Tips for Navigating the Peak Shipping Season

Posted on | by competenow

 

This year’s peak shipping season looks to be getting an earlier start than usual.   According to the National Retail Federation, monthly U.S. import volumes are expected to reach the two million TEU mark by the end of May before cresting at 2.1 million TEUs in August.

This year, however, experts are warning that it will be earlier and tougher than ever due to a number of contributing factors, including geopolitical turmoil, disruptions in the ocean freight sector caused by the Red Sea crisis and Panama Canal drought, and surprisingly strong air and ocean freight volumes despite the global inflationary pressures.

Peak season shipping always presents unique challenges for shippers, but with proper planning and execution, shippers can successfully navigate this busy period.  In this post, we’ll explore some valuable tip to help you avoid costly delays, increase turn times, and reduce costs.

Plan Ahead

One of the most critical steps in preparing for the peak season is to plan ahead.  Start by analyzing your historical data to forecast demand and identifying potential supply chain bottlenecks.  By understanding your shipping needs in advance, you can secure capacity and avoid last-minute rush fees.

Secure Capacity in Advance

Shippers are advised to book consignments as early possible in order to secure space and avoid shipping 45’ HC containers, if possible, as these are more likely to be rolled.  Also, be mindful that ports and warehouses are likely to be extremely congested so expect more time to load / unload at point of origin and destination.

Communicate Proactively

Clear and proactive communication with your suppliers is critical for managing expectations and addressing concerns or potential delays.  Suppliers should provide you with timely updates on order status, shipping times, and delivery windows.

Freight forwarders, such as OCEANAIR, are your greatest allies in helping you navigate the turbulent the peak season.  Communicate early and often with your freight forwarder and provide them with insight into your shipping forecasts, required delivery dates, and purchase orders so that they can advise you on the best routing options and the most appropriate lead times.

Be Flexible

Consider choosing a service with a slightly longer transit time.  The fastest transit time services are more likely to be overbooked, which increases the chances for having a shipment rolled.

Prepare for Potential Disruptions

As we’ve all witnessed over the last four years, unforeseen challenges and disruptions do occur, despite careful planning.  Shippers should have contingency plans in place to address potential issues such as weather-related delays, capacity constraints, or other supply chain disruptions. By preparing for contingencies in advance, companies can minimize the impact on their operations and maintain customer satisfaction.

Prepare to Pay for Extra Fees

Peak season surcharges (PSS), bunker surcharges, emergency bunker surcharges (EBS) imposed by several of the world’s top shipping lines due to rising fuel prices, and general rate increases (GRI) are driving up costs for all modes of transport.  Congested ports mean longer wait times for truckers, who will charge wait fees and port congestion fees.  Some ports and rail ramps may also apply chassis split charges if they experience chassis shortages.

 

 

Panama Canal to Increase Daily Transits in January

Posted on | by competenow

After receiving better-than-expected rainfall in November, the Panama Canal Authority (ACP) has announced it will increase the number of daily vessel transits from 22 to 24, beginning on January 16.  The measure replaces all previous announcements and will remain in place until further notice.

The ACP will also be adjusting its process for reserving slots after the lengthy wait times forced many vessels without reservations – which included fishing boats, cruise ships, Ro/Ros, and LNG/LPG tankers – to divert away from the canal.  Under the new process, the ACP will limit each customer to one slot per calendar date, regardless of when the slot was booked, in order to provide “a more equitable and fair distribution of slots.”  The auctioning off of slots will be prioritized according to the highest bid in the auction process, fully laden containerships, and customer ranking.  These changes are also scheduled to take effect on January 16.

The ACP has also made significant headway in clearing the backlog of vessels waiting to transit the canal.  As of December 15, there were 64 vessels in the queue, down from a normal of 99 vessels.  Of the 64 vessels in the queue, 23 were without reservations.

Carriers Suspend Operations in the Red Sea to Avoid Attacks

Posted on | by competenow

 

Major carriers have announced the suspension of all Red Sea operations following targeted attacks on commercial vessels, including an attack on the MSC Platinum III on December 15 in the Bab Al Mandeb Straight.  Thankfully, no injuries were reported, but the vessel suffered some fire damage in the drone attack and has been taken out of service.

The number of carriers refusing to risk Red Sea transits via the Suez Canal is growing by the day.  As of this morning, carriers who have opted to pause Red Sea transits and/or reroute around the Cape of Good Hope – along Africa’s southern tip – include MCS, Maersk, Hapag Lloyd, CMA CGM, ONE, OOCL, Zim, HMM, Evergreen, and Yang Ming; tanker owners Frontline and Euronav; car carrier Wallenius Wilhelmsen; and oil and gas companies BP and Equinor.  Additional carriers are likely to follow suit in the coming days.

Rerouting vessels around the Cape of Good Hope will lead to significant transit delays, adding roughly 10 – 14 days to sailing time.  Freight rates will also face upward pressure due to increased operating costs and fuel consumption.

 

 

What Shippers Should Expect from a Prolonged Diversion

As the transit route through the Cape of Good Hope adds 40% to the voyage distance, there will be a significant reduction in capacity due to fewer vessel turns.  As a result, vessel capacity will become tighter as carriers are forced to reduce the number of previously scheduled sailings – with some cargo possibly not able to find space – which in turn will drive up rates.  While we do not expect a repeat of the catastrophe experienced in the early days of the pandemic due to the current oversupply of capacity, the longer the detour persists, the more likely rates will be under pressure.  Additionally, shippers should be prepared for the potential of equipment shortages, as cargoes will travel further to reach their destination.

Carriers will continue to monitor the situation and will likely make adjustments to vessels and routings as the situation evolves, most likely at the last minute.

Shippers should also anticipate the imposition of additional surcharges – including bunker fuel (BAFs) and war risk – and general rate increases, which will further add to the landed cost of cargos.

Some experts are warning that further escalation of the violence in the Red Sea could potentially lead to a complete closure of the Suez Canal, and any disruption within these waterways will have a domino effect that could have dire consequences.  While a complete closure is unlikely, it cannot be ruled out.

About the Suez Canal

The Suez Canal connects the Mediterranean Sea to the Red Sea and provides the shortest maritime route between Asia and Europe.  It is one of the most heavily used shipping lanes, with more than 17,000 vessels passing through it annually, and accounts for ~30% of global vessel traffic.   The Bab Al Mandeb, which stretches 32km from the southern end of the Red Sea to the western end of the Gulf of Aden, serves as the sole route for vessels transiting the Suez Canal.