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With Hapag-Lloyd — and by extension its partners in THE Alliance — advising customers of 21 de facto cancelled sailings in February in the eastbound trans-Pacific due to schedule disruptions, importers should anticipate even tighter capacity with all carriers in the coming months.
Unlike blank sailings made by carriers in response to weak cargo volumes, these missed voyages are structural in nature - meaning that when a vessel has been delayed for a week or longer at a given port, the carrier will then institute a “structural” blank for that ship’s next sailing to rectify the service schedule.
These recent schedule changes and blanked sailings are in response to the continually increasing cargo volumes in the Asia-North American trade.
Eastbound liner reliability from Asia to both US coasts was under 30 percent for both coasts in December, according to Sea-Intelligence Maritime Analysis.
US imports from Asia are uncharacteristically high for this time of year. This is due to a backlog of merchandise at Asian factories in the run-up to the Lunar New Year holidays beginning February 12.
Additionally, carriers will be unable to rely on a drop in imports next month if factories work through the Lunar New Year, and vessel space will continue to be tight for the foreseeable future.
Nearly all Asian ports are experiencing vessel delays and equipment shortages.
Asia Equipment & Trucking Updates
Shippers are scrambling to secure containers for their clients to load their freight before the Chinese New Year Holiday (Feb 11-17) and also for after the holiday, as ships are filling up as well.
For those US consignees whose suppliers arrange the own origin trucking, we are recommending that clients instruct them to print the Equipment Interchange Receipt (EIR) on the first date that it is available and for all container sizes available.
For most carriers the equipment window opens six days prior to vessel departure and closes when vessel space has been fully allocated.
This allows the maximum opportunity for suppliers to secure equipment for your shipment.
BRi USA is also reporting that truck capacity in Asia is becoming very tight.
For many truckers, all their capacity is fully booked through the Chinese New Year holiday. In some instances in cities such as Shanghai, Ningbo, and Nanjing, some truckers have already returned to their hometowns over COVID-19 travel concerns or are planning to return this week.
In other cities such as Fuzhou, truckers are still honouring bookings through February 5, but no new bookings are being accepted. It is also anticipated that trucking volume may be slow to return after the holiday due to the quarantine requirements of various provinces.
Major U.S. Ports Status Update
Below is a general overview of the BRi USA has been able to gather for most major ports. This list will be updated as information is made available.
Port of Seattle and Tacoma – The Northwest Seaport Alliance handled a 6.1% increase compared to last December. For the month, full import volumes through the Seattle and Tacoma harbors grew by 15.7%, compared to the same month last year when the gateway experienced 13 cancelled vessel calls. Import demand remains strong and is forecasted to remain steady through the first quarter. Total imports grew 9.6% while total exports declined 2.1%. All terminals are open for normal operations this week.
Ports of Los Angeles/Long Beach – Despite an acceleration in COVID-19 cases among longshoremen in the ports of Los Angeles and Long Beach, waterfront employers say there are enough general dockworkers to handle near-record container volumes, although a shortage of trained equipment operators is a problem. To help combat the continued delays, the Port of Los Angeles next month will begin doling out some $7.5 million in incentive awards to encourage marine terminals to meet certain metrics for truck turn times and dual transactions as the clogged gateway continues to struggle with record imports from Asia. Vessel bunching, delays of several days in vessel berthing, congested marine terminals, long truck lines at terminal gates, chassis shortages owing to excessive street dwell times, and import warehouses filled beyond capacity have plagued the Southern California gateway since summer. Delays for port cargo or for cargo to be moved inland by rail can be excessive - up to weeks. All terminals are open for normal operations this week.
Port of Oakland – The Port of Oakland reported December imports grew 11 percent compared to December 2019. Containerized export volume was up 0.9 percent during the same period. Total TEUs for December were up 7.4 percent compared to the same time last year. The Port said it expected the increase in December's imports when it saw November imports had decreased. Delays at the Southern California ports have affected the West Coast supply chain therefore impacting Oakland. All terminals are open for normal operations this week.
Port of Houston – The Port of Houston recently received notification from the U.S. Army Corps of Engineers (USACE) that it was awarded a “new start” designation and $19.5 million in federal funds to begin construction of the Houston Ship Channel Expansion Channel Improvement Project. The Houston Ship Channel Expansion, known as Project 11, will widen and deepen the channel for safer and more efficient navigation of vessels calling the port’s eight public terminals and more than over 200 private facilities operating along the channel. In addition to the “new start” designation and $19.5 million in construction funds, the Port also received $55.5 million in annual operations and maintenance funding to ensure safe and efficient vessel traffic on the current channel. All terminals are open for normal operations this week.
Port of New York/New Jersey – After a likely decline in annual container volumes at the Port of New York and New Jersey in 2020, the largest US East Coast gateway is focusing on improving efficiency, including through better data sharing with truckers. Despite the second-half rebound, total container volumes at New York and New Jersey terminals for 2020 are expected to total 6.6 million TEU in 2020, the lowest level in three years and 12 percent below PANYNJ’s pre-pandemic estimate. All terminals are open for normal operations this week.
Port of Virginia - In Norfolk, two ship-to-shore cranes are undergoing testing and should be put into service sometime in January. Once the cranes are operational, Norfolk International Terminals (NIT) and Virginia International Gateway (VIG) will each have 15 ship-to-shore cranes capable of handling up to 19,000 TEU, enough to service three vessels simultaneously in each terminal. All terminals are open for normal operations this week.
North Carolina Ports - All terminals are open for normal operations this week.
South Carolina Ports - The opening of the Hugh K. Leatherman terminal in March will mark a major milestone for the port, as the facility will have one berth capable of handling ships up to 19,000 TEU and a capacity of 700,000 TEU annually. The port’s existing Wando Welch Terminal can handle three 15,000 TEU vessels simultaneously, but not a 19,000-TEU vessel. SC Ports is also hopeful a dredging project to deepen the Charleston Harbor to 52 feet will be complete in late 2021. The Charleston Harbor will become the deepest on the East Coast, at least for the time being. All terminals are open for normal operations this week.
GA Ports - The Georgia Ports Authority moved more than 4.68 million twenty-foot equivalent units (TEUs) in 2020, a 1.8% increase over the year before. December 2020 was the busiest December ever at the Port of Savannah, with a year-over-year increase of 24%. Rail volumes for the month grew 16.4%. All terminals are open for normal operations this week.
JAXPORT - Jacksonville Port Authority (JAXPORT) contractors have completed the latest phase in a total of $104 million in berth enhancements at the existing SSA Jacksonville Container Terminal at Blount Island, adding an additional 700 linear feet of newly rebuilt Deepwater berthing space. Completion of the final phase of the project will coincide with the completion of harbor deepening through Blount Island in 2022. All terminals are open for normal operations this week.
Shippers Urged to Rethink Container Allocation Strategies
Shippers need to focus on better capacity forecasting, sharing of benefits with carriers, and concentrating volume with fewer partners to navigate what will be a tricky container allocation environment in 2021.
Container allocations refer to the process of divvying up a shipper’s volume among various vessel operators and non-vessel operating common carriers (NVOs) on an annual and more short-term basis. Allocations are built on a mixture of annual contracts — based on projected volume associated with a negotiated rate, also known as minimum quantity commitments (MQCs), and shorter term, ad hoc needs — so they essentially act as ongoing projections for what volume a shipper will send to a specific carrier on a given week.
In a sense, allocation strategy allows a shipper to avoid having the space allocated to them weekly reduced to a non-scientific MQC-divided-by-52-weeks equation.
In an ideal environment, shippers would convey their ongoing volume based on rolling projections, and container lines and NVOs would be able to meet those varying allocations based on the advanced notice. However, the second half of 2020 threw many of those allocation projections out the window. One retailer, who did not want to be identified, told JOC.com it has traditionally forecast its allocation needs to container lines 10 weeks out on a rolling basis.
“That didn’t work last year,” the retailer said. “They continue to stick to MQC-divided-by-52 set in early 2020, prior to the pandemic, and in some cases they want a peak season surcharge to even give us space according to MQC divided by 52. This year our forecasts are going to be better, since we have orders out there further than normal due to increased demand in our planning scenarios.”
Allocations go out the window
Last year shone a light on the fact that a shipper’s ability to forecast its capacity needs more accurately and further into the future is only one part of an allocation strategy.
“For decades, shippers and freight forwarders have been squeezing carriers and went shopping, exchanging their partners whenever offered rates did not match their expectations,” said Jonas Krumland, CEO of logistics software provider Logward, a spinoff of the German forwarder Leschaco. “The same players who’ve demonstrated to be short-term opportunists are now surprised at being kicked off carriers’ loading lists when, for once, the leverage shifted to the other side.”
Krumland said the widespread anecdotes of shippers struggling with blank sailings, tight capacity, premiums required to get loaded, and cargo rolls belie the reality that some cargo owners managed the turmoil of the last year better than others.
“What too few people talk about is that numerous companies managed the 2020 chaos very well, backed by solid partners,” Krumland said. “No matter which metrics you look at — total true lead times, rolling ratio, booking confirmation speed and reliability — those of our customers who invested in profound allocation management suffered roughly 70 percent fewer rolling’s than the opportunists.”
Shippers need to think about what Krumland framed as a “certain amount of open capacity in the market” that container lines can allocate to shippers in any way they see fit.
“Guess what? Carriers don’t randomly create their vessel load plans,” he said. “Instead of just rolling the dice, carriers rationally prioritize customers by profitability and strategic importance.”
“Look at your carrier relationships as long-term partnerships in which each partner wants to help and support the other.”
Forecast by port pairs and strings
An example of mutual allocation management, according to Krumland, should include a yearly allocation commitment of volumes broken down by port pairs and assigned to service strings. It should include transparency into sailing schedules and regular reviews of performance on both sides. That should include rolling and shared forecasts on a weekly basis, at least eight weeks out.
“There will be blank sailings and capacity shortages in 2021 as well,” he said. “So, you want to know exactly in which week you may face bottlenecks. Knowing which of your purchase orders are affected by a discovered bottleneck enables you to prioritize your shipments. Good allocation management will not ensure that 100 percent of your shipments proceed as planned. It ensures that you are in control to find the right compromises whenever it gets chaotic.”
The challenge, according to Chris Kirchner, CEO of logistics software provider Slync, is that data resides in systems within multiple parties — the shipper, the logistics services provider, and the carrier — and in both structured and unstructured formats.
“This makes it very difficult to get a[n] accurate picture of what is going on, and what needs to be done at various points in the allocation process,” Kirchner said. “The operational challenge is that allocation is a fluid situation taking place around the world on a continuous basis. It relies on carrier confirmations that can fluctuate, especially in today's environment, and requires a lot of human attention in most operations.”
The traditional process has been to flow contract rate data from spreadsheets and emails into widely used booking systems that only represent a sliver of the process. Kirchner’s contention is that the mismatch, for both forwarders and shippers, creates a system that’s set up to fail.
Traffic light approach
Krumland advocated for a “traffic light” approach to measure shippers’ commitment on an annual basis and at the weekly forecast level to determine which port pairs, in which time frame, both partners are either over- or underperforming. “This shows shippers quickly where they may find open capacity according to their agreements,” he said.
Another suggestion from Krumland: Shippers that previously relied only on direct contracts with carriers but are considering adding an NVO as a safety valve should openly communicate such plans with their container line partners.
“If shippers feel the necessity to add NVOs, it should be openly communicated or even discussed with their awarded carriers,” he said. “The worst scenario would be to place volumes with an NVO or forwarder behind the carriers’ backs. It may happen that a forwarder finds capacity on vessels for which the operating carriers themselves turned shippers down.”
Krumland also urged shippers to consider spreading their volume commitments around to hedge their bets, consolidating volume with fewer carriers to increase leverage with each one.
“No large and diverse shipper can rely on only one partner, but spreading volumes should be limited,” he said, suggesting shippers have a maximum of five core carriers on a global basis, and to spread those volumes out by region, “so that carriers may still plan their service usage better.”
Secretary of Commerce Designee Prioritizes Domestic Manufacturing, Exports, and Clean Energy
If the U.S. Senate, as expected, confirms her as Secretary of Commerce, Gina Raimondo will play a significant role implementing President Biden’s economic and trade agenda.
Read the full report here - https://www.freightwaves.com/news/raimondo-vows-to-pursue-pro-worker-industrial-climate-policies?utm_source=piano&utm_medium=email&utm_campaign=as_daily_nl&pnespid=i7F0sfJHVw6N_3LN2NKVY5zOO2o6yfUOn2jMPF1J
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Keeping you updated,
BRi Customer Solutions TeamBack to News Page