More schedule disruption and equipment shortages push freight rates upwards yet again, with the SCFI (Shanghai Containerised Freight Index) reaching a new historical high last month.
As predicted, the obstruction of the Suez Canal has continued to aggravate an already highly stressed market, with delays to many ships, by one or two weeks, forcing carriers to blank sailings in both directions reducing possibility to reposition drastically needed empty containers.
Carriers have effectively increased capacity on the major East West trade lanes. Weekly average nominal capacity on the Asia to North America trade this week stands at 568,351 TEU, the highest level ever recorded and up 45.7% on a year-on-year-basis. This compares to 423,689 TEU for the Asia to Europe trade, up 24.7% compared to a year ago.
With the stabilisation of service hopefully leading to freight rates flattening and some reductions in spot rate. This stability will also bring back the longer validity to contract rates rather than the twice monthly review currently being forced on the market.
The logistics industry in India has been facing space and equipment shortage since January and it continues due to the Covid-19 surge. Despite the lockdown, the Indian government are supporting export and import activities by categorising them as an emergency service. However, many manufacturers have still closed or have reduced staffing which creates significant delays in movement of cargo from factory to port.
Blank sailings are back to haunt shippers and forwarders on the Asia-Europe trade lanes. Shipping lines are continuing to pull capacity with several blank sailings to restore schedule reliability, which we are strongly hoping will help to stabilise the freight rate market soon enough.
In 15 months, we’ve seen the freight rates more than quadruple and, in the market today, there’s no guarantee that the container will even move.
We’ve seen a lot of ‘special services’ where shippers can pay an inflated premium, however, the shipping lines reserve the right to roll cargo for up to three weeks. In this instance, rates are only good for seven days and if cancelled, shippers face a $2,500 surcharge.
It’s a very volatile situation that has left both shippers and freight forwarders stuck in a tricky situation. We are hoping that the rates are due to bounce back to some sort of normality, however, if shipping lines continue to drastically drive their rates through the roof, we’re not going to see rates of $10,000+ significantly decrease anytime this year.
It’s currently at an unsustainable level, with SMEs in particular, spending more on shipping their goods than the goods themselves, with no other option than to splurge on the outrageous rates.
Brexit brought a flurry of complexities and delays; however, we can rule out that it is further contributing to any part of the ocean freight conundrum. Most of the challenges we face with rates is on the Asia inbound route, where Brexit causes disruption around the Channel Tunnel, Dover, Calais etc. and focuses more on European road freight.
The main disruption to supply chains here is around the return of customs controls, sanitary and phytosanitary controls, the constraints from rules of origin, the marking of products (CE vs UKCA), work permits and the end of freedom of movement between the UK (United Kingdom) and EU (European Union).
Despite the free trade deal, UK (United Kingdom) exports to the EU fell by more than 40% in January 2021, with challenges proving substantially more difficult for the food and drink sector whose exports to the EU fell by 40% in February 2021. This is largely due to sanitary and phytosanitary controls and the lack of veterinaries to deliver Export Health Certificates (EHCs).
These challenges are particularly affecting SMEs, who have much less resource to deal with them. The increase in documentation and customs requirements are leading to huge delays for many shipments with some business having to rely on the “groupage” of multiple consignments to get them through the border, which increases the risk that they get blocked.
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India is severely affected by the most recent wave of Covid-19. People continue to struggle, as it has challenged the India’s healthcare infrastructure greatly. The Indian government is trying its best to curb the spread. The Northern part of India (Mumbai, Delhi) continues to grapple with high case load and hospitals are running out of beds and oxygen support. South India (Chennai, Tuticorin, Cochin) the cases are increasing day by day with bed and oxygen shortages reported. Many states have imposed partial or complete lockdowns to mitigate the impact.
Many suppliers’ industries are closed or running with limited staff which slows production and delays movement of cargo from factory to port.
During this new outbreak, we have made several contingency plans to support our clients, and continue to develop highly integrated software to streamline communication.
Congestion remains high, with disinfection and quarantine measures being continuously implemented by local authorities to prevent the spread of Covid-19. We are predicting delays to all vessels departing Yantian in the next two weeks, with significant risk of further disruption should the current Covid-19 outbreak worsen. At the moment, no other ports are affected, and the impact is contained to vessels operating in and around Yantian. Read our full article here.
A brief overview:
We're facing remarkably similar challenges to last month, and quite frankly, all year. We’re hoping to see a little bit of stablisation across rates and availability and will stive to keep you informed and ready to respond.
We recommend getting in touch with your Key Account Manager to touch base and ensure you have a clear idea on what to expect for your shipments.