The ripple effect of changed ocean freight traffic and port congestion
Thomas Kofler, Chief Commercial Officer, Cargoo
“When you have done everything within your power to anticipate and optimize, all that’s left is getting the track & trace facts and communicating them.”
Following the Houthi rebel attacks in the Red Sea, ocean carriers have shifted global traffic patterns and port operators are also delayed. The reason is simple: major shipping lines suspended services through the Red Sea and Suez Canal, rerouting vessels via the Cape of Good Hope. This is causing widespread congestion and delays in most industries.
Over the past months I see knock-on effects of changed Asian-European ocean freight traffic patterns which I summarize this way:
Transit times have increased
Rerouting vessels via the Cape of Good Hope has extended transit distances by an average of 9%. This reduced available capacity by 15-20% in the second quarter of 2024 (2) because there are fewer vessels available to move cargo. Once in port, they also need more time to refuel. So, the ocean freight supply chain is simply moving slower on Asian to Europe routes.
Port Congestion and Delays
Trans-shipment ports like Singapore have seen severe congestion due to the changes in carrier service patterns. The time ships spend waiting to berth has increased by 43%, leading to significant yard congestion. (3) This congestion is compounded by shippers advancing their orders. Carriers for European routes, and some Middle East / Latin America routes are seeing peak periods now (in June / July) rather than August. This leads to longer handling times. Barcelona is experiencing double digit increases in volume, a result of new trade routes and an earlier peak season.
Costs. Damn high costs
The longer routes and increased costs have pushed shipping rates from Asia higher. The Shanghai Containerized Freight Index has recorded twelve consecutive weeks of rate increases, prompting frequent adjustments in peak season surcharges and general rate increases. (1) It also affects the return of empty containers, which complicates logistics in Asia and creates a negative net capacity.
So, what can we do?
Ending the war in Gaza is not a decision in the hands of ocean freight professionals, so we have to ride out the storm. In my mind that boils down to two options:
Pay the price when you must:
A quick Google search provides the “top 10” freight forwarders in almost any country, all of whom offer LCL services for ocean transportation. Shippers are pre-booking space and entering allocation agreements with carriers to provide weekly LCL capacity. Their rates are eye-watering, but LCL keeps smaller quantities of critical goods moving despite space limitations.
Data – get the facts and communicate them:
There are many visibility tools offering real time tracking data to evaluate carrier lanes and anticipate delays. Once the vessel is underway, virtually no visibility provider reports how many of which SKU’s are in each container. They simply do not have that data. Cargoo is a SaaS solution for ocean freight transportation that has the data. So when trans-shipment times are delayed by 18hrs / 26hrs / whatever hrs, you know the impacted containers, their contents and can communicate the ripple effect of that delay within your company. When you have done everything within your power to anticipate and optimize, all that’s left is getting the track & trace facts and communicating them.
Sources: www.dhl.com, www.maersk.com, www.logupdateafrica.com
About me
I have been in the supply chain and logistics industry for 30 years, I am acting president of the CSCMP Roundtable Switzerland and CCO at Cargoo, the experts in ocean freight transportation. Cargoo is more than a TMS. It supports supply chain execution across procurement, planning, execution and control. In other words, RMS, OMS, TMS, DMS. Learn more about Cargoo on our website.
Thomas Kofler
Chief Commercial Officer
e: [email protected]
w: www.cargoo.com
