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Challenges in ocean freight: Capacity, congestion, and resilience

Sep 4, 2024 | , , , , , , ,

The ongoing disruption in the Red Sea and Gulf of Aden, which started with the hijacking of a vessel nearly ten months ago, has led to a substantial reduction in available container vessel capacity, driving up freight rates, intensifying port congestion, and exacerbating equipment shortages.

The impact of this crisis, second only to the pandemic, has caused widespread disruptions, with global ocean freight continuing to grapple with significant challenges.

Blanked sailings
To counter the drop in demand and falling container spot rates, ocean carriers are implementing a high number of blanked sailings, particularly ahead of China’s Golden Week holiday. The cancellation rate for scheduled sailings in September is currently 10% across major trade routes, with the transpacific accounting for 51%, Asia-Europe 28%, and the transatlantic 21%.

Despite the recent softening, freight rates remain significantly higher than last year – +350% on the Asia-North Europe route and +150-180% on Transpacific routes. Events such as the looming threat of port strikes, the introduction of new import tariffs and an early Chinese New Year could keep rates elevated, even in the face of softer demand.

US West coast volume surge
As the peak shipping season approaches, the US West Coast ports of Los Angeles and Long Beach are preparing for a surge in import volumes.
Ocean carriers are deploying 28 additional “extra-loader” vessels to handle the expected influx, driven by strong consumer demand and the diversion of cargo from the US East and Gulf coasts due to potential labour disruptions.

Economic resilience is likely to sustain high import levels through the end of the year, further increasing activity at these key ports.

Ongoing Port congestion
Global port congestion remains challenging with hot spots in Asia and India in particular. The delivery of new container ships and fewer overall blank sailings in recent weeks, along with the Red Sea diversions, are absorbing the added capacity and demand remains high, resulting in vessel bunching and berthing delays at major ports in China, the USA and South America.

The risk of further supply chain disruptions persists, with potential threats from labour strikes and the increasing impact of severe weather events linked to climate change.

Red Sea diversions soak up equipment
Container equipment situation in Asia, and China in particular, remains challenging but is improving with India now becoming the main hotspot.
Ocean carriers and container leasing companies have booked all available container production slots at Chinese manufacturers until mid-October, following record-high deliveries earlier in the year. In the first seven months of 2024 alone, container deliveries increased tenfold compared to the same period in 2023.

The availability of 40ft high-cube containers has tightened significantly, putting additional pressure on carriers and manufacturers to meet delivery schedules amid strong export growth from Asia and ongoing port congestion.

As the industry navigates these complex challenges, the focus remains on managing capacity, stabilising operations, and mitigating the risks posed by economic and environmental factors.

Ongoing demand for ocean freight and challenges in capacity suggest a complex and potentially turbulent peak season ahead.

We recommend talking to us now, if you have high-priority orders and sharing your shipping forecasts, so that we can secure your space, on the services that meet your deadlines, at the best possible rates.
To learn how we can safeguard and enhance your ocean supply chain, please EMAIL our Chief Commercial Officer, Andy Smith. 

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Sustainability focus

Sep 4, 2024 | , , , ,

When managed effectively, supply chains not only reduce costs and boost profitability but also play a crucial role in sustainability. The impact of climate change has underscored the need to improve supply chains to protect our ecosystem and conserve natural resources for future generations.

As the global push for decarbonisation intensifies, both the maritime and aviation sectors are under pressure to adopt sustainable practices. Metro has been at the forefront of these efforts, investing in new fuel technologies that will support the green transition.

Ocean
In July, the International Maritime Organisation (IMO) set a new climate strategy aiming for net-zero greenhouse gas emissions by around 2050. Interim targets include reducing emissions by 20%-30% by 2030 and 70%-80% by 2040, compared to 2008 levels. To achieve the 2030 target with green fuels alone, over one-third of international shipping would need to transition to low or zero-emission fuels within 5-6 years, which is highly challenging.

However, the IMO could meet its 2030 goal with only 10% of ships using green fuels if it also significantly improves energy efficiency. This would require increasing the energy efficiency target from 22% to 38% by 2030, which could involve widespread adoption of wind technologies and reduced operating speeds.

Shipping CEOs have united to push for faster decarbonisation in global maritime transport, advocating for an end date for fossil fuel-only ships and urging the International Maritime Organization (IMO) to establish regulations that will speed up the shift to green fuels.

Their joint declaration outlines four key regulations:
1. Set an end date for new fossil fuel-only ships and establish a timeline for greenhouse gas (GHG) intensity standards to encourage investment in green technologies
2. Implement GHG pricing to make green fuels competitive with traditional fuels during the transition
3. Allow vessel pooling for GHG compliance, where a group’s overall performance counts, accelerating decarbonisation
4. Adopt a Well-to-Wake (lifecycle) GHG approach to guide investments and avoid stranded assets

LNG is seen as the most practical current solution for decarbonisation, with the ability to transition to net-zero carbon fuels like bio-LNG and e-LNG. LNG-fuelled ships are growing in numbers, with over 1,000 expected by 2027, compared to just 36 a decade ago.

Air
The aviation industry is relying on SAF to achieve 65% of its net-zero emissions target by 2050, but current production is a fraction of the 500 million tonnes needed annually by 2050 and the challenge now lies in financing, not engineering.

Investors are being urged to fund large-scale SAF ventures, as this could lead to a new industry that transforms aviation, creates jobs, and offers substantial financial returns.

Redirecting some of the $7 trillion in fossil fuel government subsidies could significantly accelerate the shift to sustainable fuels, with countries like Japan, Singapore, and the US already incentivising SAF production.

Metro has been investing in Sustainable Aviation Fuel for years, and was the first forwarder to join the Air France KLM Martinair Cargo (AFKLMP Cargo) SAF programme.

Grant Liddell, Metro’s managing director said. “We are proud to take this collaborative approach directly with the airlines. Air France and KLM have been pioneering SAF since 2009 and Metro’s participation will help fund the research and development, which can increase production and make SAF available in greater quantities and in more locations.”

Metro has been certified carbon neutral for three years and is committed to extending this zero-emission strategy as far down customers’ supply chains as possible. 

The same toolkit we use to measure, reporting and offset our emissions, to achieve carbon neutrality, is available ‘free of charge’ to our customers.

Part of our MVT supply chain platform, the ECO module monitors the energy emissions, emission costs and CO2 equivalent emissions, of customers’ consignments, by every mode. 

Reports and key eco statistics related to their movements, allow them to see which areas will benefit most from emissions offsetting and where efforts can have the most impact.

To request a demo or discuss your requirements, please EMAIL Ian Powell.

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Bangladesh’s garment industry determined to rebuild global confidence

Aug 19, 2024 | , , ,

As factories reopen, truck movements increase, and key logistics operations resume, Bangladesh’s garment industry is determined to recover and win back their customers’ confidence.

Rail freight operations resumed on Monday, 12th August, and airports, container freight stations, terminals, and ports remain operational with essential personnel working to process cargo.

Truck and container movements have seen an uptick, reflecting the country’s determination to get back on track despite the recent turmoil. However, the situation remains fluid, and our local partners are working tirelessly to find solutions to keep cargo moving.

The political unrest, which culminated in the fall of Prime Minister Sheikh Hasina’s government, has shaken buyer confidence, with factories forced to close during curfews triggered by weeks of violence in July, causing significant disruptions to production and supply chains.

As a result, clothes and shoe deliveries to Europe and North America for the winter season have been delayed, with backlogs still being cleared at ports and airports.

In an effort to mitigate the damage, factories have turned to air freight and extended working hours to make up for production delays, with some backlogs stretching as far as a month.

However, this has not been enough to prevent some retailers from diverting a percentage of their orders to other suppliers in countries like Cambodia, Indonesia, India, and Turkey.

Despite this setback, Bangladeshi manufacturers are intent on regaining the confidence of global retailers. The new interim government, led by Nobel Peace Prize-winning economist Muhammad Yunus, has made reestablishing law and order a top priority. A new industrial security task force has been created, and the army has been deployed to guard factories.

Yunus has also pledged to tackle corruption and reform key institutions such as the bureaucracy and judiciary, which industry executives believe will make Bangladesh’s export sectors more competitive in the long run.

Garment and footwear producers continue to benefit from the country’s plentiful and low-cost labour, which remains an advantage that is difficult for rival suppliers to match.

As factories reopen and gradually ramp up production, some of the world’s largest fashion retailers have expressed cautious optimism, welcoming the steps taken towards greater stability. And while business may have temporarily shifted to other countries, Bangladeshi exporters are hopeful that the situation will improve soon and that the country will regain its position as a leading supplier of garments and footwear.

We are working closely with clients impacted by the evolving situation in Bangladesh to avoid disruption to their supply chains.

Our operations teams and local partners are expertly managing the challenges at Chittagong Port and Dhaka Airport, ensuring the stability of our customers’ supply chains despite ongoing regional tensions.

If you have any concerns or would like to discuss our contingency services, please reach out to our Chief Commercial Officer, Andy Smith, via EMAIL.

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Container ship fires trigger operational and financial risks

Aug 19, 2024 | , ,

The temporary closure of the Beilun Phase III Terminal at Ningbo (one of the world’s busiest container ports) following an explosion on the YM Mobility on the 9th of August, is yet another example of the fragility of global supply chains and the inevitable ripple effects such events have on shipping operations.

Even though operations resumed on the 12th of August, the brief interruption is expected to exacerbate existing congestion at major Asian ports, leading to delays and highlights the vulnerability of global trade to sudden disruptions.

Shipping schedules are likely to deteriorate further, which will directly impact the timely delivery of goods, which could lead to cascading effects across industries, particularly those with narrow sales windows, or reliant on just-in-time delivery.

While there will always be options to mitigate these delays, such as rerouting through less congested ports, the full impact of incidents like the YM Mobility fire only become apparent in the ensuing weeks. And while it’s possible to protect the business from supply chain shocks, having comprehensive marine insurance to protect the businesses from financial shocks is equally critical.

The Ningbo fire is not an isolated incident. Just two days later, on the 11th of August, another fire broke out aboard the MSC Capetown III at Sri Lanka’s Port of Colombo. This fire, which began in the under-deck cargo space, escalated to an explosion.

Despite the successful containment of the fire, the incident once again brought attention to the recurring issues of mis-declared cargo and inadequate insurance coverage.

Fires aboard container ships are not uncommon, with recent events involving the Maersk Frankfurt (in July) and YM Mobility further emphasising the need for shippers to ensure their goods are adequately protected. Mis-declaration of cargo remains a significant problem, putting both the vessel and other cargo at risk.

One critical aspect that many shippers overlook is the principle of General Average (GA). In the event of an emergency where costs are incurred to protect the vessel and complete the voyage, all cargo owners are expected to contribute to these expenses. However, without proper marine insurance, shippers may find themselves liable for significant costs, even if their own cargo was not directly damaged.

Shippers must recognise that relying solely on the limited coverage offered by freight forwarders or carriers is insufficient. Comprehensive marine insurance, such as Metro’s All Risks cover, offers essential protection against total loss, damage, and GA declarations, safeguarding businesses from potentially catastrophic financial losses.

In conclusion, the recent fires at ports like Ningbo and Colombo serve as a critical reminder of the vulnerabilities within the global supply chain. Businesses need to be prepared for disruptions and protect their financial interests with adequate marine insurance, ensuring that they can weather the inevitable storms that arise in global shipping.

When General Average is called, the consignee will need to provide security for the cargo’s proportion of the General Average, typically a percentage-based deposit, or an Underwriter’s Guarantee.

Metro’s All Risk marine insurance covers the full value of your goods and protects you against all loss of cargo and the risk of General Average, including your Underwriter’s Guarantee.

For further information on our marine insurance cover and to ensure that you have full liability, please EMAIL Laurence Burford, Chief Financial Officer.

Category: Supply Chain

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