If you’re a shipper, we’ve got important information for you about what’s going on in the ocean sector. And for those of you who say “we’re not big ocean shippers” it is important to understand these issues as they could have a significant impact on your supply chain. That is because ocean freight issues can affect the logistics networks of your suppliers or customers and thus, your company.
Right now the ocean markets are very, very fluid. For example, we are witnessing a sharp decline in the rates for ocean containers. The rates for shipping a container have dropped from about $15-25k a year ago to $5-8k today. While this is a great reprieve for shippers for now, nobody knows what will happen in 2023 and these lower rates aren't being extended for more than about 6 months typically.
And that is just one example. There are other significant issues as well. With that thought in mind, last week we interviewed Peter Tirschwell, VP at IHS Markit and an expert on ocean issues at the Journal of Commerce.
In this interview Peter addressed the factors affecting ocean rates, the likelihood of a shutdown or disruption at the West Coast Ports in light of the recent news that the “ILWU security guard local authorizes LA-LB strike”.
Ever since the contract expired at the end of June, a major question mark has been what will happen with the negotiations between the ILWU and the PMA. Early on, it appeared that there was a low risk of a shutdown at the West Coast Ports since the Biden administration had brought both parties together to make this commitment. However, in light of the current situation, one shipper I spoke with commented that they previously estimated the likelihood of a slowdown or a shutdown at 5-10% but now they’re putting it in the 75-80% range.
And no interview about ocean issues would be complete without addressing the rapid escalation of detention and demurrage charges. With many ports reducing the holding time before demurrage charges kick in and other factors beyond shippers control - e.g. lack of equipment etc. - Peter noted that these issues aren’t likely to be resolved anytime soon.
Add it all up and now, more than ever, it’s time for shippers to create a written supply chain plan that defines the issues, outlines how the issues will be addressed and makes everyone aware of the resources that will be required. If you have questions or want to discuss how your company can create this plan, give us a call or send me an email. You can listen to Peter's perspective here.
BY MIKE REGAN, CO-FOUNDER OF TRANZACT
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