'Volatile' box trade has shifted 'from a demand crisis to an operational crisis'
The era of low-cost ocean freight could be over as volatility and exception handling become the new battleground for forwarders and carriers.

According to Otto Schacht, Kuehne + Nagel’s executive vice president of sea logistics, this year’s supply chain shocks and volatility mean container shipping is moving away from being largely cost-focused.

For example, he said, many customers were expecting a 50%-60% drop in volumes in April and May, but demand came back much faster than expected, with the resulting uncertainty having a huge impact on supply chains.

«A lot of global shippers had no visibility on purchase order details,» Mr Schacht said during a webinar last week. «I think the focus is now on better visibility.

«A lot of people are saying they have to invest more money into this, and that they need the right strategic partners. So we’re getting away from ocean shipping as being a purely transactional business, to being more organised within supply chains.»

Vincent Clerc, Maersk CEO for ocean and logistics, agreed that a lot of companies were «scrambling to cope» with the uptick in demand as the lockdowns had quickly shifted consumer spending from travel and experiences to buying physical goods.

He added: «The conversation with many customers during the second quarter was ‘how can you slow down my goods? I don’t need them right now’. But today it’s ‘how can you speed them up? and how can I get more allocation?’.

«So we actually moved from putting on the handbrake to putting the pedal to the metal.»

The sudden bounce-back in demand created some operational issues, however.

«We’ve had a hard time repositioning equipment back to Asia fast enough,» Mr Clerc admitted. «And then you start to see congestion at destination ports and a shortage of truckers, which compounds the shortage of equipment where it’s needed for the next shipments.»

He said Maersk’s entire fleet was now fully deployed, with «all available equipment moving goods».

He added: «We’re managing hand-to-mouth now to make sure we provide as much speed, as much capacity and as much reactiveness to needs that our customers have.»

Alan Murphy, CEO and founder of Sea-Intelligence, said that as the industry shifted from a demand crisis to an operational crisis, the battleground for carriers and forwarders would be over who can better manage the increased volatility, while also providing visibility and efficient exception handling to customers.

«I think the era of below-cost freight rates is gone, because carriers can much more tactically adjust capacity to the available demand and sustain rates,» he added.

Analytics on topic
Rail Container Transportation in Eurasia in the First Half of 2020

In the first five months of 2020, the total value of mutual trade between the EU and China carried out by railway transport, increased by 21.22% year-on-year (47.42% more in May than in January 2020) . This development allowed rail transport to increase its share in the total trade volume from 2.83% in January-May 2019 to 3.47% in January-May 2020.

Message from Alexey Grom, CEO of UTLC ERA regarding the launch of renewed and updated ERAI web-portal.

The Eurasian Rail Alliance Index (ERAI) was introduced for the first time exactly a year ago, at PRO//Dvizhenie.1520 Transport Logistics Forum in Sochi. It is a unique instrument that allows any market player to decide on the delivery mode by assessing the cost of transportation via the longest leg of the Trans-Eurasian Route.