Updated: Oct 31, 2022
While space on ocean freight carriers is now more readily available, shippers need to be aware that this may be short-lived because carriers are beginning to blank sail and cancel services as consumer demand decreases around the globe.
These actions are done with an eye toward preserving profitability and optimizing available capacity. This has the potential to restrict container traffic at any port of any size and re-create the congestion issues that left a lasting impression on shippers around the globe.
“The lesson carriers learned during the pandemic is just how valuable their space is and that shippers are willing to pay a premium when it is in short supply,” said Frank Costa, Vice President of Sales at OEC Group’s New York office. “In fact, shippers should prepare for these and other related costs across the industry to remain high as other areas of the supply chain are dealing with all the residual challenges caused by the last two years, which will keep costs elevated.”
Labor negotiations, congestion, and space availability are a few of the issues keeping prices high right now. Prolonged labor contract discussions have been particularly acute as they affect the railroads, trucking and warehousing industries, and can cause disruptions that result in additional fees being assessed to shippers. For example, congestion has become a significant problem on the railroads due to a shortage of labor. This has resulted in severe congestion and extended dwell times, causing some railroad companies to avoid transporting cargo from ports to certain rail hubs and to charge additional fees for containers dwelling at the yards past their agreed upon free time.
However, the shortage of labor is not the only reason congestion remains a problem. There is also an industry-wide shortage of chassis, which aggravates ground stacking problems at rail yards. As a result, rail yards are looking to clear out as many containers as possible and are utilizing strategies from ports to charge storage fees for containers. In turn, shippers are incurring additional fees. Also, warehouses in the United States are nearly at capacity, meaning it will be difficult for any shipper to store cargo once it is transported out of the rail yard.
“The good news is that many of these issues and fees can be managed if not entirely avoided by partnering with a logistics expert who can advise on the best strategies and use industry knowledge from decades-long relationships to identify routes that are both optimal and cost-effective,” said Peter Ku, Vice President of Sales at OEC Group’s Seattle office. “The secret to lowering costs lays in how you plan your supply chain. Working with an expert who has the relationships needed to get your cargo where it needs to be should be your forever strategy.”