Explained about The current container shortages after the Lunar New Year by Video
Hello, it’s IINO.
This time, I’d like to talk about the status of the current container shortage after the Chinese Lunar New Year.
As a full month has not passed since the end of the Lunar New Year, which ended in mid-February, the statistical data is unavailable.
So, the content of this video is based on my own point of view, but is hopefully useful to you.
Here we go!
The current status of container shortage
Container shortages have become a problem since last November, and some people said that the container shortage will be solved after the Lunar New Year.
One of the reasons is that the new containers which ordered to Chinese container manufacturers will become available after the Lunar New Year.
So, what actually happened then?
Unfortunately, the container shortage situation hasn’t improved at all.
They continue to have container shortages in Asia and they are still unable to book space on vessels.
In this case, where are the containers?
As I have explained this in my previous container shortage video, the containers are located in inland America, Europe, at ports and on the sea.
The reason why the containers are there and they aren’t returned is explained in the previous video. I have attached the link in the comment section, so please check it out.
The current situation of shipping market
Now, let me explain the current situation in detail as some of you may wonder if there is any update from the last time.
First, ocean freight has skyrocketed since last November.
Let’s have a look at the statistics. It was still going up in this January. Please pause the video to check the details if you wish.
And now, it’s in March, after the Lunar New Year.
The statistics have not yet been published, but the ocean freight information of our company indicates that the price to West and East Coast America from Thailand has gone down slightly.
It looks like the peak price is over.
Now, in terms of Asia and South Eastern Asia based on our company in Thailand, the figures show that ocean freight is still increasing slightly.
Why? The reason is restricted to Thailand but March and April are the seasons for transport of durians.
In addition to that, Thailand has their Lunar New Year in mid-April.
A lot of durians are transported using reefer containers from Thailand to China each year.
Shipping lines will prioritize containers and vessel space for durian transport and as there is an increase of last minute bookings before the Lunar New Year, it is still very difficult to book space for export in Thailand.
The problem of off-schedule
Now, I would like to explain again what kind of logistic problems we have due to container shortages.
The biggest point of the current problem is not only increase in ocean freight, but also that “we are unable to set a schedule”.
Why are we unable to set a schedule? The reasons are as follows.;
– Roll over
I will explain each reason in detail.
First, “delay”. This means the vessel is delayed from the original schedule.
Why is a vessel delayed? This is linked to port congestion.
Currently, a lot of vessels are waiting at each port for their turn to load and unload their cargo.
These off-shore waiting times may be more than 1 week at Long Beach in America and may be more than 5 days in Singapore which is the Asian hub port.
The reason why ports are congested is explained in my previous video, so please check it out.
Due to congestion, vessel delays for 2 to 3 days become normal, and sometimes, they may delay for a week.
Now, what do shipping lines do to solve the delay? The next keyword is “omit”. To skip port.
Container ships follow a scheduled sea route which includes several ports to call in to load and unload containers.
Then, all of sudden to speed up the schedule, they decide to skip ports and move to the next port.
From our freight forwarders’ point of view, we receive “omit” notification and we have to tell our customer that “The shipping line decided to skip port, so we have to book next week’s space”.
If we get notified one or two weeks before the cargo loading, it’s better. But sometimes, we get omit notice after the cargo is loaded at the port.
About “roll over”
Finally, “roll over”. This means the container isn’t loaded.
At the moment, shipping lines are overbooking. Overbooking means that they accept 120% capacity when they receive bookings.
If a shipper cancels their booking and the total booking is only reduced to 110%, this 10% overbooked space is unable to load onto the vessel.
In this case, the cargo will be rolled over to the following week’s vessel.
If “roll over” happens at a transit port which is very congested, it will cause more problems.
Currently, there are 40% to 50% of rolled over cargo in transit ports in Singapore and Port Klang in Malaysia.
And, there is 30% of rolled over cargo in Busan in South Korea and Shanghai in China. As you can see, depending on the port, 30% to 50% of containers haven’t been loaded.
It’s better if “delay”, “omit” and “roll over” problems occur as individual cases.
However, in some cases you may receive a combination of the issues. Your cargo may get “roll over” in the first week and then “omit” in the following week.
If that happens for an indirect freight, your load may get “rolled over” at the next transit port. In this case, the container is delayed for about 2 to 3 weeks for the shipper.
What we, forwarder, can do
Sometimes, I receive a great deal of pressure from the customer saying “Do something, otherwise our factory will stop!”
The only thing I can do is to ask a shipping line’s sales person “not to roll over this cargo!” “Omit” is not something which a shipping line’s sales person can control.
It’s not like they can always do something about “roll over” cause how much they themselves are able to control “roll over” problem depends on the capacity of the vessel.
As you can tell, sea transportation schedules are not normal at present. So what we would like to ask our customer is to hold the stock as much as possible.
Of course, we fully understand that you have storage issues and warehouses costs.
However personally, as the current schedule is unstable and we are not in full of control at the moment, you need to prioritize things.
Until when container shortage will continue?
Now, you may say “Okay, IINO. We understand the situation.”
And ask me “So when does this situation improve?”
In my opinion, it is not easy to answer but I think the ports in America and Europe will start to operate as normal from the end of June at the earliest once the Covid vaccine is in full circulation.
Depending on the area, it may take much longer.
According to some organizations, they anticipate that it may continue until the end of this year.
For example, in America, the Presidency of Joe Biden has agreed about 200 trillion yen worth of economic measure plan.
With this measure, all citizens excluding high-income earners will receive about 150,000 yen.
If this money is spent on products rather than services, large volumes of cargo will be sent from China to America resulting in more congestion in Los Angeles and Long Beach ports in West Coast.
This may cause additional container shortages. So, “It is really hard to tell” is my honest opinion.
Let’s summarize today’s topic.
Our guess that “container shortages will be solved after the Lunar New Year” was wrong, and we still have international logistics troubles.
We haven’t yet received the ocean freight statistics after the Lunar New Year, but based on the figure we have in our company in Thailand ocean freight toward America has passed its peak. However, the cost to Asia is still going up slightly.
In Thailand, as March and April are durian season, and are before Songkran, we continue to have difficulties when booking space.
In Asia, there are a lot of vessel delays, omit and roll over and we are unable to set a schedule.
There is not anything which freight forwarders like us and shipping line’s sales people can control. So, what we can do is to explain the current situation to our customers and if possible ask them to maintain their stock levels.
We don’t know how long this situation is going to continue. The earliest finish may be the end of June, but it may continue until the end of this year with additional problems.
At this point, what we can do is to explain the current international logistics situation to our customers to get their understanding and do our best by focusing on what we can control rather than to look at something we are unable to control.
We will keep updating information, so we appreciate for your continuous support.
That’s all for today. Thank you.
Contact to IINO san