Global Congestion Concerns
The challenges of space, congestion and handling for shippers moving goods globally are real and multifaceted. Our goal is remaining engaged with our customers and ensuring they’re in possession of the most current information to make informed decisions for their supply chains.
Non-US Trade Lanes
Between Asia and Europe, Hapag Lloyd has announced their intention to blank additional sailings to north Europe the first week in December. This comes on top of announced increases to FAK rates that would see some of the highest rates in years in this trade.
We have a positive working relationship with the carriers we are utilizing, and they have been good partners in ensuring that space is protected for our clients. But as we have been reminding shippers throughout 2020, we have weekly allotments of containers whose bookings are accepted and space protected. Containers above and beyond these committed quantities that need to move are handled on a case-by-case basis that could require changing carriers, paying additional for space, or having to be booked for a future sailing or on a different service.
In the UK, major ports are forecasting congestion through December and shippers are being subjected to not just the insult of delayed discharges, but the injury of higher rates as well. It doesn’t help that concerns over Brexit and the ability for cargo to travel in-bond from European ports of arrival after January 1st are creating an artificial demand to get as much cargo directly in the UK before that date as possible.
As cargo arrives, however, there are increasingly fewer places for it to be stored. Large retailers are petitioning British customs authorities for permission to convert empty space to bonded warehousing in order to permit the duty-free importing and exporting of products as the uncertainty looms larger.
In the US, Southern California’s triple-whammy of challenges
In the United States, the most visible and concerning congestion has been happening in Southern California at the ports of Los Angeles and Long Beach. Both ports are reporting still-escalating volumes which are impacting fluidity on the terminals.
Several terminals use an appointment system to pick up and return containers. As volumes increase, the number of appointments has not increased, leading to more containers to be moved than slots available.
The use of Southern California as an entry point for much of the country’s consumer goods that have shifted from a traditional brick and mortar to e-Commerce fulfillment has congested local warehouses that are transloading containers
Those same e-Commerce volumes are driving huge domestic intermodal volumes eastbound—volumes so high that the UP has imposed punitive rates on small shippers to try to divert cargo from rail to truck.
Finally, the congestion at those warehouses has meant that the traditional turn time—the time it takes for a container and wheels to leave and be returned—has doubled from 3.5 to more than 7 days. Without a pool of wheels to remove containers from the pier, they remain in stacks.
We also want to mention that we are seeing and experiencing the same overbooked phenomenon on the westbound transatlantic trade lane, both for capacity as well as available containers.
What TOC is doing for our customers
We have a limited number of options at our disposal, but we are utilizing them all and encouraging our customers that based on what we’re hearing, the eastbound transpacific congestion issues will remain through Chinese New Year, 2021 (that’s mid-February for those counting down the days).
- Forecast and prioritize what needs to move. We know that many clients like to utilize the same carrier or alliance because of cut-offs, sailing dates and transit times. Given the lack of containers in Asia and the lack of space on vessels, we are protecting allocations four, five and six weeks in advance of cargo readiness.
- Determine if safety stock should move via expedited LCL or air. If rolling the dice on a delay in sailing could make or break a production line, TOC offers both expedited LCL service to several US ports and inland destinations. We also encourage clients to evaluate whether or not safety stock shipped by air makes sense. Now is the best time to do this, because even with demands on consumer electronics and holiday merchandise, vaccine distribution will change the landscape of availability and pricing in early 2021.
- Flexibility is the key to riding this out. We’re with you—the challenges 2020 brought forth accelerated moves to ensure we had the capability to be a fully remote workforce and to have all the necessary resources and knowledge available digitally that a walk across the room afforded us pre-COVID. We continue to listen and as we have adapted our processes, we know many of you have adapted your processes and supply chains, too.
The news is full of positive stories on the early success in vaccine trials. Realistically, we know that the time to produce, distribute, inoculate and monitor the long -erm efficacy of these vaccines means “2019” style operations won’t be back until later next year. We thank everyone for your patience, your understanding, your transparency and your willingness to adapt with us, together.
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