 Pandemic-disrupted markets put spotlight on forwarder value |
Source |
American Shipper |
Post Date |
11/11/2020 |
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Securing container equipment and space on vessels out of Asia has become a priority for forwarders, with rates almost a secondary concern amid a chaotic freight market uped by the COVID-19 pandemic.
Forwarders are trying to leverage their global volume and years of building relationships with carriers to get customers¡¯ containers on board ships leaving ports in Asia for North America and Europe, despite facing rising container equipment shortages, a lack of visibility in demand, and schedule reliability so poor in September that almost half the vessels calling at ports around the world were more than four days late, according to Sea-Intelligence Maritime Analysis.
xxx said BCOs and NVOs were dealing with a high volatility in the market, where agreements were not being met and both sailing schedules and allocations were changing constantly.
¡°The ocean freight market currently lacks much needed consistency and reliability, as some ocean carriers have chosen to be transactional,¡± he told JOC.com. ¡°You can¡¯t build a sustainable business model on the backs of other market participants and ultimately the customers.
¡°Given the unpredictability of some ocean carriers, it has become very difficult for NVOs to provide an adequate level of service to customers. Some ocean carriers actively manage capacity and yields by exploiting only the ad hoc market.¡±
abc said global lockdowns to slow the spread of the coronavirus disease 2019 (COVID-19), coupled with an unexpectedly strong recovery through the third quarter, have disrupted the entire global supply chain. Shippers and forwarders were now facing congestion at ports in China and Europe, full ships on the trans-Pacific and Asia-Europe trades, and huge imbalances building in container equipment.
¡°It is not only about rates right now; it is more about making sure the customers get the goods and keeping the supply chain alive,¡± abc said. ¡°On some trades, rates don¡¯t even matter at the moment, you just try to get the cargo on a ship. Even if you pay sky-high rates and premiums, at least you get your box on board.¡±
xyz told JOC.com that it was up to forwarders and their relationships with carriers to ensure that cargo continued moving. But he warned that securing capacity in such a tight market would come at a price.
¡°If you treat your partners fairly and pay a decent rate, and if you ship above allocations, you need to pay premiums,¡± he said. ¡°If you hammer a carrier on a super low rate and the market is currently twice what you are paying, then don¡¯t be surprised if any excessive volume doesn¡¯t run at this low rate level.¡±
As of Oct. 30, the average Asia¨CUS West Coast spot container freight rate up 142 percent from the same week in 2019, while the Asia¨CUS East Coast rate was up 78 percent year over year.
¡®Abysmal¡¯ carrier schedule reliability
xyz said the availability of space on container ships out of Asia was supply and demand driven, but the bigger challenge facing service providers and shippers was adjusting to poor schedule reliability.
¡°There is massive disruption, congestion in ports, and weather,¡± he said. ¡°We like to have everything in sync, but schedule reliability comes from the equipment problems, congestion, weather, volatility from customers, imbalanced trades, and larger ships with longer port handling.¡±
Sea-Intelligence Maritime Analysis data shows global schedule reliability falling to 56 percent in September from 77.4 percent in the same month last year, with the average delay per vessel rising to 4.75 days.
¡°For our business model and the way we work, we need reliability,¡± Scott Phillips, supply chain and sourcing director of global shoes production and sourcing at footwear maker Ecco, said at the Global Liner Shipping conference Tuesday.
¡°Being rolled costs us money and reputation to our brand, so we need capacity load management to be sharper and carriers not just waiting for a guy with a bigger checkbook at the port to bump someone else off,¡± Phillips said. ¡°This forced us into a partnership model with service providers, and we hope that having been partners with them for many years will stand us in good stead as the capacity constraints and the costs go up.¡±
Predictive supply chain analytics provider Port found the average schedule reliability from January through September fell 46 percent compared with last year, with a 64 percent increase in schedule delays for vessels arriving in European ports in the six months ed Sept. 30.
xxx took a dim view of container carriers¡¯ overall on-time performance in 2020. ¡°The reliability is abysmal to say the least,¡± he told JOC.com in an interview last week. ¡°If we had a similar level of service in our road product, for instance, we would have been out of business long ago. I would hope carriers will use their newly gained profitability in 2020 to invest in improving reliability, because it is leading to big constraints in the supply chain when you don¡¯t know when your cargo is arriving.¡±
xxx was one of the largest buyers of sea freight in the world, and was able to leverage that to secure slot allocations from carriers. ¡°We are a large forwarder, so in most cases we get the space we need, and we have a very good relationship with all the carriers.¡±
Long list of reasons for vessel delays
Container imbalances have been very difficult for carriers to manage, especially considering the volatility of demand, which crashed during initial COVID-19 lockdowns only to come roaring back when they were lifted, according to Rolf Habben Jansen, CEO of Hapag-Lloyd. ¡°When you look at the deployment of vessels in the trans-Pacific, the industry was able to react to [the increase in demand] quite swiftly,¡± he told the Global Liner Shipping conference.
¡°But when we look at equipment availability, with the volatile demand we ed up with the boxes in the wrong places,¡± he added. ¡°No one expected the increase in exports from Asia to be so strong, and now all of us are fighting to get the boxes back.¡±
Carriers have told JOC.com the high level of supply chain disruption and poor on-time performance can be linked to a range of factors. No seasonality of demand in the second half has left carriers with no downtime to recover operations, while berth occupancy and terminal utilization in Asia and North America have been at all-time highs with extra loaders exacerbating the congestion. Added to this are weather delays, crew change issues related to the pandemic, positive COVID-19 tests that delayed ships in ports, rising dwell times, and delays in returning containers leading to equipment imbalances, with limited scope to increase the box fleet at short notice.
There was some sympathy from forwarders for the operational challenges container lines were facing.
¡°Carriers are investing billions into ships and equipment, and we expect them to constantly react to changes in the supply chain,¡± Meincke said. ¡°Currently, the Asia outbound volume is booming like there is no tomorrow, but who would have predicted that in April or May? That instead of going on vacation, people would invest all that money saved in retail products.
¡°Now, everyone expects that the carriers ship everything,¡± he added. ¡°There is nearly no ship available, so the argument that the carriers are artificially creating shortages is incorrect. There are just no ships available.¡±
Amri had the same view. ¡°I don¡¯t believe the carriers are [delivering poor service levels] on purpose,¡± he said. ¡°COVID-19 has completely disrupted the supply chain and caused all the problems that come with it ¡ª capacity issues, space and equipment shortages, poor schedule reliability, and delays. While we can all be happy with the positive volume growth tr, that obviously comes with chall
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