After 18 months in this pandemic, many issues have arise in the global economy. While some countries are beginning to feel some sense of normalcy, others are still reeling from the aftershocks of the virus. One pressing issue that has always resurfaced is freight. In part 1 of this 3 part series, we try to explore more about Cancellations and Delays during COVID-19 and together, hopefully try to better understand the Global situation.
Some recent observations:
- Reduced Responsiveness of Agents / Liners
- Sudden Roll over (postponement) of confirmed containers
- Extended Export / Import clearance times (Loading / Unloading Port)
- Increased transit times
- Insufficient Clean Container Cubes available – Part 2
- Rising Shipping & Freight Cost – Part 2
1. Reduced Responsiveness
Covid-19 continues to weigh upon the world including Indonesia. Many companies have transited to working from home (WFH) options or adjusted physical working hours to a minimum which affects productivity, efficiency, and communication between departments. The latest implementation of the nationwide partial lockdown measures (PPKM starting 3 July 2021 – extended till 2 Aug 2021) by the Indonesian government further reduced corporate operation efficiency. These factors, combined to drag down service response rates throughout the country.
2. Sudden Roll over (Postponement) of confirmed containers
As demand increases and container space begins to thin out, agents/liners tend to overbook their freights to maximize each vessel’s space to improve efficiency.
Like the airline industry, where ticketed passengers are delayed and rescheduled at the gate due to oversold seats, the overbooking results in late arrival stuffed containers being turned away. As soon as the ship reaches its maximum capacity, subsequent stuffed containers are rolled over (pushed forward) to the next available vessel. Thus, it tends to inadvertently overbook the next ship, repeating a vicious cycle of overbooked vessels.
3. Extended Export / Import clearance times
Many ports have experienced a spike in the volume of vessels during this period. The large amounts of containers loading and unloading poses a challenge for ports as they try to keep containers moving along to reduce congestion while adhering to measures to safeguard their staff against Covid-19. Additionally, present ground infrastructure of many ports are not well-equipped to handle the spike in volume of vessels, resulting in delays.
As the backlog increases and ports get more congested, ships are forced to be waiting outside ports instead of quickly transiting to clear ocean shipping demand. This, in turn, shrinks the overall global supply of ships as capacity is struck at wrong areas.
The crude new protocols and imperfect procedures of various ports further lengthens the clearing time of ships waiting to be unloaded/loaded at destination ports. This inevitably increases port unloading times and unfortunately port loading times too.
4. Increased Transit Times
Due to additional safety protocols to counter Covid-19 and delays in ports, transit times have been seen to have increased by 42% internationally. Vessels waiting to unload have been quarantined and held outside each port awaiting available berths creating uncertainties and delays in arrival and departure times. With the additional Suez Canal incident (where a container ship blocked the entire route) causing a pile up of shipping lines and Yantian Port Infection (second wave of COVID Strains) held up 5% of global freight, congestion and delays have been further exacerbated.
Due to the combination of these issues, the past few months, we have seen numerous cancellations and delays during Covid-19. So what about Containers and Freight Costs?
Stay tuned for part 2 of this 3-part series as we learn more about freight issues in this Covid-19 Pandemic!
– Your Fellow Organic Coconut Sugar Lover –.