Port Congestion 2020: the forwarders' predicament

Alexa McPherson, 21 December 2020

Port congestion is not unfamiliar to the shipping industry. And logistics professionals have always managed the cyclical swells and dips according to natural imbalances and peak seasons. But it’s 2020, so you know what that means… shall we bring up the word “unprecedented” yet again?

Where are we currently with port congestion 2020?

 

Ladies and Gentlemen, we are at maximum capacity.

 

The current situation changes daily, with the latest reports showing delays of up to 10 days due to the congestion in the ports in the USA, Canada, Australia, New Zealand and Great Britain.

 

As port congestion reaches a critical gridlock state, especially in the Port of Los Angeles and the Port of Long Beach, Otto Schacht, EVP sea logistics at Kuehne + Nagel, pointed out there were currently 15 vessels anchored outside LA-Long Beach, waiting for a berth.

 

“Last time we saw this was 2015,” he said. “With a volume surge, terminal capacity is at its limits"

 

On the trucking front, according to the JOC, LA–LB truckers plead for suspension of detention and demurrage charges, as at this point, timeliness is a concept no longer in anyone’s control. And some reports predict truck traffic in Europe to reach its absolute peak in the next three weeks.

 

Meanwhile in China, port congestion in the aforementioned countries have created an extreme equipment problem. Shipping containers are desperately needed for exports. And in an effort to get containers back to Asia faster, carriers are bringing them back empty or less than full.

 

The cherry on top of this fiasco sundae: carriers aren’t honoring many ongoing agreements and some have frozen new bookings coming out of Asia.

 

The role of carriers in port congestion 2020

 

We may want to quickly point our fingers at COVID-19 lockdowns curtailing the workforce as the obvious culprit of the current situation. However, carriers have been recently under fire for their actions which have ultimately contributed to the critical state of port congestion.

 

Tight capacity management and increased blank sailings are major contributing factors. The many blank sailings in the early stages of the pandemic have resulted in the dramatic imbalance of global container volumes. Now they’re repositioning empty containers that should otherwise be carrying cargo. This has temporarily destroyed the ebb and flow of container shipping and skyrocketed spot rates to historical highs.

 

As if this hasn't been hard enough on shippers, this month carriers have imposed high surcharges for the congestion and peak season. For example:

The port congestion 2020 surcharges CMA CGM and MSC have added to Europe-origin cargo are $1,500 and $1,250 respectively. CMA CGM has also introduced a peak season surcharge of $500 per teu from all Asian ports to Mediterranean and North Africa And Hapag-Lloyd announced a peak season surcharge on the Far East trade from Far East to North Europe and Mediterranean of $500 and $1,000 per teu respectively, effective until further notice.

 

Carriers claim the reason for this is an unexpected demand swell for the global container shortage but, “Consequently, 2020 is expected to be one of the best years ever recorded for ocean carriers in terms of profits.” 

 

Many forwarding agents have been vocal on the matter as well- calling out carriers for “profiteering over a problem they created”. One outspoken critic has been Mads Drejer, Scan Global Logistics’ COO for air, ocean, and rail. According to the Load Star, he has accused carriers of “chasing short-term profits over supply chain stability by directing container equipment to trades where the highest price is available and not where equipment is needed”.

 

What options do forwarders have?


Let’s face it, it's a tough time for freight forwarders.

 

Now more than ever, it is important to utilize strong partners in order to secure freight space, explore route options and access the needed sea freight services for equipment and capacity. Independent freight forwarders can ban together to come up with alternatives and combat the current challenges.

 

It's going to take a lot of expertise, strategy and development of unique solutions to maneuver through the current chaos. Joining a network which focuses on expertise, like 7ConNetwork, connects you to top industry professionals, thus enabling forwarders to create unique service solutions.

 

Through 7ConNetwork, forwarders gain access to not only an expert community but also an assortment of tech partners offering niche solutions. One such example of a 7ConNetwork partner is Container xChangewhich aids forwarders in sourcing SOC containers for their cargo and thus reducing the number of containers which are repositioned empty.  

 

Networks focusing on progressive digital solutions and expertise are your best bet in mitigating the challenges left on the shoulders of forwarders by unchecked carriers.

 

On to port congestion 2021

 

As the new year approaches, many of us are looking forward to saying good-bye to roaring 2020 and hoping for a better outlook in 2021. But in container shipping, port congestion 2020 rolls on into the new year.

 

SeaIntelligence reports that the equipment shortage will persist until January. And container manufacturers are sold out until at least February 2021.

Couple this with a reduction in capacity of the local feeder services in southern China (due to the Covid restrictions) which is not expected to normalize until late February. Furthermore, expect higher rates and shortage in trucking coming soon as companies try to avoid sea freight.

 

Will the market be back to “normal” by March? That is certainly up for speculation. At the moment, one determination everyone seems to agree on: this will not be resolved before Chinese New Year.

Contact Alexa McPherson