As the 2019 holiday shipping season approaches, U.S. importers have begun reviewing the market conditions that will heavily impact supply chain costs for the second half of the year. The following infographic is a snapshot of peak freight trends that international shippers should pay attention to in the next six months.
OCEAN
Inventory overhang from 2018 has finally cleared out of USWC warehouses just in time for new 2019 holiday products.
This year, however, shippers have not been front-loading of inventory as they did the year before panicked by China tariffs. This decreased demand may be a sign of weak peak shipping volumes. Importers have reduced front-loading cargo because it leads to high inventory costs.
Weak demand leads to carrier capacity management through blank sailings and other methods to ensure spot rates remain profitable. For Beneficial Cargo Owners (BCO) this could mean the fixed rates they agreed to in April may not be enough to ensure bookings/sailings against high market spot rates (as the market has experienced in the past several years).
4 CARRIER TOOLS FOR MANAGING CAPACITY
BLANK SAILING TRENDS
WEAK DEMAND = BLANK SAILINGS
LOW CAPACITY (LESS SPACE) = HIGHER SPOT RATES
U.S. IMPORT SOURCING SHIFTS
ASIA TO EC
Low-value, non time-sensitive cargo.
ASIA TO WC
High-value, time-sensitive holiday products.
PANAMA CANAL
As reported earlier in this year, the Panama Canal is still experiencing some of the driest months in the past 106 years. Draft restrictions have been implemented, limiting the capacity of large cargo vessels through even the newest addition of expanded locks due to lack of rain and record-low water levels. Discouraged carriers must manage capacity carefully along this precarious, yet popular trade lane.
LOW SULFUR FUELS
EFFECTIVE: JANUARY 1, 2020
Carrier contracts that overlap into 2020, may see forced re-negotiation because carrier projections and formulas are vague. The lack of liquidity of low sulfur fuels has made pricing unpredictable.
Capacity leading into the first week of January may be restricted as vessels get dry-docked in order to flush out heavy fuels in exchange.
Shippers can expect roughly 10% or $100-300 increase to logistics costs.
Will dry-docking also be used as an additional excuse by carrier to manage capacity before the Lunar New Year?
CHINA’S LUNAR NEW YEAR STARTS JANUARY 25, 2020
AIRFREIGHT
For premium modes, such as airfreight, airlines have been able to reduce pricing because of a drop in fuel costs, but the overall demand has remained weak.
TRUCKING & RAIL
A soft trucking market has left capacity open and rate correction as a hot topic. Trucking companies are not willing to go back to 2017 pricing because of heavy investments in equipment and labor.
Falling trucking rates have contributed to a slump in intermodal. Some rail lines discontinued many regional services to focus on larger lanes. And while intermodal customer service levels have improved, the pricing difference between the two modes are very close, making trucking a more flexible, faster option.
Seeking to improve your supply chain program this holiday season? Contact us at greenworldwide.com and start moving freight forward.
BOTTOM LINE, WE SPEAK FREIGHT.
