Changes in ocean freight prices policy during the pandemic

Because of the current unstable economic situation, manufacturers may face sudden freight cost changes. 

Maritime transport is crucial to the world’s economy. More than 90% of the world’s trade is carried by sea and it is, by far, the most cost-effective way to move en masse goods and raw materials around the world.

In August, the peak season for freight started the same as the previous years, however, this year pandemic had its impact. During the last few months, prices went higher and capacity reduced. Difficulties with the transportation of goods around the world caused a decrease in the global freight forwarding market. According to Statista, total container volumes handled at Chinese ports dropped by 10.1% in the first months of 2020. 

Impact of COVID-19 on the global logistics industry

Pandemic and lockdowns caused not only supply chain disruptions but also lead to delivery delays, congestion, and higher freight rates.

Due to reduced volumes, resulting from the fast-spreading Coronavirus and a corresponding collapse in demand throughout numerous key markets, the ocean carriers have reacted by pulling out capacity in the form of additional blanks sailing and by eliminating complete strings, reducing total capacity by 50%+ in some large volume trades.

Matt Leonard, Associate Editor at Supply Chain Dive, says that in June, importers began bringing in more inventory as talks of reopening economies began circulating. This wave of imports hit a freight market with a lot of pulled capacity, and rates skyrocketed. This could be an issue for peak season as well if volume outpaces the container line capacity.

At the end of July, Sea-Intelligence CEO Alan Murphy said in a statement: “…on Asia-North America West Coast, carriers have un-blanked 30 previously announced blank sailings for Q3. From week 29 onwards, virtually no blank sailings are scheduled on the trade lane … with the Y/Y capacity growth suggesting that, from the carriers’ deployment considerations, Coronavirus is no longer as big a challenge.

Strategies for manufacturers and sellers

Logistics management is one of the key components for multinational companies’ trade success. Here is a number of strategies for your organization to avoid extra costs during international trade:

• Maintain clear communication with your shipping agents and freight forwarders so they would be able to inform your team regarding any changes in the itineraries, cancellations, and availability of spaces, as well as updates in times of transit. Shipping agents and freight forwarders are your strategic ally in the logistics coordination of your operations and therefore constant updates and communication will allow you to plan your times and action plan.

• Be flexible and adaptable: prioritize your shipments to be able to weigh the transportation rate versus the container´s space. It is common for many companies to have contracts agreed for installments with their logistics agents, however, it has been reported that these contracts are NOT being able to be honored due to the lack of space. As a result of the above, please maintain a flexible stance in the face of current market conditions.

• Optimize your operations for effective and low-cost logistics. It is reported that due to the shortage of containers and spaces, shipping lines are asking for deposits for the containers they lease. The Container Loading Supervision inspections not only provide you with a complete picture of the loading conditions of your products in terms of compliance with commercial specifications (product and quantity) but also represents an extra tool that allows you to verify the physical conditions of the containers from the origin and detect damages or breakdowns that the containers present from the moment they are positioned for loading.

Sources: https://www.dhl.com/content/dam/dhl/global/dhl-global-forwarding/documents/pdf/glo-dgf-ocean-market-update.pdf