The cargo surge that began in June of 2020 and continued through year-end, has showed no signs of slowing down in 2021 with projected 20 to 30 percent year-over-year increases in cargo demand. Shipments of personal protective equipment (PPE) that moved in addition to typical holiday cargo volume, resulted in a 2020 peak season the likes of which we have not seen in years, in both record volume and duration.
In efforts to reverse previously cancelled vessel strings at the onset of Covid-19, ocean carriers responded by taking down the idle fleet from nearly 600 containerships to about 100 (mostly unsuitable) remaining, for deployment in vessel strings, with another 30 or so used as extra-loaders. The shift was effective in allowing carriers to take on more volume through the second half of the year, but created new problems along the way:
- Roll Pools in Asia – created by excess cargo that could not be loaded due to upsurge and continuous overbooking
- Equipment shortages in Asia – as a result of container imbalance during onset of COVID that left many empties in USA waiting to be returned
- Empty returns rejected in USA due to terminals overrun with incoming containers leaving them with no room to process empty returns
- Chassis shortages in USA due to rejected empty containers sitting on badly needed chassis
- Rail car displacement while realigning to accept the changing patterns of the upsurge causing week’s long rail delays to inland destinations
- Congestion delays at ocean terminals handling increased vessel rotations and a record number of extra loaders (mostly west coast)
- Vessels going to anchorage to await berths at overloaded terminals, causing vessel bunching, and adding to transit time delays
- Truckers inability to handle their normal weekly flows due to increased idle time at congested terminals, and lack of chassis availability
- Increased cost by truckers nationwide
- Increased ocean freight costs (to record levels) as carriers maximize profits with prioritization programs
- Europe competition with higher freight rates than USA that is siphoning off equipment from Transpacific to Asia-Europe trade
In a typical cycle, we would see projected volumes decline in December with a slight spike ahead of the Chinese New Year week-long shutdown, followed by a relatively quiet spring season through the April to June contract renewal period. This year however is shaping up to be quite different.
More extra loaders continue to be announced for January to all coasts. Vessel numbers will remain stable however as there are few suitable idle vessels available for deployment. The deficit of empty equipment in Asia will slowly ease with the addition of new-builds, and incremental replenishment of empty returns from USA and Europe. Chassis availability will ease with rebalancing of equipment, but may take a few months to get back to normal. The Chinese New Year holiday (mid-February) will impact space and equipment availability a few weeks prior with the post CNY period slowly seeing a return to regular (albeit higher) shipping levels as the cold weather COVID season abates, and with it, a possible slowing in PPE volume. This all comes down to market demand, currently very high, and anyone’s guess where it will go for the remainder of this this year.
To get around the pitfalls of this high demand cycle, we recommend having your suppliers book cargo 4 weeks in advance. While this will not guarantee space or equipment availability at the time of sailing, it will put your cargo into the que earlier than before. We also recommend your consideration of paying the carrier’s “premium rates” that are the best chance for getting equipment and getting on the vessels. Most carriers are offering this now as a no-roll option or priority service, adding anywhere between $ 1000 to $ 3500 per container above already record freight rates that are continuing to rise based on market factors. Unfortunately it is a seller’s market now, and the carriers are motivated by highest revenue more than ever before. If your cargo must load, you need to consider their “guaranteed” rates.
Please work with your Mohawk team to guide you through the available options.