Rising costs in the US market have continued apace as the latest news reports suggest the cost of trucking has more than doubled, from US$35 to US$75/day, while some beneficial cargo owners (BCOs) are paying super-rates to ensure their cargo gets shifted, while others have decided the costs are too high and the service is too poor.
[s2If is_user_logged_in()]Meetings between carriers and authorities are expected to take place in China this week, with the Federal Maritime Commission and the European Union (EU) both reporting that they are investigating shipper claims of unfair practices.
Anti-trust authorities may want to reflect on consultant Jon Monroe’s claim that one Chinese exporter paid a super-rate of US$18,000 to move cargo from Asia to the US West Coast. Monroe pointed out that, “BCOs are the parties who pay the entire cost of the supply chain. They pay their factory, forwarder, carrier, customs broker, drayage provider and the warehousing. Is there any profit left to pay themselves? Every segment of the supply chain has taken rate increases.”
Shipping lines have issued a statement today saying that while carriers sympathise with the plight of the BCOs, it is the market conditions that are driving rates up, not any one party within the supply chain.
“Shippers and forwarders are understandably not pleased, but one must not forget that this is the same market fundamental that kept rates very low for several years. History shows that rates fluctuate over the years as supply and demand shift, moving from high levels fairly quickly as market conditions stabilise,” said the World Shipping Council (WSC) in a statement to the press.
According to the WSC, the situation in global supply chains is “abnormal” and no one element or party could have managed or foreseen the developments that have occurred over the last year as a result of the pandemic which has spread across the globe.
However, the carriers believe that at this time of crisis it will take industry collaboration to resolve the issues that have arisen.
“All parties are doing what they can to manage their way through this unprecedented pandemic. Unfortunately, they may unknowingly cause issues for other parties in the chain. Closer dialogue is necessary for us all to better understand how to support each other and collaborate for better outcomes. To remove bottlenecks, container velocity must increase, forecasting must be more accurate, and transparency must increase across the supply chain,” said the WSC.
Some European importers are reportedly cancelling cargo as the rates spiral out of control, with spot Asia to Europe rates currently at US$7,652/FEU, up from US$7,294/FEU a week ago. European rates now dwarf US spot rates which are at a comparatively low US$4,267/FEU, up from US$4,027/FEU last week.
Meanwhile, the congestion at the Southern Californian ports of Los Angeles and Long Beach has become so congested that carriers are offering Northern Californian and Washington state alternatives.
“CMA [CGM] has three extra loaders going to an [Asia-] Oakland – Seattle port rotation. That is a real smart move. At least get me to California without going through Los Angeles and Long Beach,” said Monroe.
A point further illustrated by the extra four weeks necessary to get cargo from China to Washington DC this year compared to the 2019-time frame (see below).
Even though it looks like blank sailings will be minimal this lunar New Year, at just over 2% with the carriers saying that more than half of these are for vessel maintenance, the vessel capacity will, apparently, still be available in the major trades.
However, Sea-Intelligence consultant Lars Jensen said that the container shortage situation will be resolved by the Chinese New Year, on 12 February, if carriers were allowed to continue repositioning empties without hinderance, that is without exporting cargo from the US.
That would contravene the US Shipping Act and the Federal Maritime Commission (FMC) wrote to the WSC last month to remind the carriers of their obligations enshrined in this law.
In response to the FMC letter, written by commissioners Carl Bentzel and Daniel Maffei, John Butler, president and CEO at the WSC, wrote in late December, arguing that “Carriers are in the business of carrying cargo, and so they seek to accommodate the transportation needs of all of their customers – both importers and exporters – in markets around the globe,”
However, it is a fact that US imports and exports are unbalanced with volumes for 2019 showing there were 24.9 million TEU of import cargo compared to 13 million TEU in US exports.
“This means that, if the supply chain is to continue to function, almost half of the loaded containers imported must be returned empty to the countries from which US imports originate,” said Butler.
He went on to say, that “The areas within the United States to which imports flow and from which exports flow are often not the same. Speaking broadly, imports flow to areas of high population density, in many cases on the nation’s coasts. Many exports, in contrast, especially agricultural exports, come from areas of relatively low population density. This means that empty containers, if indeed they are available, must often be moved considerable distances at significant expense and additional time in order to be available for certain export cargoes.”
According to the WSC, the whole system is further stressed by the congestion in the US, which he emphasised is not caused by the lines.
“These challenges are not caused on the water; they occur on land when far more cargo than the U.S. intermodal system is designed to handle lands suddenly and in a sustained surge,” explained Butler.
In addition, the WSC outlined the measures taken by carriers to mitigate the effects of the pandemic, including:
- Employing all available vessel tonnage.
- Repositioning vessels to trades with the highest demand.
- Speeding repositioning of excess empty containers and increasing cargo fluidity.
- Purchasing, leasing, repairing, and deploying all available containers.
- Working with customers and inland transportation providers to encourage prompt return of empty equipment for repositioning for carriage of import and export cargoes.
The WSC went on to outline measures that were not in their control that are adding to the congestion including labour shortages, extended use of equipment excess demand for inland transportation and multiple bookings with ‘no-shows’ from both cargo owners and truckers.[/s2If]
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Nick Savvides
Managing Editor
