Rachel Shames discusses the general consensus from TPM regarding where the market is headed in the coming year (0:42-3:44), ocean contract negotiations – what shippers can anticipate from carriers this year and our advice on when to issue an RFP (3:38-6:58), and finally, how the changes in ocean freight services may impact our future (6:58-END).
Additional Notes:
On the west coast, there are signs that the recent structural blank sailings are helping: as of March 16, there were 20 container ships at anchor off LAX/LGB, the lowest number since December 2020. This is a positive development for the busiest and most congested gateway in the US.
Overall, however, import demand is very strong and forecasts are solid through at least Q3. Carriers are planning for full sailings for the majority of the year as US importers strive to keep up with orders and, eventually, rebuild inventories. The latest round of stimulus payments to most US consumers will keep demand high in the short-term. As vaccination rates rise and consumers gradually shift some spending to services, demand for certain commodities may dip while demand for others will increase. According to the JOC, US retailers project 2021 sales growth may exceed 2020’s growth of 6.7%. Pressure on vessel space, container availability, port systems, warehouses, and truckers will persist for the foreseeable future, unfortunately.
With demand continuing to outpace available space and equipment, the balance of power in ocean freight has clearly shifted to the carriers over the last year. Carriers are planning for another record year by finalizing freight contracts early and limiting fixed rate volumes. Shippers who’ve already issued RFPs have the advantage of more options to secure fixed rates. This year, more freight will move at short-term market levels, fluctuating based on demand. Shippers will need to forecast well and early; carriers are more likely to allocate fixed rate space to business with weekly, reliable volumes. Forecasting is essential and will be of increasing importance as the industry eyes enforceable contracts. There is a consensus that ocean contracting will move in that direction over the coming years, incorporating penalties for underperformance by either party.
Vessel space for US exports is a growing challenge, and rates are rising. Carriers are still moving large quantities of empty containers overseas to get them into the hands of suppliers faster, leaving exporters struggling to find capacity. Export demand is strong, but most services across the major trade lanes are booked up at least a month in advance. Combined with the truck capacity shortage, it may take 3-6 weeks to get an export shipment loaded.
Early booking and forecasting are critical so we can plan appropriately for allocation and scheduling requirements. Again, we urge you to proactively communicate any specific space needs to your dedicated CVI customer service or sales representative.
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Rachel serves as Director, Pricing and Procurement for CVI. Her responsibilities include vendor selection, contract management and negotiation, transportation pricing, FMC compliance, and international agent network management.
Rachel began her career in international shipping with CMA-CGM America. She joined CVI in 2011, gaining experience in various departments with a focus on inside sales and marketing for the company. In 2014, Rachel assumed the role of Manager, Transportation, working on service procurement and development of client proposals. She has served in her current position since 2018.
A native of Norfolk, Virginia, Rachel earned her bachelor’s degree from the University of Michigan in 2005. She holds a Master of Business Administration with a concentration in Maritime and Supply Chain Management from Old Dominion University.
– Rachel Shames, Director, Pricing & Procurement, CVI
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