Pierre Bonel, Chief Business Development Officer shares his thoughts…
"The alliances brought opportunities for moving goods to market. Larger ships were more efficient to operate in terms of energy, crew and volume per sailing. However, what we have seen more recently is that a dense pool of vessel owners has real limitations, when fronting a crisis like the one we find ourselves in now. These larger vessels put a strain on existing terminals due to their sheer size and their increase in demand for the number of containers needed to feed them. Note, most of those ‘mega vessels’ were deployed on Asian routes.
Once the Pandemic hit….
When Asia was hit by the pandemic, it started a chain reaction of events in global ocean freight that no one was prepared for. Stopping both the production and movement of
goods, from a part of the world that governs the majority share of international cargo freight. The dramatic downfall in container demand that started in Asia, soon followed in other parts of the world as lockdowns and safety measures were put into place. Global container production then
took a major dip in August 2019 which resulted in extremely low ratios of TEUs per vessel slots.
What happened next, was that the carriers started to flex their muscle memory from the 2008 economic crisis. Implementing what they had learnt and quickly introducing slow steaming and blank sailings as a way to control an unsettled environment.
The bounce back
The real catalyst for the situation were in now though wasn’t so much the downturn of global freight movements, but the boom that came after. Consumers took to the web for their purchases, which then heightened the demand for goods to be shipped. The volume of goods waiting for exporting started to pile up, which coincided with reduced vessel capacity and strained inland capabilities to manage freight.
Stevedore numbers were at an all-time low because of Covid-19 symptoms and restrictions. The port environment became inefficient and dwell time skyrocketed. At the peak of the crisis, Los Angeles port showed a berth wait time of 8 days! All of this together meant that the predictability and reliability of usual ocean freight services is suffering and as is the freight payers purse.
Are carriers taking advantage right now?
So why at a time of chaos and crisis do we see ocean carriers making a good profit? Initial thoughts may have you thinking they’re capitalising on a troublesome situation, when in fact we need to champion their success. Carriers operating near to bankruptcy is not a good thing, especially now. Just five shipping line carriers control 67% of all ocean freight. If one of them goes down, the impact on all other carriers is huge, furthermore that impact would be felt by everyone in the supply chain, right down to consumer. The truth is that we need them to do well, we need good sea vessels and we need good sea shipping services. They need to survive and thrive for everything else to work, and work well.
So at a time when we seem to pay more and get less, what does it mean to have a contract with a carrier? For Hillebrand, we try to spread our capacity across all our contracted carriers and offering what we call a ‘basket rate’ to customers. It’s where one freight rate to you has multiple shipping carrier options behind it. It alleviates the ever present issue of capacity by opening up more options across more vessels and sailings.
