Container Shipping: Schedule Reliability Improves, but Growth Slows
According to a report by Sea-Intelligence, container shipping has seen a steady improvement in schedule reliability over the past year. The report, which tracks the performance of over 60 carriers across 34 trade lanes, shows that carriers have managed to rebound strongly despite the challenges of 2021 and early 2022. However, the pace of improvement has been slowing down in recent months.
This trend has significant implications. While the overall reliability has improved, the slowing pace of improvement suggests that carriers are still grappling with operational challenges. The report also highlights that the average delays have decreased for the fourth consecutive month. However, as volumes stabilize and potentially increase later in the year, the industry might face new challenges in maintaining this level of reliability.
Emerging Trends in Ocean Freight: The Rise of LCL Shipments
In recent times, a shift in the dynamics of outbound Asian containerized volumes has been observed. This shift is characterized by a slowdown in large shipments, while smaller, less-than-container (LCL) shipments are seeing an uptick. This change is largely driven by inconsistent consumer demand and an overstock of goods at key destinations, which has reduced the need for restocking.
This indicates a change in how goods are transported. The increased demand for LCL services across major trade lanes reflects this shift. This approach of sending smaller shipments more frequently offers flexibility and could potentially lead to cost savings, especially in a market with weaker ocean rates. However, it also presents new challenges in terms of managing logistics and ensuring timely delivery.
Unprecedented Dip in Long-Term Rates for Container Shipping
The container shipping industry is facing a significant slump in its global long-term freight rates. As of May, the contracted cost of shipping containers has seen a drastic drop of 27.5%, marking the ninth consecutive month of decreasing rates. This decline is the largest ever recorded on Xeneta’s Shipping Index (XSI®), a platform that tracks real-time global rate developments.
This downturn in rates is a reflection of the current market reality. The decline is largely because May was when previously existing 12-month contracts in the US ended, and new agreements (priced much lower) started. This change is a result of today’s subdued markets. The impact of this shift is evident in the industry’s current state, which concerns those carriers that are struggling to manage capacity amidst evaporating trade volumes and macroeconomic uncertainty.
Nearshoring Trend Gains Momentum for US Companies
The nearshoring trend, where companies move offshore operations to neighboring countries, has seen a significant rise this year. The ongoing pandemic has largely influenced this shift. Mexico, in particular, has become a primary focus for US companies, surpassing China as the top trade partner of the US, accounting for 16.1% of total trade in the first quarter.
For importers and exporters, this trend is crucial. Over 400 companies are expected to establish businesses in Mexico this year, contributing to the country’s industrial growth. This shift is particularly noticeable in Laredo, Texas, a city on the border that has become a central hub for the nearshoring boom. This trend is expected to continue in the future.
Norfolk Southern Railway: Enhancing Cargo Flow and Reducing Fees
In recent developments, Norfolk Southern Railway, a major player in the intermodal transport sector, has decided to roll back several measures implemented over the past two years. These measures were initially introduced to expedite cargo flow but are now deemed unnecessary due to the increased fluidity of intermodal terminals.
This decision is particularly relevant to shippers, including reducing rail demurrage fees. This fee is charged when shippers fail to retrieve their containers within the stipulated free time across all intermodal terminals; this time has now been extended back to two days at some of the less congested inland hubs.
New Equipment Pool Receives Initial Chassis in South Atlantic
The ports of Jacksonville, Savannah, and Wilmington, North Carolina, have recently received the first batch of chassis for a new equipment pool. This marks a significant step in developing the new pool, which is set to be operational by October.
References
https://gcaptain.com/container-shipping-industry-faces-unprecedented-slump-in-long-term-rates/
https://www.ttnews.com/articles/nearshoring-trend-escalates
https://www.joc.com/article/first-new-chassis-arrive-new-south-atlantic-pool_20230601.html
