Shipping FAQ - What's going on in the supply chain industry?

• Hundreds of vessels have been delayed, either stuck behind the Ever Given, attempting to take a diversion route around the Cape of Good Hope or even turning around having started on the diversion route to re-attempt the canal when the Ever Given was refloated
• In turn, this means delayed arrivals to North European base ports including the UK, USA & Ireland
• Container lines have discharged Asian imports wherever they can to turn ships around in North Europe as quickly as possible and return vessels to Asia, where several weeks of full loads at highly inflated spot rates await (Loadstar)
• Serious congestion at North European base ports including the UK & Ireland with vessels arriving at the same time causing berthing queues with some vessels being diverted as a result
• There will be serious congestion at all China ports disrupting eastbound and westbound service, however, problems are not hitting yet as the vessels delayed by the Suez have still not returned - the real impact will occur in May
• A lack of empty containers getting back to Asia leading to severe equipment shortage, which in turn has carriers announce blank sailings or a change in routes, where certain origin and destination port calls may be omitted to speed up the process
• 40ft containers are especially affected with some carriers suspending all 40’ DV / HC equipment bookings from SE Asia until the end of April to all customers who do not have space protection as equipment cannot be guaranteed in any port. 20’ bookings can continue to be accommodated from most areas subject to being light cargo only with combined cargo / tare not exceeding 9 tonnes.
• Due to the equipment shortages, delays and the congestion that will occur in May, the expectation is that vessel transit times will increase by 10-14 days from then, although carriers are not advising this on their schedules yet

The impact of the Ever Given being stuck in the Suez Canal has ultimately resulted in reduced vessel, routing and equipment availability with demand way outstripping availability leading to continuously high rates, which we expect to see increase further. For example, freight rates for UK bound containers are expected to rise by up to $2K a 40ft container from May on today’s FAK prices.

Schedule reliability and equipment shortage are impacted by two main factors: recent delays via the Suez Canal and lower port productivity, especially on transpacific and European trade routes, mainly as a result of the effects of COVID-19.

Several hundreds of vessels were stuck around the Ever Given in the Suez Canal with thousands of containers onboard. Carriers are searching for berths in ports around Europe to offload their cargoes but a queue for berthing spots will mean a further delay to get containers offloaded and back to source, adding to the equipment shortage the industry already struggled with due to the impact of COVID-19 on ports.

As a result of the backlog and lack of berthing space and equipment, shipping lines announced blank sailings, delayed departure dates or a change in routes, where certain origin and destination port calls may be omitted.   The aim of this is to minimise vessel delays and to avoid having running vessels where there are not enough containers available to make the voyage financially viable. Vessels follow a loop rotation – so if a vessel is a week late, the next schedule could potentially be a week late and so on with the only way for them to catch up being to remove ports, speed up or slow down to catch slot windows.

Supply chains across the globe are affected. Since global shipping is interconnected, through global equipment availability, routes and demand/availability impacting rates worldwide, the entire industry is struggling with the pressures the impact of the last year has had on resources, ports and suppliers.

Already-booming US imports from Asia accelerated even further in March, jumping 22 percent from February to 1.66 million TEU, up a staggering 90.5 percent from the same month a year ago. (JOC.com)

Major gateways piled new import loads on top of the existing container backlogs (as reported on in February), with the ports of Los Angeles and Long Beach, which handle about 50 percent of US imports from Asia, impacted significantly. In March, record increases on imports across US ports from Asia of up to 145% resulted in locations like Charleston having to open additional terminals to provide additional capacity and try to ease some of the berthing queues. The connected container backlogs play their part in the growing equipment shortage across the globe.

As a result of the backlog and lack of berthing space, there is evidence that Asia import traffic is now bypassing the West Coast altogether and going into New York (and other ports) instead. Furthermore, Midwest imports that are being routed into the West Coast are jamming up places like Chicago with the sheer amount of rail traffic. All of this additional import cargo coming in is meeting a major shortage of drivers and chassis availability at all sea ports and most major inland rail terminals, causing delays of over a week collecting containers on some occasions

• China Outports – no real equipment availability and carriers are not looking to move any there from the main ports
• South China – better areas for equipment availability, definitely still problem areas but not as bad as North China & SE Asia (Indonesia, Thailand, Vietnam, Malaysia)
• North China – equipment shortages as returning vessels are omitting and not supplying empties. Port effected but not limited to; Qingdao, Dalian, Xingang, Tianjin, Ningbo. This is expected to deteriorate in the coming weeks as less vessels are expected to call these ports and likely the shipping lines will omit these ports and just call Southern China ports and then return to North Europe.

• As mainly serviced by feeder vessels, no empty equipment is reaching there e.g. Vietnam only about 50% of bookings are moving. This situation is expected to deteriorate as we move into May as carriers are not looking to re-position empty equipment into main SE Asia ports
• Singapore is already badly congested, and this is before vessels retiring from Europe (following the Suez canal blockage) start arriving which is expected in the coming days

Equipment shortages and vessel capacity problems will really be felt from May, with the expectation being that vessel transit times will increase by 10-14 days and rates will once again continue to rise.  We expect the industry to take a few months to work through the backlog with some predicting normality to start to return from July, while others suggest that disruption could run into Q3 with the advent of the traditional “Peak Season” of volume.

The expectation is that European freight rates will never truly return to the levels that were seen prior to Covid.  Covid has allowed the shipping lines to better understand how they can control their capacity and ensure that available capacity does not outstrip demand which would result in them needing to drop rates to very low levels in order to try and attract volume and fill their ships.

There has also traditionally been an imbalance between transpacific and European freight rates with the former being much higher, and Covid has allowed there to be some equalisation. The upside of this in terms of the equipment shortages is that carriers who had previously shown a bias towards releasing equipment for the transpacific trade lanes over European, will now no longer do so.

With the expectation that the Suez created problems will last until the start of July in parallel to the onset of the “Peak Season”, rates may decline from that point but likely not considerably until into Q4.

Our Woodland teams are working hard to find solutions in what is an extremely challenging time with everyone in the supply chain industry affected, including the end consumer who faces reduced availability of product and increasing cost.

We source alternative transport solutions, such as rail, truck and air, all which experience an increasingly tighter capacity, so please enquire early. We also recommend buying in smaller quantities and utilising our consolidation services from CMP, which are more protected in terms of space and equipment. We are working closely with all carriers to utilise what options are being put forward which include sporadic schedules from some ports in China shipping via the continent and feedering into ports like Tilbury / Hull.

Given the current situation and with it expected to worsen in the coming weeks, we expect further increases from the shipping lines and we strongly recommend booking well in advance in order to give us the best opportunity in securing both space and equipment for your shipments.
Please build a buffer into your lead times of at least 2-3 weeks minimum. Shipping line websites are still showing schedules as normal in most cases but this will not be the case. The knock-on effect of the Suez canal blockage has not yet kicked in and you will have many vessels arriving in at the same time trying to berth outside of their slotted windows. Shipping lines will look to omit certain ports (most likely UK, European Ports – Hamburg, Gdansk etc & Northern China Ports) in an effort to catch up on schedules. Cargo will most likely be unloaded in main hub ports like Rotterdam & Antwerp which is going to cause severe congestion.

Chinese outports (inland port that connects to the main port / mother vessel by barge) will struggle for equipment. Where possible, it is worth speaking with your supplier to see if you can move the shipment from a main port instead as there will be a better chance of securing equipment / space from there.

Blank sailings are sailings that a shipping line cancels because it doesn’t have enough containers to fill the ship sufficiently. This will reduce availability thus driving up cost as demand outstrips availability.

It means they remove vessels from their schedule thus cutting capacity. This would be due to not having enough equipment to fill the vessel and it thus not being commercially viable to run the vessel.

Where the main vessels do not call directly at that port, they feed the container into the main deep-sea ports on smaller vessels. At the moment, carriers are not finding it cost effective to place empty containers at outports. Instead, they favour China Main Ports because this is where the greatest volume of freight is moving from, where the demand is and where all empties are dropped off / stored.

China's main ports:

• Ningbo
• Shanghai
• Hong Kong
• Shenzhen / Yantian
• Dalian
• Xiamen
• Qingdao

China's key outports:

• Guangzhou
• Zhuhai
• Zhongshan
• Jiangmen
• Foshan
• Shunde
• Wuhan
• Shantou
• Fuzhou

When a container booked onto a particular vessel is then moved onto a later sailing due to there being no space on that vessel, a vessel cancellation or a moving of the date.

Port omissions are when carriers avoid stopping at a port they were meant to stop due to congestion around berthing slots, which would cause further delays, or to make up time if they're behind schedule.