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Challenges persist on all fronts for international shippers. Transpacific Eastbound services remain full due to high demand, blank sailings and continuing port congestion. The Transatlantic Westbound trade is experiencing very severe capacity constraints. Europe terminals are congested to the point that many cannot receive any loaded containers; some carriers have implemented full booking stops from Europe to the US. Vessels out of Europe are booked up at least 6-8 weeks in advance. All US inbound and outbound volumes continue to be plagued by full vessels, port congestion, and a shortage of truckers, chassis, and warehouse space, keeping the fight for capacity intense and rates high.

Covid-related lockdowns announced over the weekend in China are shuttering factories and slowing cargo operations. Many manufacturers and warehouses in Shenzhen are closed completely; volumes are likely to drop significantly for the duration of the lockdown, currently planned for seven days. A lockdown in Shanghai may result in similar conditions if the situation worsens.

Ocean and air freight services between the US and Ukraine/Russia have been largely suspended. For air freight, there are broader implications. Airlines have been forced to re-route services on most global trade lanes to avoid vast areas of unusable air space, resulting in severely limited options and capacity across the board.

The Russia/Ukraine conflict has sent fuel prices soaring worldwide, adding a new layer of rate increases on all modes of transportation, domestic and international, import and export. In the US alone, truckers have quickly implemented significant fuel surcharge increases as high as 50-60% over February levels. Transportation costs will continue to rise as long as fuel prices climb. Any escalation of the conflict will bring more, likely significant, impacts to the global supply chain.

Ocean carriers are still completing contract negotiations with beneficial cargo owners (BCOs) before shifting to NVOCC negotiations. Carriers are reducing fixed contract allocation significantly as well as eliminating many contracts entirely based on desirability of business, service/lane alignment, and quality of partnership overall. There will be a tremendous amount of freight moving in the variable floating and premium rate markets this year.

The Journal of Commerce’s annual Transpacific Maritime conference (TPM) reconvened in-person this month for the first time in three years. Shippers of all sizes expressed frustration over reduced allocation and contract options. Conversations revolved around strategies to secure reliable, adequate capacity – a major shift from the pre-pandemic focus on rate negotiations and securing lowest costs. There was a broad consensus that shippers need more and better quality partnerships now more than ever – multiple ocean carriers, NVOs, truckers, with a variety of contract arrangements and service options.

While there are signs that demand growth will slow this year, there are significant challenges that are likely to keep the market tight and relatively unstable well into 2023. In the short-term, there is uncertainty surrounding the ongoing west coast labor contract negotiation. Any level of work slowdown will exacerbate an already congested port system; many shippers are re-routing cargo over alternative gateways on the east and gulf coast to bypass west coast ports. Longer term, port and landside challenges and a new round of decarbonization regulations (IMO2023) are two major factors expected to counterbalance slowing volumes. Prepare for a continuation of instability and unpredictable cargo flow.

 

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Your CVI team is here to assist you through these current market challenges. Ocean freight, air freight, domestic road/rail, and Customs Compliance – count on our dedicated professionals to care for you and your supply chain. Call us and let us show you what we can do!

 

Rachel Shames

Director, Pricing & Procurement

CV International, Inc.

 

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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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