Dear Valued Customers
Logistics concerns, constraints, inefficiencies and frustrations still abound and are seriously negatively affecting importers and exporters. We attempt below to update you on multiple complex issues as briefly as possible. Should we have not covered anything vital to you in enough detail please advise and we will make every effort to research and expand as required.
SEAFREIGHT
Lack of consistent and reliable service delivery, together with inflated and unstable rates, continue to heavily impact import and export movements. Port congestion worldwide is an increasing problem, a result of multiple causes not least of which are continued Covid outbreaks and related port regulations, poor output performance within most ports, chaotic and under resourced domestic landside services and trucking, regular cyber-attacks, labour issues as a result of politics, Covid and war, and severe weather events. Port congestion in Europe, USA and the Far East is chronic. Waiting time for vessels outside ports is crippling costs and schedules, and landside congestion (road, rail and barge) for movement of containers in and out, combine to create inefficiencies and instability previously unknown in global trade. Primarily as a result of congestion and delays, shipping line schedules are exceptionally volatile and there are none that can be trusted on any routes. Lines are continually adjusting services, bypassing ports, and altering routes in order to try and balance schedules and maintain some degree of service (with most changes taking place after a booking is made and a service committed to an importer or exporter). As a result of congestion at origin ports, and even more so at transhipment ports, we are seeing an alarming increase in short shipments / roll overs, resulting in frustrating delays for importers and exporters. Once a container is loaded and in a port stack at origin, we are at the mercy of the shipping line and alternative plans cannot be put into place. The space constraints on the Far East route to SA have definitely eased and whilst nowhere near back to be being able to guarantee a booking in a required week it does seem that more regular space availability is being achieved.
Sea freight rates were starting to normalise in terms of increases and some stability was returning to the market HOWEVER the current Ukraine crisis and the spill off both in terms of war risk surcharges, and more importantly oil and fuel costs, is resulting in many parties forecasting a new run on radically inflated global freight rates. Loadstar recently reported many industry analysists negatively predicting the possibility of a doubling or tripling in current freight costs over the next few months.
Empty container equipment remains seriously imbalanced and container shortages in Europe and China are back to the worst we have seen through the pandemic. Not only does this mean that often there is a struggle to secure empty equipment but now this too is affecting export space from South Africa with shipping lines choosing to fill ships with empty equipment so that they can get containers back into circulation in Europe and the East cheaper and quicker as full equipment involves free period of demurrage and use both at origin and destination.
Finally it is noted the trucking constraints in USA and Europe still seriously hamper supply chain processes. Not only is securing truckers still a serious battle because of shortages of drivers but now too we face regular examples of agreed bookings not being executed because a better more profitable job (often not involving delays in port queues) gets offered to truckers who are in a position to pick and choose as they wish.
The Ukraine War and subsequent various sanctions placed on Russia has radically affected global carrier movement. Most lines have stopped services in and out of Russia and the war region. Whilst this does not directly impact most SA importers and exporters, the indirect effect on already chaotic line schedules and rerouted cargo into other European ports is adding to congestion, instability and altered schedules. Obviously a continued escalation of the War could and will continue to negatively impact global trade as a whole and the resultant effects will be closely monitored.
AIRFREIGHT
As the world starts to live with Covid, added schedules by many airlines has opened up greater airfreight options on many routes, including South Africa. Backlogs are still a real issue as the instability in markets and chaos on sea freight has led to an increased requirement for airfreighting. As a result of the increased demand, increased fuel costs, and economic pressures felt by airlines because of the pandemic, air freight rates remain high and volatile and are forecast to increase radically over the next few months. An unfortunate outcome of the volumes and Covid / labour issues, is that we have noted an alarming increase in transhipment errors, damages and lost cargo. A negative spin off of the war and sanctions on airspace use is that we are seeing a number of airlines cancelling routes unrelated to the war region or Russia, simply because air space restrictions mean longer and unprofitable flight paths.
WHAT CAN BE DONE BY SCT AND YOURSELVES
From an SCT perspective we have obviously identified some time back that the result of the pandemic and the resultant restrictions, every single movement requires substantially more attention, planning, tracking, chasing and organisation, and as a result we have increased our staff compliment to ensure the right attention to each order. Clear communication, unfortunately usually of a negative nature when it comes to bookings, delays, tracking and changes to schedules, has become paramount and we continue to pay significant attention to our systems, data, staffing and training to ensure this is constantly improved. We do wherever possible avoid transhipments or lines we know are facing greater congestion issues. We are also wherever possible giving you multiple options to consider on all orders relative to carrier, cost and transit time so that as a partnership we can make the most informed decisions on every movement.
From your side it remains critical to focus on planning and forecasting and draw SCT into the process as soon as technically possible to allow for a maximum period of planning. Whilst we appreciate it is seldom possible, wherever you can it is prudent to add at least two weeks additional lead time to sea freight and 3-4 days to airfreight to allow for delays and changes to services. Protection on changing freight costs is still a difficult process but wherever possible build into negations and quotes the ability to adjust freight costs once booked, like one does with ROE.
If there is anything that SCT can do better, be it information, communication, data or reporting, please do not hesitate to contact myself. Challenging environments like this require genuine partnership as well as innovative, creative and proactive adjustment to options and services. This is our passion and commitment to you. .
INTERESTING NEWS FEEDS
There are so many articles being published around supply chain issues and the effects of the War on the same, however we attach to this a selection of interesting reads.
https://www.businessinsider.com/russia-war-ukraine-could-triple-ocean-shipping-rates-experts-2022-3?IR=T
https://www.bloomberg.com/news/newsletters/2022-02-28/supply-chain-latest-global-trade-feels-force-of-russia-invasion
Maersk the latest carrier to suspend new bookings to and from Russia
Barge delays on N Europe waterways surge to highest peak in years
Kind Regards
GARY KNIGHT