By Arthur   Photo by eurosnap  Link: pickupimage

Many international container transportations are handed over to freight forwarders because customers have encountered extreme difficulties in securing the space of shipments. Even the shippers are willing to pay premiums, the shipping lines still do not comply with the contractual agreement. The reason is that the shipping lines have over-signed the BCO contracts with excessive cargo volume at the beginning of the year, but due to various unexpected accidents, such as the ship Ever Given blocked the Suez Canal, the outbreak of covid at the Shenzhen and Ningbo ports, the congestion in the Seattle and Los Angeles ports, and the Chicago rail terminal etc. have made ocean transportation in paralysis. They caused the empty container turnover rate to reach a new lowest level to 2.5 times per year. The available empty containers and shipping spaces are severely narrowed down and in short supply, so that liners cannot fulfilled the MQC (minimum quantity commitment) to customers who have sign contracts in certain volume. In addition, the current market price has reached more than US$20,000/40' from China to the West Coast of the United States. This market price is far higher than the FAK rate deal in the BCO in March this year, and even 40-50% higher than the premium price released by the shipping lines. Some shipping lines sales took the allocation supposed belong to BCOs to the market scalpers in peddling high ocean rate under guaranteed space . Of course, the shipping lines sales rushed to high profits and left behind their contracted customers without hesitation.

On the contrary, the freight forwarders can help customers book the space from multiple shipping lines, which considered as flexibility. Large shipping lines are often be easier targeted by hackers. None of the top four liners in the world has been spared. This is reflected in the advantage that freight forwarders can book space from multiple liners and use flexibility to against shipping lines. The US import data for PIERS under IHS Markit from January to June reflects the shift of business to freight forwarders. In the first half of the year, the market share of NVOCC (non-vessel carrier) relative to BCO increased by 6.8% to 53.3%. However, many large and medium-sized importers contracted by BCO have already experienced the pain of being abandoned by shipping lines as well as large global freight forwarders that are also dishonored in providing sufficient guaranteed space. More and more small, medium and large importers have opened their doors to welcome those small and medium freight forwarders with strength and certain amount of guaranteed allocations to be acted in their new logistics providers. The chaotic shipping market is also an ongoing process. The mentality of the shippers and the consignees have changed --- they no longer believe that the super-large global logistics companies are the banners of guaranteed in service! On the contrary, it is necessary to establish more trusting and long-term cooperative relationship with capable small, medium-sized logistics companies, so that they will not be abandoned again due to various accidents in the post-epidemic era. In the post-epidemic era, new business relationships have taken place. In the international logistics industry, the probability of "the most biggest players take the major market" has changed to " the strengthen players in certain fields will also share the market."

Another worrying phenomenon is the accelerated spread of the Delta mutant virus in many countries, which has led to a slowdown in the global container turnover rate. The typhoons that occurred in the southern coastal areas of China in late July also have impact. Philip Damas, managing director of Drewry, a maritime consulting company, said, "We have not seen this in the shipping industry for more than 30 years." Since May last year, the Drewry Global Container Index has risen 382%. The continuous increase in ocean freight rates also means that shipping companies' profits will increase. The economic recovery on the global demand side, the imbalance of imports and exports, the decline in container turnover efficiency, and the short of container ship capacity, the aggravation of the shortage of containers has led to a sharp increase in container freight rates. This phenomenon shows that the "extreme freight rate" will continue until the Chinese New Year in 2022 or even the middle of the year. According to the data of the United Nations Food Organization, the global food index has been rising for 12 consecutive months. The transportation of agricultural products and iron ore must also be carried out by sea, and the prices of raw materials continue to rise, which is not a good thing for most companies in the world. And American ports have a large backlog of cargo. Following the fluctuations in the prices of bulk commodities such as iron ore and steel, the surge in shipping prices in this round has also become the focus of attention of all parties, and shipping costs are still on the rise. According to industry insiders, on the one hand, freight costs have soared, which has greatly increased the cost of imported goods. On the other hand, freight congestion has lengthened the time period and increased costs in disguise. For the surge in demand in the North American market, coupled with the rise in global oil prices, the inflation in the North American market will further intensify. Sea transportation is the most basic underlying structure of the commercial supply chain, and it is also the latest visible expense item reflected in the total cost structure of all business trades. The sky-high ocean freight rates now appearing are undoubtedly an obvious manifestation of inflation. Everyone should prepare for dealing with the day when inflation is really coming, and it may be at the end of this year.