Disruptions caused by the Covid-19 pandemic, the Suez Canal blockage, ongoing port congestion and vessel omissions are having a crippling effect on supply chains with massive reliability and capacity problems, further resulting in container freight rates at record levels and cargo arriving between two to five weeks later than scheduled.
The recent surge in cargo demand has also led to an equipment imbalance and a shortage of space from various global ports. As a result, shipping-lines do not have space, and whatever space is left is being sold at premium. Furthermore, the waiting period to secure bookings has increased drastically, and contractual bookings are not being honoured.
Huge challenge in securing bookings
- Negotiated freight rates out the door. Negotiated contracts with major shipping lines are not being honoured due to current and challenging market conditions, carriers cannot maintain validity periods.
- Demurrage. The average demurrage and detention (D&D) charges across the world’s 20 largest ports has double since last year. Most shipping lines have reduced the free period at origin and/or destination as carrier principles mandate extensions. This mainly due to global equipment shortages and in many instances a maximum of five days is given regardless of whether cargo is released from the terminal or not.
Other reasons lack of capacity, delays, and resultant increased freight rates
- Covid-19. Covid-19 infections detected amongst crew members have resulted in entire vessels being placed under quarantine with carriers having to make last-minute changes to schedules to maintain vessel integrity. Furthermore, recent increased cases in Chinese and Indian main ports has negatively impacted productivity.
- Suez Canal. After three long months, the Ever Given, an ultra-large container vessel, finally set sail from the Great Bitter Lakes after being arrested and held for close to three months for jamming the southern channel of the Suez. Due to the blockage, more than 400 ships were out of circulation, causing a huge backlog.
- Trade routes. Due to better yields, the major trading hubs of the United States, Europe, Asia and even West Africa have received preference putting further pressure on South African cargo. Sailing schedules have even been amended whilst vessels were on-route without prior notice, thus affecting the visibility of shipment and extending the lead time.
- Citrus season. The Citrus Growers Association of Southern Africa (CGA) expects to have a record citrus export year – with an expected demand of 95 000 reefer containers. This figure rises to 120 000 when deciduous and subtropical fruit volume is included. As a result, shipping lines will give preference to reefer containers over general cargo.
Message to Ziegler Customers
These challenges have a massive impact on our ours and therefore your forecasting, your planning and your costing. To be on the safe side, we recommend you plan shipments at least three to four weeks further ahead of what you would normally. In addition, we urge logistics and business heads to please circulate this information amongst their own sales teams and customers, to manage expectations and avoid disappointment.