Freight Forwarding Industry Status – April, 2020
April 14, 2020 • 9 minutes read
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The Freight Forwarding industry is currently in a chaotic mess, and most are worried about how the coronavirus epidemic has impacted the supply chain. Any previously planned out freight isn’t moving about as previously announced, the transactional volume is rising, and shippers aren’t capable of forecasting their way onwards. With this crazy moment in time, trying to gain a stable ground in real-time and the digital management of freight forwarding is being stressed in ways it’s never been.
Global trade is a massive industry that can be quite difficult to completely halt, especially since most nations need essential supplies that can only be acquired from specific regions of the world, so most freight forwarding companies won’t have to worry. According to CargoMetrics, freight forwarding hasn’t entirely come to a stop even though the coronavirus has managed to cause massive changes all over the world.
Previously in February, CargoMetrics published data revealing how Chinese imports and exports were currently in free fall, compared to the previous couple of years due to the lockdown that had occurred on Wuhan. They released another set of data during March that showed the volume in Chinese shipment was starting to quickly rebound back to its usual numbers. Although, this started happening before the United States and out countries around the world began implementing draconian social distancing and quarantine rules.
Cause and effect
Right now, consumers aren’t purchasing as many products as they were initially spending before the epidemic managed to make everyone take cover. Businesses and countries, especially those in the United States, are understanding how fragile the supply chain is and have made many rethink the way cargo is transported around the world works. With President Trump having activated the Defense Production Act to get local businesses to start producing masks and ventilators for hospitals, there’s an extraordinary possibility that this could affect the way certain goods are made overseas.
Doug Watkins is one of the many people that oversees the Medical University of South Carolina health system and ensures the doctors are capable of getting their supplies so they can continue saving lives. Although this epidemic has made it difficult for him to find ways to obtain replacement garments for doctors and nurses. With how badly the virus has increased all over the world, demands for garments increased, leaving people like Watkins running around looking for ways to acquire gowns.
“This is probably as bad as I’ve seen it,” he said in a phone interview. We’ve built a global supply chain that runs on outsourcing and thin margins, and the coronavirus has exposed just how delicate it is. “I guess we’ve done a good enough job within the health-care supply chain of getting pricing down to the point that the vendors don’t have a lot of extra margins or slack to play with,” Watkins said.
This reveals how depending countries like the United States have become reliant on China to procure their pharmaceutical supplies. With numerous people coming to this realization, there’s a possibility that certain industries, particularly those in the freight forwarding industry, will start to witness a change in the way we acquire essential products.
One of the main difficulties with the impact the coronavirus has caused to this industry involves port calls and blank sailings. Ocean Insights has succeeded in keeping track of over 386 blank sailings announcements that shall take place until the middle of March till the very end of April 2020. Freight forwarders have decided to respond by replacing massive volume vessels with much shorter volume vessels to deal with the small trade volumes. This mirrors the measured Vessel Capacity of most major carriers, which is especially going quite well in the Asian Trade lanes, with over 23 percent detected decreased from between January to mid-March.
Port performance and port call
Recently there have been reports that there have been no significant trends when it comes to the performance of ports. Although there was a massive decline in the number of ports during the Chinese Lunar new year, this is considered normal during that time of year. Afterward, there was a slow crawl back to the top for trends there, Which remains constant with the closely watched lower volume of shipping traffic from the Asian region.
Port calls pretty much went into decline once the coronavirus outbreak started hitting every continent in the world. Furthermore, the relative number of shipping schedules that were change was increased by a slight margin compared to the amount of crisis that had begun to fold. But, this isn’t over yet, While China is recovering from this epidemic, the rest of the world that purchases their goods from China are still combating the deadly virus for the time being. This means China will have to wait quite a while before their usual customers are out once again and ready to order their goods from overseas.
The volume of exports from Australia is one of the significant indicators for China, given the massive numbers of iron ore and coal that have shipped. As of February 13-17, large volumes of cargo have been increasing during this time. It usually requires 10-15 days for dry bulk shipments to make the trip from Australia to China, suggesting that the Chinese import will start to rebound once those cargo ships have arrived with the goods.
The amount of shipping container lines, ports, and forwarders warning of potential congestion problems occurring in US ports have been quite high. Many of these ports will experience obstructions because of imports stacking at marine terminals during the past couple of weeks the industry will be dealing with a near-term threat of clogging that’s never been witnessed in the entire history of the industry.
There are plenty of reasons why US retailers and manufacturers aren’t showing up to pick up these essential containers. It could be because the warehouses are full, closed down because they aren’t designated as fundamental service providers reacting to the coronavirus epidemic, or because retailers have already requested to delay any deliveries at distribution centers. Regardless of the reason for not picking up their cargo, most of these ports are starting to run out of areas to store these incoming shipments, leading to some severe issues in the future.
Keeping the shipping lines from continuously flowing with this currency chaotic situation, mirrored by the stop of each location until it reaches its destination, will take some pressing cooperation amongst the people in this industry. At the moment, this corporation shall be dealt with by high-minded charge to assist with the supply chain and the simple fact that none of the carriers or shippers are capable of angering any of the other too much, lest those disagreements lead to severe problems with the trans-Pacific service contract negotiations and the extensive relationship between nations.
According to Jon Gold, Vice president of the supply chain at the National Retail Federation, this is one of the most significant disruptions they’ve ever experienced. “All the ports need to get stakeholders together to prepare. No one knows when this is going to end. But if we’re not talking as an industry about a way forward, we’re going to fail.”
While they’ve had to deal with some severe problems in the past, such as the 9/11 terrorist attacks that raise national security because of potential dirty bombs making it past the supply chain and the 2014-15 West Coast port crisis that halted the Asian imports, they’ve never had a scenario appear where so many cargo owners were incapable of receiving their cargo, which potentially damages the supply chain at the moment.
The US president of Zim Integrated Shipping Services, George Goldman, had this to say about the situation. “The conveyance of cargo has been pretty fluid, and I can’t say a backup has started. Having said that, we are anticipating it.” During the final week of March, a rise in usage for the Asian-US services has increased, and Goldman predicts that there will be at least four to six weeks of heavily loaded cargos as the US ports before the import volume starts declining.
North American importers have canceled, minimized, or delayed their freight forwarding at a rapid pace, leading to the increase in urgency for the industry to start teaming up and coming up with plans to ensure the supply chain continues to flow. During the early parts of March, plenty of US importers were doing everything they could to get goods out of China once the spread of the deadly virus caused restrictions to be put in place, causing the delay of restarted factories after the Lunar New Year by several weeks. Freight Forwarders began witnessing a massive wave of ocean shipment reduction and postponement from their shipper customers.
Even more, complications arise as this continues to become severe. Several suppliers of goods have stated that large retailers contacted them during the last week of March, telling them that retailers are refusing to pick up their shipment, and they required help from the forwarder to destuff the containers. Although, as of April 6th these large retailers called by stating they would start accepting the shipments not that they’ve arrived at the port, but then proceeded to cancel the receipt for five containers from its suppliers a few minutes after the call, which was an immense issue since those containers were already on their way and were set to arrive within two weeks.
While the industry has been plagued by some severe issues, they haven’t completely frozen in fear because of this situation. If anything, the industry has continued to respond quite well with container lines encouraging cargo owners to acquire their containers in a suitable time and return empty containers. The Ocean Carrier Equipment Management Association (OCEMA) commented that it was initially concerned with the availability of structure, especially when considering the inland movement.
Container liners are also providing shippers with options to alleviate the demurrage fee by allowing people to store containers at their properties. US port authorities are currently doing their best to add extra storage space. By recognizing the threat of congestion early on, the Federal Maritime Commission with the backing of fact-finding launched on March 31st and led by the Commissioner Rebbeca Dye are bringing in leading maritime executives to get together and plan ways to ensure cargo comes in smoothly through the nation’s port during the next coming weeks.
While how massive the congestion situation can become is currently uncertain, it’s fair to believe that there will be a rise in detention and demurrage disputes that shall occur between cargo owners, forwarders, carriers, and marine terminals. The FMC is expecting to conclude and vote on new interpretive rulemaking by the end of April, which should hopefully provide the much-required clarity on how the industry should be dealing with the detention and demurrage disputes expected to occur.
These newly implemented rules shall provide the agency with the much-needed scope to determine whether detention and demurrage fees can be considered reasonable and whether the charges can really incentivize the prompt retrieval of cargo and return of the containers.
The Freight forwarding industry is currently in a chaotic state, but that doesn’t mean that everyone isn’t doing their parts to continue ensuring the shipping routes and products continue to flow as smoothly as possible. Plenty of ports are still admitting essential cargos to flow in to provide the rest of the country with necessary supplies such as medical equipment, various foods, toilet paper, and much more. Even so, there’s going to be a period of chaos that will ensue once the Coronavirus has started to dissipate from our lives.
Most people will have to go and start picking up their cargo or deal with paying up fees they’ll most likely be unable too. Freight Forwarders will again need to start reaching out to their clients and seeing if any of them are still planning to continue conducting business with them. At the moment, all we can do is keep a close eye to what’s happening and await the day everything can finally go back to the way it was.
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