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Current logistics situation under Covid-19 in terms of container shortage and survival of NVOCCs

Gone are the days when being an non-vessel operating common carrier (NVOCC) or shipper owned container (SOC) box operator you could buy containers in any region, as per the need of any particular project of specific move, from one port to another, without facing any obstacle in getting space from vessel operators, port congestions and other loading issues, like vessel delay, port skip and roll over problems; but today it is not a piece of cake for non-vessel Operators (NVOs), to even find out the availability of containers, competitive price and get the space smoothly, in various regions including China/Europe and South East Asia.

One of the major reasons for these sorts of issues is Covid-19, which was confronted in 2020, due to which many countries had to implement a lockdown, started from China and moved on to Europe, the US and then spreading to almost all countries. Travel and transportation restrictions, came into effect all over the world, leading to sales & procurement dropped drastically, and so did global trade.

Nowadays, container shortages have become a serious problem in the logistics industries, which not only affect the global shipping industry but also have a strong negative impact on manufacturers, traders and of course retail businesses.

When countries entered into lockdown, their economic activities were restricted, including the number of workers in ports/depots/warehouses/container freight station (CFS), which were minimized extensively, in turn, this ultimately reduced the speed of cargo/custom handling, and clearing.

On top of that, many small and medium sized factories temporarily closed in different locations in Asia, mainly China. An event that led to a large number of containers stopped and became long-aging units at terminals and inland depots with the uncertainty of the next move.

As the movement of cargo was limited, shipping lines reduced the number of ships, to stabilize the cost and to maintain the freight levels, considering their major cost factors with blank sailings, which is another headache for NVOs/customers, as they have limited options of sailings from vessel operators.

But the main question still remains: "Where are the containers and why is no one able to access them easily let it be an NVOCC/freight forwarder or even a shipper?"

If I consider analyzing this situation, being an NVOCC and based on my practical experience, I understand that in most of the cases the containers are lying at ports/terminals and inland depots, leading to port/depot congestions, the same situation persists for all major transshipment hubs, like Singapore / Jebel Ali / Hong Kong / Busan / Shanghai / Colombo, etc. Simultaneously, the majority of containers are also onboard vessels for long haul, especially from China/South East Asia to US/Europe, hence the largest container shortage is in Asia, while Europe/Mediterranean also faces a deficit.

Due to these circumstances, vessels started omitting some ports, which is one of the common reasons for vessel delays; even if containers are lying at port for loading to a vessel, but are not able to be shifted over for sail, it leads to roll over to next sailing, without any certainty, as vessels right now are not being operated according to their fixed schedules; this is also the reason why containers are being moved via 1 or 2  transshipment ports, as an alternative route, which simply swaps the short transit time to a longer one.

On the other hand, whilst shipping lines were reducing the number of vessels, they were not able to collect empty containers at all.

Considering all these current factors and due to limited container access, manufacturers have driven up the prices of new containers, and the traders who sell second-hand containers have already created a hype in prices; this is a phenomenon not only in Asia/Europe but almost everywhere; therefore, cargo worthy containers which an NVOCC could easily buy in US$800-US$1200 bracket before 2020, now come in the range of US$2200-US$2800, likewise container leasing rates have also skyrocketed by 30% to 50%.

Apart from manufacturers and container traders, carriers/vessel operators are also trying to secure their profit, which is affecting container shortages, particularly in Asian countries. Carriers prioritize long haul shipments generally from China to North America and Europe where they can make more profit, as compared to short haul shipments within Asia, that’s why there are no empty containers in some regions.

Vessel operators are announcing general rates increase (GRI) for their carrier owned containers (COCs) and slots up to twice a month. On some routes, they even apply it on weekly sailings but still do not make any assurance that they will accept bookings and space on a regular basis which causes the ultimate war of space between NVOCCs who are also compelled to buy the slots on dead freight basis but are still subject to containers availability.

There is no need, to stress the fact that this is one of the toughest times for those internationally engaged in the logistics industry and nobody knows when this situation will return to streamline condition as according to some organizations and resources they anticipate that it may continue until the end of this year.

Nonetheless, we all have to survive and try to sustain our services especially NVOs/forwarders, by accepting and facing the current situations in terms of reality. At this point, all we can do is to explain the current logistics problems and situations to our customers, to get their understanding and do our best by focusing on what we can control, rather than to look at something we are unable to control.

Though I am uncertain as until to when we will have to face this situation or when the pandemic will be eventually vanished, however being a part of an NVOCC as VMR Lines, I am confident of playing a positive role in offering our services in every way possible, even if it means reducing the volume of our services, to some extent, but never compromise on its quality; we are committed to giving our customers, partners, agents, carriers and venders our 100%.


Author of the article: Rehan Khan, Director and Co-Owner of VMR Lines

Rehan Khan is one of the Directors & Co-Founders of VMR Lines with an extensive professional experience of +18 years in Shipping & Logistics with vast expertise in the NVOCC Industry & Management Scale. He is the pioneer to introduce Pakistan-based entity to start regular NVOCC services in Europe, UK & the Mediterranean.

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