What’s Happening, and Why?
Demand for global shipping has weakened following a period of sustained reduced consumer spending around the world, and this reduction in demand had driven down shipping rates as well. In an effort to prop up shipping rates and retain profitability, steamship lines have taken measures to control available global shipping capacity and therefore demand.
Steamship lines can control capacity by limiting the amount of vessels available for sailing (called “Blank” or “Voided Sailings”), and by reducing sailing speeds (referred to as “Slow Steaming”).
By utilizing Blank Sailings and Slow Steaming, steamship lines can create artificial demand by reducing supply, which has the effect of driving up rates. These measures are often put in place in conjunction with periods of historically high shipping in order to augment the perception of increased demand.
One such period is the lead up to Lunar New Year each year, in which the market is now. As China and other East-Asian countries prepare to effectively shut down for the holiday, there is a rush to replenish inventories.
This rush of demand in combination with a manufactured shortage of capacity has driven freight rates up, and makes it very difficult for shippers who have not planned for it in a difficult position.
Image Courtesy of Drewry (Drewry – Service Expertise – Cancelled Sailings Tracker – 05 Jan)
“…Drewry anticipates reduced carrier service reliability compared to last week. On average, it is projected that 88% of ships will adhere to their scheduled sailings over the next five weeks. It is crucial to note, however, that this situation could rapidly evolve due to the challenges faced by shipping lines amid the emerging issues in the Red Sea.”
Pay For Space
While capacity is greatly restricted, space is still available for shippers willing to pay the market-adjusted increased rate. For shipments that must ship during this peak season, Cubeship will work with clients to secure space at the most competitive rate levels.
Use LCL
If a full container load (FCL) of goods is not 100% necessary, shippers can still fill gaps in inventory without paying the full container rate increases by utilizing less-than-containerload (LCL). Cubeship runs our own weekly consolidation boxes from Ningbo, Shanghai, and Shenzhen into the US where clients pay only for the space they need.
Plan For the Future
Clients who are building resilient and sustainable supply chains prepare for this annual demand crunch/rate increase by signing negotiated contract rates which can lock in rates and equipment/space protection earlier in the season. Cubeship offers and recommends such deals to all our clients, can design a program built around your needs and risk tolerance.