Further to our recent Freight Industry Update on the 9th June 2021, I hope that you are all keeping well in these trying times of COVID-19 and the global shipping issues we are all experiencing.
For all companies involved in international freight, the problems continue and in some cases they are worse with a lack of space availability, a lack of container availability where needed and the continual freight rate increases. This is having a major impact on the bottom line for all companies and something outside of your control.
KEY ISSUES WITHIN INTERNATIONAL FREIGHT
- Congestions continue in most major seaports around the world.
- Shipping lines have just announced a further GRI from Asia into Australia of USD500/20’ container and USD1,000/40’ container effective from the 1st August as the shipping lines continue to put profits ahead of all service.o Freight rates have increased to record levels for this time of the year with further Shipping Line General Rate Increase (GRI) pending.
- The scheduled transit times are constantly blowing out and therefore the shipping line sailing schedules are becoming unreliable which is making it very difficult to manage desired stock on hand.
- Port omissions are becoming more common in most trade lanes as shipping lines are trying to get vessels back on schedule.
- There are continual blank sailings which effectively takes a vessel out of the service which only further increases demand for space and backlogs.
- The shipping lines are prioritising the repositioning of empty containers into Asia ahead of carrying contracted export cargo as the revenue received from cargo being shipped from Asia into worldwide destinations is far more profitable.
- Many exporters cannot secure space on vessels for anywhere up to 8 weeks in which they have contracts for which is causing quantifiable damage to their own business and the entire supply chain.
- For the companies fortunate enough to secure space for their export cargo, the shipping lines are offering space based on the most revenue.
- Many companies that have previously sold goods where they control the freight through to the destination port are revising the incoterms to make this the responsibility of the buyer to arrange the freight.
- We have contract rates with most shipping lines and in certain cases the shipping lines are imposing a surcharge of between USD4,000 – USD8,000 per container on top of the agreed rates just to secure equipment and space.
- Cargo being shipped from China to the USA and Europe can costs as much as USD23,000 per 40’ container with further increases likely.
- Shipping Line profits are at record highs and an example would be one major carrier reporting a profit in the 1st quarter of 2020 of USD48 million and in the 1st quarter of 2021 of USD2.1 billion. This is an increase in profits of 4,375% and they are not the only shipping line seeing these profits.
- The shipping lines are continually advising that the space issues have been largely caused by COVID-19.
- Global manufacturing is as high as it has ever been with more goods being sold internationally and we are seeing container space at an all-time low with demand for space at an all-time high.
- We are seeing the shipping lines and vessel owners building larger vessels than ever and yet space is supposed to be the problem.
- There are continual blank sailings which is causing further backlogs.
- There are more delays at terminals for cargo availability which is causing more container demurrage charges as the shipping lines have reduced the number of free days to return the empty containers. The first day of availability is the day of the vessel arrival into port or the day the container is offloaded from the vessel but NOT the container availability date from the port. We have experienced shipments where the vessel berths on the 31st of the month, the containers discharged from the vessel on the same day which was the first day calculated by the shipping line only to see the containers not made available by the port until the 4th of the following month meaning we have lost 5 days of the 7 days causing thousands of dollars in late return fees. This is compounded by the continual reduction in free days being reduced in many instances from 21 days, to 14 days, to 12 days, to 10 days and now generally 7 days and yes this has become a major source of revenue for the shipping lines.
- Being busy and having an opportunity to manipulate rates does not give the shipping lines the right to price gouge to these levels and unfortunately our governments do not seem to understand the effect this is having on businesses.
- With many places in lockdown, there is a reduction in passenger aircraft flights which is seeing a reduction in space availability and an increase to airfreight prices.