We have been informed by our carriers that the congestion and overbooking situation in Asia for the TransPac Eastbound lanes is going to get much worse over the next month, at least.
TOC’s primary carrier has announced that three (3) service strings in their alliance are so overbooked as of today, that they will be implementing a +700 TEU “double roll”; meaning an automatic roll of at least 2 vessels for these +700 TEU’s.
Since all service strings are alliance managed, if one carrier is claiming this congestion to us, the other carriers are doing the same to their contract holders. Why?
There are a number of factors impacting this:
We urge you, our customers, to immediately engage your planners, buyers, suppliers and TOC service representative(s) to put a contingency plan in place to deal with these imminent disruptions to all our supply chains.
Thank you for allowing TOC Logistics International Inc. to serve you.
TOC Logistics International Inc. offers the following ocean market announcement:
In light of significant fuel cost increases, the top ocean carriers of the world are announcing Emergency Bunker Surcharges. This is in addition to any normal quarterly fluctuations. TOC traditionally maintains ocean rates to be inclusive of standard Bunker Adjustment Factor (BAF), however this surcharge is an emergency surcharge implemented outside of normal contractual terms.
We do not yet know if these surcharges will be implemented in full, if they will be able to be mitigated, or waived entirely. Much depends on the trajectory of the oil price over the next 3 weeks, but the carriers are very aggressive to recoup losses so it is safe to assume some level of Emergency Bunker will be implemented.
As of this message, primary TOC carriers have announced following:
CMA – July 1 2018 effective date. $55/TEU (press release attached)
MSC – June 21 2018 effective date. $100/TEU (official notice attached)
Hapag – No official announcement however one is expected at similar levels in the coming days.
In accordance with FMC regulations, TOC is providing its customers with 30 days’ notice of implementation of an Emergency Bunker Surcharge of $100/TEU effective July 1, 2018, for all FCL shipments to or from United States and Mexico.
We will negotiate this charge with our carriers, and implementation will be a pass through cost of whatever the final amounts are.
The final Emergency Bunker Fee amount will be communicated to each client once mitigation conversations are completed and further reflected in the updated client Negotiated Rate Agreements (NRA’s) which will be provided prior to July 1, 2018.
We thank you for allowing TOC Logistics to serve you.
TOC LOGISTICS INTERNATIONAL INC offers the following ocean market update:
The National Coordination Committee for the six port workers federations in INDIA has called for a nationwide, one-day, strike on May 28, 2018. Followed immediately by an indefinite strike beginning May 30, 2018.
Worker demands have gone unattended by the Ministry of Shipping and attempts of resolution between the competing entities have proven unsuccessful.
The following major ports in India are expected to be affected:
TOC strongly encourages our customers to take immediate action to review your supplier release schedules and seek counsel with your operations agent or Account Manager to explore alternative modes of bringing your product in or out of INDIA.
March 12, 2018: US Trucking and Container Drayage Market Update
The US Trucking capacity and pricing struggle continues; affected modes beyond traditional trucking are intermodal, and container drayage.
The previous updates from February 5, 2018 and February 23, 2018 (below) are still valid and offer a realistic progression of the situation leading up to today’s update.
The latest tactic taken by vessel operators, whether they are handling “door” moves or not, is to boost their revenues by reevaluating accessorial charge application.
As of this writing, 2 vessel carriers have announced a reduction of free time at origin loading, or destination unloading from 2 hours down to 1 hour; and an increase from $75.00/hr up to $125.00/hr. TOC must adjust our application of free/wait time for all moves controlled by vessel operators to the same.
This is added to our announcement from February 23rd, advising that all vessel operators are now charging demurrage without exception.
This article from the Journal of Commerce, while lengthy, is the best commentary on the spread of the US Trucking industry situation and the modes being affected, so far. The scariest statement in this article is the estimate that 50% of the container dray drivers in the US are looking to convert to long-haul, over-the-road, jobs; further exacerbating the already traumatic situation at the container ports.
Please remember that in today’s market, long validity rate contracts DO NOT guarantee capacity. Spot quoting to obtain capacity is at its highest level ever, in our opinion. The inland and ocean port dray situation is not better, and pundits claim will not level out until sometime in 2019.
We urge you, our customer, to stay in close contact with your Account Manager and/or Operations Specialist, to all be on the same page about your hot shipments/releases and the associated additional costs to meet your delivery or production expectations. TOC’s procurement efforts are non-stop and we will provide the best cost and capacity availability possible, to meet your service demands.
February 23, 2018
TOC LOGISTICS INTERNATIONAL INC offers this supplemental market update from our previous notice of under capacity and shortage of drivers in the US Trucking and Drayage Market;
The snowball effect resulting from the following current conditions, has reached critical mass:
Vessel operators are now claiming FORCE MAJEUR in major ports and refusing to provide origin/destination “door” moves, leaving the NVOCC, Forwarders and, yes, even the BCO’s, to fend for themselves to get containers either delivered to the port or delivered to the end customer.
Vessel operators who have not claimed FORCE MAJEUR, have announced a line item increase to contracts of at least $300 per container to continue managing “door” moves under their existing contracts.
Further, because of the lack of availability of equipment, “dwell times” ( the number of days it takes for a container to be pulled from the port ) have risen, nationally, to 7-10 days; this is particularly important to understand because there are TWO surcharges at risk of being applied with this increased dwell time:
Regarding demurrage charges, until now, these charges could be waived or greatly reduced so as not to affect the supply chain spend to volume customers; but now, in order to manage the increased costs of the current under-capacity market, vessel operators are applying demurrage without exception.
TOC Logistics International Inc must officially announce here that all demurrage charges by the vessel operators, NOT caused by negligence of TOC Logistics, will be passed on to our clients via a demurrage line item charge on invoices generated AFTER March 15, 2018. Since these demurrage charges are unable to be forecasted, TOC Logistics recognizes the need to increase our attention to each client’s container reality and make every effort to provide advance warnings of additional charges; but we must state that this will not be a perfect solution or outcome and we will make appropriate notices as we are made aware.
The supply chain conditions today are not just challenging, but truly critical, and surviving this will be very expensive for ALL of us. Please endeavor to stay closely engaged with your TOC Account Manager and/or Operations Representative to collaborate together on maintaining as smooth a supply chain as humanly possible.
February 5, 2018
TOC Logistics International, Inc. regrets to inform that the truck capacity situation in the United States is creating a severe problem to the supply chain community.
Our team received a letter from the 3rd largest vessel operator stating, “The US trucking industry is facing a growing shortage of qualified drivers in both the international and domestic markets. The shortage is having a dramatic effect on our ability to deliver freight in a timely and effective manner.” The vessel operator is experiencing a significant increase in service delays as a direct result of the current trucking situation in the United States.
This letter that we received in evidence of what the rest of the vessel operators and the NVOCC industry is facing.
This same vessel operator that sent us the above letter had also reached out to our team asking if we could handle dray moves for containers that were not TOC’s. This is proof that the situation is not just affecting long-haul FTL providers, but also port dray carriers. While there are many factors at play, the eLog regulations are playing a huge role.
The new US eLog requirements, which were enforced beginning December 18, 2017, have truly caused capacity reduction. In regards to the container dray carriers, the simple facts are:
Some of the impacts to NVOCC operations are:
TOC Logistics is committed to finding and having alternative options in place in order to keep our programs running on-time. However, should the capacity situation become a regular detriment to operations at current rate levels, all supply chain users must be prepared for expected rate increases.
Also, please note this article which details the troubles that some of the largest companies in the U.S. are facing when it comes to keeping their supply chains going, some of which includes paying DOUBLE the contracted rates for certain critical lanes.
The impact for 2018 supply chains is not yet fully realized or understood, but costs are sure to increase rather than stay static. Contracting long-rate validities does not guarantee capacity, which means “out of gauge” services will become more prevalent in order to keep supply chains moving.
We offer this market update for your information and benefit.