A recent article in The Loadstar highlights the plans by a couple of shipping lines to pull capacity on the Asia – Europe trade lane over the next few months. In Oceania, we’ve seen the frequency of blank sailings increase in the last 12 months and it’s going to get worse. So, what does this mean for our part of the world?
Let’s start with the ‘why?’
The shipping lines are doing this because it allows them to control demand and maintain high ocean freight rates. Contracted rates are currently significantly above the Spot Market rates and, in reality, we haven’t had a peak season.
The shipping lines would like to hold rates where they were earlier this year, not drifting down to USD 4000/40’ and below from China to Australia’s East Coast.
If you’ve booked with a carrier and they blank a sailing, those containers will not be moved.
They will remain until at least the next service from that carrier. This obviously puts pressure on your demand planning functions, and raises potential issues with sales and marketing, and on downstream, especially at transhipment point.
It also has a significant impact on equipment availability. We’re seeing the challenges of returning empty containers in Australia and significant equipment availability issues in the USA, and with reduced sailings the equipment imbalances are only going to increase.
Unfortunately we’re going back to a “Just in Case” scenario just when we’re being asked to tighten our belts. We’re going to see not only increased direct freight costs but also additional warehouse costs, and the dreaded detention and demurrage.
Once again we’re increasing risk in the supply chain with, potentially, containers stuck in origin and transhipment ports.
I think we’re going to be talking a lot about blank sailings for some time in the future. At Ligentia, we’re working with a number of our customers on a blended procurement strategy, which involves:
- prioritising purchase orders
- the highest priority purchase orders are moved on NAC across a spread of carriers, and
- the rest are moved as FAK
- monitoring local conditions to catch any blank sailings as early as possible
- monitoring freight rate trends and reviewing the mix of NAC v FAK. If NAC rates move close to, or lower than, FAK rates, we will move more freight onto our NAC
- local market intelligence which is critical
- real visibility of where shipments are and how this impacts on your inventory levels
If you are in the Oceania region and would like to discuss your freight strategy, please email email@example.com.