turning and carrying freight.
Uncertainty in sea and air freight availability saw pharma companies initially ship everything they could, by any mode of transport available, to get it out to the markets. Following months of disruption, passenger airlines began loading aircraft with cargo in the lower decks and loose load cargo on the upper decks.
Whereas I was hoping things might be back to some kind of normality in March, I am now inclined to add another quarter to that. I now think there will be exacerbated sea freight and sea container availability issues throughout the first half of 2021.
Given the sea freight situation, we will continue to see the utilisation of air freight to transport pandemic payloads. When it comes to economics, without the passengers on the main deck is a much more expensive operational option. However, pharma customers are prepared to pay those premiums.
The volumetric efficiency on aircraft is critical at the moment because it is such a scarce resource. We need to ensure the best use is made of it. With air freight capacity a dwindling resource, it is even more important to have the efficient packing density of temperature-controlled products on such limited air freight resources.
Vaccines vs. virus - rapid response
As the development of successful COVID-19 vaccines continues, approved vaccines are already being administered as part of ongoing mass vaccination programmes worldwide. Temperature-controlled packaging manufacturers continue to play a pivotal part in the global deployment of these, but as COVID-19 vaccines fall into different families of technology, some have frozen and deep-frozen temperature requirements, leading to a scramble to qualify existing solutions for shipping at those specific lower temperatures.
In a rapid response to the logistical cold chain challenges involved, we have adapted our shippers to meet those requirements, as have other providers. There has been an impetus for innovation to support these temperatures in volume. Suppliers stepped up to meet the vaccine temperature challenges by adapting existing shipping solutions. The capacity is there, so I don’t anticipate it will be an issue going forward.
The focus is reverted back to the capacities in the transport modes and – given the nature of these drugs – people are paying whatever it costs to ship them, with rates rising sharply from $2.5 a kilo to $23 – although, that is starting to calm down.
Beyond the current vaccines being approved there will be the need to provide boosters. It is going to create a recurring step up in the volume of vaccines being shipped, alongside the flu vaccines being transported and other pharmaceutical payloads every year.
There will not be a continuous crisis. There will rather be a continuing trend for smaller aircraft with reduced air freight capacities moving pharmaceutical products at temperatures that sea freight cannot do. It really can only fly.
However, there’s not going to be a modal shift from air to sea because sea cannot meet the temperature requirements. You get a displacement, whereby COVID-19 shipments, whether vaccines, test kits and reagents, or some of the therapies which help with recuperation, are flying at almost any cost on a dwindling resource.
The pharmaceuticals, which have more normal temperature shipping requirements, get displaced. In that situation, when the air freight rates get so high, sea freight would normally be seen as a shipping solution.
However, with all of the sea freight challenges, coupled with the fact that their transportation rates have also doubled, there has been some displacement – although not as much as pharma companies would have liked, which is what has kept pushing the prices up in the region of the $23 a kilo figure for air freight we had seen previously in the market.
Sea freight will improve in the first six months of 2021, so some of that displacement can take place more efficiently. Aircraft, however, will still be loaded with COVID-19 related products.
2021 will see the industry learning to operate in ‘the new norm’. Next year, we might start to see some improvements and efficiencies, but I think this year is about adjusting our planning, our capacities and our operations around this spike in demand and the gradually improving capacity picture. Almost like wearing in a new pair of shoes.
Aerial photography of Southern California full of container ships! Terminal operators expect to get rid of the dilemma by the end of spring
Recently, a cold wave swept the United States and quickly plunged the southern state of Texas into disaster. In this unprecedented cold wave, more than 4 million people in the United States have suffered power outages, countless power plants have been destroyed, and electricity and natural gas prices have skyrocketed. ; At present, the price of electricity in Texas has increased by more than 100 times, up to 9,000 US dollars per megawatt, and the price of natural gas has skyrocketed by more than 160 times, reaching US$500, compared with only US$3 in the past; it is jaw-dropping.
Except for Texas, which is in a serious disaster, other states in the United States are not doing well. There are about 168 million people in the United States under the threat of this cold wave. Numerous airports have been suspended. According to data from the flight monitoring website "flightaware", Dallas and Houston , Austin area airports have cancelled more than 2,000 inbound and outbound flights on the 15th . Coupled with the new crown pneumonia crisis that is still raging across the United States, the United States is really miserable.
In terms of shipping, the Southern California anchorage is full of container ships, and the congestion continues to worsen ! The latest video released by the U.S. Coast Guard provides intuitive evidence of the congestion levels in Los Angeles and the Port of Long Beach. From the picture, a large number of container ships are moored at the anchorage in San Pedro Bay, California.
U.S. Coast Guard aerial scene
Data shows that the historic container ship congestion in California ports has not really eased. There are currently 63 container ships in Los Angeles and Long Beach, and 32 container ships are waiting for berths at anchorages. (On February 1st, the highest record of 40 container ships anchored at anchorage)
The Port of Los Angeles announced the number of berth days for a particular container ship through its Signal platform last week. Data shows that some ships stay at anchorage and wait for almost as long as they sail across the Pacific Ocean . For example, as of last Thursday, the 6332TEU container ship "Ever Envoy" has been parked for 11 days. As of Tuesday, the 9,400TEU "MSC Romane" has been parked for 12 days. And the three container ships of 11356TEU "CMA CGM Andromeda", 8452 TEU "Ever Liven" and 4888TEU "NYK Nebula" also berthed for 11 days as of last week.
As of the end of 2020, the number of container ships at anchor has increased to 30; since then, it has remained between 20 and 40. At the same time, the number of vessels at berths in Los Angeles and Long Beach remained at around 20 and 30. Kip Louttit, executive director of the Southern California Shipping Exchange, said: "We seem to have adapted to the new normal of about 30 container ships waiting in line every day. I don't know if this situation will continue."
As of Tuesday, the average time for ships docking in Los Angeles was 8 days , up from 7.3 days at the beginning of last week. From the information on the waiting time of ships provided by the platform from January 27th, the waiting time for ships to berth has been maintained for about one week, and the data for the last two periods has been extended to 8 days.
The latest data from the Signal platform: 20 ships at anchor, with an average anchoring time of 8.0 days. There are 14 ships waiting to be pre-anchored.
What caused the blockage? The extended berthing time of ships forced some shipping companies to cancel multiple voyages this month. This is not due to lack of cargo demand, but due to lack of available vessels to handle these services. Delays on land have also caused congestion at sea: extremely high inbound volumes and complex logistics inside and outside the port have caused delays on land. One of the challenges facing the port is the new crown virus infection of dockers and a serious shortage of labor.
Despite productivity gains last month, terminal operators at the Ports of Los Angeles and Long Beach said the ports may have to wait until the end of spring to get rid of the ship backlog and congestion that have plagued them in the past six months . The near-record number of containers will continue into the spring of this year, but the backlog of ships at the port and the fully loaded inbound containers at the terminal should disappear sometime between April and June.
The managers of SSA Marine, Yusen Terminals and Fenix Marine stated that in order to alleviate the congestion in the port, two projects to be developed are necessary. First, the COVID-19 vaccine must be widely distributed among dock workers to alleviate the recent labor shortage. During the Lunar New Year holiday this month, container traffic has declined moderately, which should also enable shipping terminals to remove the backlog of fully loaded imported containers from their facilities.
"The terminals are full and there is no place to put these containers. We deliver 35% less cargo (to truck drivers) than usual," said Ed Dannick, president of SSA Containers.
According to data from the HarborTrucking Association, the average truck stay at the terminal in January improved from 93 minutes in December to 88 minutes, but it was still much higher than the record low of 58 minutes in June. Imports peaked during the recovery period after the first wave of COVID-19 lockdown.
The backlog of ships in Long Beach, Los Angeles, is increasing unabated. According to statistics from the Marine Exchange of Southern California, there are currently 63 container ships in the Port of Long Beach in Los Angeles, of which 32 are at anchor waiting for berths and 31 are at berths.
The latest data released by the Pacific Merchant Shipping Association (PMSA) shows that in December last year, the average container stay time at the 12 terminals of the Port of Long Beach in Los Angeles was 4.99 days. This is twice the average length of stay (approximately 2.5 days) recorded by PMSA in the first half of 2020.
“The longer the container stays at the terminal, the more serious the congestion will be. When the container piles up like a mountain, the congestion creates additional and inefficient handling requirements,” said PMSA’s government affairs manager jessicaalvarenga.
The new crown epidemic hits labor in the port
According to the Pacific Maritime Association (PMA), the West Coast port employers' Association and the International Terminal and Warehouse Union (ILWU), the new crown epidemic has severely affected the labor force along the Los Angeles-Long Beach Port. As of January 17, The International Terminal and Warehouse Union (ILWU) reported that 694 of its members tested positive. By January 25, this number jumped to 803.
PMA stated that there is a particular shortage of skilled equipment operators, who need to remove containers from trucks, and then move them into and out of the container yard, which is critical to the operation of the terminal. As a result, the joint committee of PMA and ILWU, which is responsible for allocating workers to the docks on a daily basis, cut the allocation share.
"It boils down to the labor issue at the terminal," said Scott Weiss, vice president of business development at Port Logistics Group, which has a large number of truck and warehouse operations throughout Southern California. "Containers still have bottlenecks in and out of the terminal."
The latest information released by the Signal platform of the Port of Los Angeles shows that due to the new crown epidemic, the productivity of coastal labor has decreased, which has caused ship delays and the average delay of port facilities is 8.0 days .
These ports are working with trans-Pacific shipping companies to reduce Southern California's load until the volume returns to normal. Gene Seroka, executive director of the Port of Los Angeles, said that he is working with shipping companies and terminal operators to "measure" imports until the port catches up. Hapag-Lloyd (Hapag-Lloyd) has announced the opening of a structured route to Southern California in February, and CMA CGM will remove Los Angeles from the trans-Pacific route and use Oakland as the first port of call from Asia. , Followed by Seattle-Tacoma.
The terminal operator said that when workers throughout the supply chain are vaccinated and imports drop, the congestion in Long Beach, Los Angeles, will disappear.
Spring recovery?
Alan McCorkle, President and Chief Executive Officer of Yusen Terminals in Los Angeles, said that in the past six months, the container throughput of these terminals was close to record levels, but there was no overall congestion. This fact shows that if the peak season does not last for six consecutive months, they will have Ability to handle peak season cargo volume. He expects to return to normal in May or June.
Scott Schoenfeld, general manager of Fenix Marine Services in Los Angeles, said that Fenix is showing signs of improvement, so he is optimistic that congestion may be eased as early as April . The density of containers in the yard is not as high as late last year, and more truck drivers are able to transport containers every day.
However, container traffic is still rising, and as overloaded ships continue to arrive in Southern California, this trend will continue until at least next month. NVOCC consultant Jon Monroe said that the eastbound transpacific shipping company has deployed or will add 10 additional loading vessels in February, all deployed at the Port of Los Angeles-Long Beach. Judging from the latest data from the Los Angeles Signal platform, there was another peak in the surge in volume in the eighth week.
Volume surged in the eighth week
Jon Monroe pointed out that although more Chinese factories will continue to maintain at least part of their business this month to clear the backlog of merchandise orders compared to previous years, the total volume of the East Pacific trans-Pacific region should be greater than the previous six months. Months are less.
Scott Weiss, vice president of business development at Port Logistics Group, said that the 1.8 billion square feet of industrial and distribution space throughout Southern California is not fully loaded, just like last fall before the holiday season merchandise was transferred to stores across the country. However, the availability of space in warehouses and distribution facilities has been mixed. "Some warehouses are in a mess now, others are working well. I think the ratio is about 50-50,"
Scott Weiss said that productivity has generally declined, and warehouses across the region are experiencing labor shortages due to the new crown epidemic, but at the same time, freight volumes are still exceptionally strong. "Everyone I contacted is experiencing record sales and growth, but everyone is working hard to cope."
Weston LaBar, CEO of the Port Transportation Association, said that the current truck capacity is tight, and the availability of workers at both ends of the truck driver's route, the terminal and the distribution warehouse, has been challenged . However, when workers feel safe, they return in large numbers. LaBar said: "The most effective thing we can do right now is to vaccinate."
For most of 2020, the Port of Los Angeles has been struggling to deal with the problem of container surplus. Now that there has been a dramatic turning point, the Port of Los Angeles has also experienced a shortage of containers.
According to the latest statistics from Container xChange, a professional organization in the container monitoring field, the Container Availability Index for 40-foot containers in the Port of Los Angeles has dropped to 0.29.
Container xChange’s marketing director explained: “In the 49th week of 2020, the port’s availability index value for 20-foot containers and 40-foot containers plummeted to 0.27. Compared with the average index from week 1 to week 8 of 2020, these two Both containers dropped by 57%."
It is understood that when the container availability index is 0.5, it represents market balance. If it is less than 0.5, it represents a shortage of containers.
This means that the Port of Los Angeles has a serious shortage of containers.
In the previous Port of Los Angeles, due to the large increase in import volume and the epidemic factor, the port was congested on a large scale, and the efficiency of container turnover was very slow. At the peak, 10,000-15,000 containers were stranded at the terminal, and normal operations were severely affected.
According to a research report jointly issued by Container xChange and FraunhoferCML, a maritime logistics research organization, in the third quarter of 2020, there will be approximately 1.5 million containers in the United States with a turnover time of more than 115 days, while the normal average time should be less than 80 days.
Previously, due to the large backlog of containers in the Port of Los Angeles affecting the supply chain, liner companies conducted large-scale empty container deployment to ensure the normal operation of trans-Pacific routes.
As empty containers continue to be shipped back to the Asian market, the situation at the Port of Los Angeles has undergone a dramatic turn.
The industry also analyzes that the current shortage of containers in the Port of Los Angeles is related to the serious port congestion, the imbalance of market supply and demand, and the labor shortage caused by the outbreak of the Los Angeles Port.
Container xChange CEO Johannes Schlingmeier previously stated that since the summer of 2020, the U.S. container transportation supply chain has been under pressure, and the Port of Los Angeles is facing labor shortages caused by the outbreak of the new crown pneumonia epidemic.
Lars Jensen, CEO of Sea Intelligence, an industry consulting firm, believes: "The main reason for the lack of containers is port congestion."
Regarding when the container shortage will be resolved, Container xChange predicts: "In the next few weeks, as every link in the trans-Pacific route supply chain will face tremendous pressure, container supply will fluctuate further."
Nerijus Poskus, vice president of shipping at Flexport in the United States, believes that the shortage of containers may improve in the second half of 2021.
Lars Jensen said that the lack of containers in the Port of Los Angeles should be resolved before the summer of 2021.
He further explained: "After the international financial crisis in 2008, we also experienced a shortage of containers. The shortage of containers in 2010 took about 3 months from the appearance to the resolution. If we put it now Under the same background, it means that the current lack of containers in the Port of Los Angeles may also be resolved soon."
In recent days, the shipping industry has been in a panic due to the shortage of containers, and ocean freight has soared abnormally, which has affected the supply chain of the manufacturing industry.
However, currently, according to an indicator that tracks global shipping containers, the global shipping shortage seems to be showing signs of easing.
The "Available Container Index" developed by the online platform Container xChange shows that this index can be maintained between 0.35 and 0.38 until the Chinese New Year in mid-February.
This index: if it falls at 0.5, it means that the supply and demand of containers is in balance; if it is lower than 0.5, it means that the supply of containers is in short supply; if it is higher than 0.5, it means that the supply is oversupply.
When the shortage of containers was the most serious last month, the index fell to an ultra-low level of 0.06 to 0.13 depending on the size of the container, and the index began to rebound this month.
It is reported that the imbalance of container shortages in 2020 will be particularly serious in Shanghai. As the Chinese factories resumed production after the epidemic eased, the demand for goods exported to the United States surged, but no empty containers were found to deliver goods out of the port.
But Container xChange said that the situation is now moving towards a normal level .
"One of the main reasons for the improvement in the imbalance between supply and demand is that the shipping industry has made every effort to transport a large number of empty containers from the world's major congested ports back to China. The Lunar New Year may become a turning point for the lack of containers. The Lunar New Year holiday starts on February 11. "
Port of Los Angeles, USA
According to media reports, at present, many shipping companies are eager to ship empty containers back to China from the Port of Los Angeles in the United States and refuse to carry American goods. This has largely alleviated the current shortage of containers, but it has caused the export of American agricultural products to suffer.
For this reason, the US Federal Maritime Commission (FMC) has stated that it will investigate shipping companies' refusal to load American agricultural products and transport empty containers to them. If the investigation is unreasonable, it will impose a fine.
US financial website CNBC reported that from October to November last year, it was the peak season for American agricultural products exports. Shipping companies refused to carry hundreds of millions of dollars worth of American agricultural products exports, and would rather take the time to ship empty containers back to mainland China ports to load profits. Higher Chinese export products.
So FMC launched an investigation and reviewed data from several key ports in California, New York, and New Jersey to find out whether the shipping company’s refusal to carry violated the Maritime Act.
According to FMC's survey, data from the Port of Los Angeles, the Port of Long Beach, New York and the Port of New Jersey, in October and November last year, it is estimated that as many as 178,000 standard containers were rejected. CNBC estimated the value of the affected agricultural products based on the export price of each TEU soybean/oil seed/grain item on the U.S. Bureau of Statistics website in the Port of Los Angeles.
However, industry insiders said that although shipping companies’ refusal to carry US agricultural products has caused losses to US exports, it has indeed alleviated the shortage of containers in global shipping to a certain extent in the near future, which is expected to be alleviated in the Lunar New Year.
Entering 2021, the imbalance between supply and demand in the container shipping market has still not been resolved, and the persistently high container shipping rate is becoming a major threat to the global economic outlook this year.
The shortage of containers is difficult to alleviate, and the freight rates of various routes remain high
Affected by the epidemic and the peak shipments before the Spring Festival, the volume of goods on the European and North American routes remained high, the port congestion, and the lack of containers made container turnover difficult, and the imbalance of supply and demand in the container shipping market has not been effectively alleviated. The freight rates of all routes around the world have remained high.
Recently, due to the epidemic situation, the port congestion has caused the average space utilization rate of container ships from Shanghai Port to Europe to continue to be fully loaded. Most ships maintain the original freight rates, and only the spot market booking prices have dropped slightly. According to statistics from the Shanghai Shipping Exchange, the freight rate (sea freight and ocean freight surcharges) for exports from Shanghai to the European basic port market on January 15 was 4,413 USD/TEU, down 0.9% from the previous period; the freight rate for Shanghai exports to the Mediterranean basic port market (sea freight) And shipping surcharge) is 4296 US dollars/TEU, the same as the previous period.
The North American route also has bottlenecks in container transportation. The average space utilization rate of ships from Shanghai Port to the East and West US routes is nearly full. The freight rates of the routes are stable, and the spot market booking prices have increased slightly. On January 15th, the freight rates (sea freight and ocean freight surcharges) for Shanghai exports to the basic ports of the West and East US ports were 4,054 US dollars/FEU and 4,800 US dollars/FEU, respectively. The West US routes rose slightly by 0.9% and the US East routes rose 1.1%. .
The South American epidemic is severe, the import demand is large, and the transportation demand is high. Consolidation companies are increasing overtime shipping schedules to ease the shortage of capacity. The average space utilization of ships on the Shanghai Port to South America route is over 95%, and most of the flights are fully loaded. Some shipping companies have increased booking prices, and the spot market freight rates have risen slightly. On January 15th, the freight rate (sea freight and ocean freight surcharge) for exports from Shanghai to the basic port market in South America was 8907 US dollars/TEU, up 3.2% from the previous period.
In Asia, the two major port congestion problems in Singapore and Malaysia, Port Klang are the most serious. Many European or Middle Eastern routes skipped these two ports and did not call. Therefore, freight forwarders had to ship customers to Singapore or Port Klang. The cargoes of South Korea will be imported and exported from the neighboring Johor Port. It is estimated that Singapore, Port Klang and Ho Chi Minh City may rise before the Spring Festival holiday on the Southeast Asian route.
At present, there is no news about the increase of freight rates on the routes of Europe and Southeast Asia. However, because of the obvious shortage of space, the purchase fee for the US route remains high. The purchase fee for the US Eastern route was increased to US$4,000/FEU in mid-January, but so far there has been a purchase fee of US$6000/FEU. The purchase fee has reached US$2500. In addition, the port of Los Angeles and the Port of Long Beach have recently reported that hundreds of dockers have been diagnosed. The multi-billion dollar logistics economy of the two ports may be severely slowed down. The situation is even more unoptimistic.
Consolidation costs have risen several times, and the global economy may be profoundly affected
Most people in the industry believe that the problem of imbalance between supply and demand in the container shipping market will continue at least until the first quarter of this year. Nerijus Poskus, deputy general manager of Flexport, a San Francisco freight and customs brokerage company, estimates that the current global container gap has reached 500,000, which is almost equivalent to the world’s 25 largest vessels. Compared with last year, the loading capacity of 20,000 boxes of ships may increase the pressure on shipping costs this year.
Experts pointed out that it is expected that a large number of empty containers in Europe and the United States will be shipped back one to three months after the Spring Festival in April and May. The shortage of containers is expected to be alleviated, but the specifics are still difficult to say. In the follow-up, the impact of the lack of containers can be judged by three major signals: retail inventory, global ship on-time rate, and the latest container ship supply and demand. If the retail inventory level remains at a low level, it indicates that demand is still strong; if the ship on-time rate starts to rise from a low point, it means that the port congestion has been eased.
According to Alphaliner’s latest estimates in December last year, the global container loading and unloading volume this year has increased by 3.5% higher than last year; the capacity supply has increased by 3.9% annually, and the gap between supply and demand has narrowed, which shows the oversupply of the container shipping market in the past decade The phenomenon has been reversed. Although this year seems to be a year of healthy supply and demand, if the epidemic breaks out again, the market will be full of uncertainties.
Strange phenomena are frequent under the epidemic. Although the global economy is still severely hit by the epidemic, the container shipping industry has experienced the most severe price increase in history, and the shortage of supply has intensified the upward trend of container freight rates. Comprehensive data shows that the current freight rates of popular routes such as the European and American routes have increased by several times. The Australian routes have increased substantially by nearly 9 times, and the European routes have also soared by more than 5 times, even for Southeast Asian routes. Prices have also risen, and have increased more than four times since the end of last year.
Some manufacturers frankly said that they can no longer afford the current level of freight rates, and it is even more difficult to pass on the additional costs caused by the soaring freight rates to customers. The goods that were supposed to be delivered in the fourth quarter of last year have not yet been able to ship due to lack of containers and no flags. However, the warehouse can no longer accommodate the piles of goods. Some European countries even bid 8,000 euros (about 63,000 yuan). No usable container can be found. This is a situation that has not been seen in the past few decades.
Obviously, the soaring freight rate caused by the imbalance of supply and demand has affected the operation level from the supply chain level. The company is forced to reduce production or increase inventory pressure, which affects cash flow, and even affects the entire industrial chain because of the reduction in orders. The demand side. Consumers and companies have to bear the increased cost of shipping freight, which may have a longer impact on the economy than the problem of "missing containers".
