31.07.2018
U.S. import volumes are seasonal, and ocean freight peak season normally hits around mid-August and lasts through October, as shipment volumes increase ahead of the holiday retail season. Due to the ongoing trade war, high demand, and service cuts, rates are likely to increase even higher. Below, we dig into some of the reasons why.
Carriers are removing transpacific capacity to combat the excess supply and low rates.
Three Canada and U.S. West Coast services, representing over 6% of West Coast capacity, have recently implemented or announced cuts:
East Coast services are also changing, resulting in a 1.3% capacity reduction:
Why are so many carriers reducing supply going into the busiest season of the year? A number of factors, including rising fuel costs and an oversupply of ocean capacity, have led to the cuts.
President Trump’s decision to impose a 10% tariff on an additional $200 billion worth of Chinese-made consumer goods has prompted many changes:
It’s clear that the trade war has led to many disruptions that impact shippers and carriers, but the full impact is yet to be known.
An oversupply of capacity, low rates, and the rising cost of fuel are just three of the contributing factors to the financially slow first half of the year. To combat the rising cost of fuel, a number of carriers have implemented emergency bunker fuel surcharges, but that is only helping to solve part of the problem.
Carriers including Maersk, CMA CGM, and Hapag-Lloyd posted heavy losses in Q1 and Q2 of this year. Also, bunker fuel costs are up 53% year-over-year. To make up lost revenue, many are looking to peak season. From price changes to capacity adjustments, carriers are becoming more strategic and proactive as we start the second half of the year.
Multiple weather disruptions have led to delays, cancellations, and rate increases. Typhoon Ampil hit China a week ago, causing delays at Shanghai, Ningbo, and Qingdao terminals. Some vessels left the port before they finished loading containers to avoid the storm, causing significant delays as cargo rolled to another sailing.
This comes just days after China was hit by Typhoon Maria, a storm that displaced hundreds of thousands of people and temporarily stopped shipping operations in affected areas.
Last week, Cosco was the victim of a ransomware cyber attack that affected its North American operations. Although all communication channels have been restored, the breach caused the carrier to shut down connections with other regions. Customers were unable to book shipments for a few days, resulting in services sailing light, artificial reductions in capacity, and additional pressure on an already tight market.
This follows a cyber attack targeting Maersk in June 2017, which cost the company up to $300 million in revenue. Attacks of this nature can deeply affect operations at even the biggest carriers, ultimately affecting shippers.
While any of the above reasons on its own might lead to minor, temporary rate increases, the combination of all of these factors has had a much more significant impact. Peak season has started early, and we expect this year to be unlike any other. We’ll be in constant contact with our clients as changes occur, and we’ll continue to cover weekly changes in our Ocean and Air Freight Market Updates.
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