As logistics professionals are finding out the hard way, Ocean freight and the coronavirus impact on the shipping industry are raising havoc on what was looking to be a great 2020 just a few short months ago. As a result of reduced manufacturing activity on a worldwide basis, and the resulting drop in shipments of everything from iron ore to cardboard, large drops in shipping rates have had a dramatic impact on the bottom line for most segments of the ocean freight industry.
Uncertainty can have a devastating effect on an industry as capital intensive as the ocean freight business. Long lead times for new ships, ship configuration, and changes in the product mix between different geographies can make operating a profitable shipping business difficult in the best of times. With the unknowns associated with the coronavirus pandemic, planning for the future while maintaining financial stability has become a near impossibility.
With dropping commercial activity, one would expect that container rates would be dropping and in many instances they are cheaper, due to reduced demand or excess capacity. With that said, the chaos created to shipping patterns world-wide has created spot shortages of containers. In simple terms, if the demand for product drops in one location, such as is the current situation in the USA, then the availability of containers in that country will be limited for those looking for capacity to deliver their commodity to other countries.
In the industry parlance, this confusion has created a large increase in what are called “blank sailings”. In the long term, one can expect to start seeing increases in rates for both 20 ft and 40 ft containers going between Asia and North America.
Given the multiple variables and constant state of flux created by the covid-19 pandemic, the question for business owners who need to move their product from one part of the world to another is “what is the best strategy to manage costs and deliveries”?
At Eagles Air & Sea Ltd, we are intensely working with our clients to minimize costs, risk and delays in deliveries. We recommend the following strategies to ensure the best outcomes:
- Plan ahead – Booking freight, especially ocean freight as far in advance as practical is a good way to manage costs and ensure space availability.
- Consider alternative transport modes – Creative solutions for specific transport situations can include bi-modal transport, where goods are shipped using both air and ocean freight. Another option within the ASEAN region can be cross border trucking.
- Leverage warehouse capacity to position and stage goods to take advantage of spot market availability of economical freight rates. At Eagles Air & Sea, we maintain multiple warehouse locations in and around Bangkok where our customers can maintain inventory flexibility that ensures product is available when shipping opportunities present themselves.
- Work closely and communicate your plans frequently with your freight forwarder. The more information you share with your freight forwarder, the better outcomes you will have in this turbulent environment.