Plenty of suppliers to our channel who source products from China are experiencing delays in receiving products. Here is an explanation from a logistics expert as to what is happening.
The current problems are :
1. The unstable shipping schedules (vessel delays, vessels cancellations, etc.)
This has unfortunately become a normal practice/phenomenon since the outbreak of COVID and is getting worse, not better.
Ships are either heavily delayed (minimum 10 days on average) or cancelled all of a sudden.
It is also very unfortunate that almost all major ports worldwide (not just China) are suffering from port congestion.
These port congestions eventually also cause ships delays.A lot of unfortunate incidents also came up unexpectedly, such as the Evergreen ship that got stuck at the Suez Canal, the ports at Shenzhen closed down due to COVID outbreak, etc.
Moreover, the Chinese Forces are conducting military exercises for minimum 2 to 3 weeks almost every month in the waters from North to South. They closed a large area of water. For certain areas and ports, ships simply cannot go and berth there but have to re-route or wait.
The other problem which will also greatly affect the vessel’s operations is the Typhoons.
We are now going into the Typhoon season. From now till end Oct., there will be typhoons affecting the regions from North to South.
Shenzhen ports were just closed down for the past 2 days due to typhoon.
There is another severe typhoon already on its way to hit the Fujian/Zhejiang regions which means ports at Taiwan, Xamen, Fuzhou, Ningbo and Shanghai and even possibly Qingdao will be affected in the coming days.
2. Terminals policies
As a result of the heavy delays of vessels, so the terminals are taking measures to avoid port congestions.
The terminals are all implementing very strict administrative measures for gate-in of containers (deliveries of ladens).
The days allowed range from a longest of 6 to 7 days to some even just for 3 to 4 days.
Shenzhen ports for example are based on 7 days before ETB (estimated time of berthing). In other words, Shenzhen ports only allows laden containers to be delivered to terminals when a vessel has been assigned for a berthing date/time.
Shanghai and Ningbo are still based on ETA but the days allowed is shorter (maximum 5 days before ETA).
This makes time allowed for operations very very tight not only for us but also for the shippers.
It is because shipping lines will only start to release S/O to us when they have the firm date of terminal accepting ladens.
When we have the S/O from shipping lines, the time available for the shippers to arrange for pick up of empties, loading of containers, customs clearance, etc. is very very tight. For some shippers they simply cannot catch this tight time schedule and hence have to cancel the booking and rebook on the next sailing.
3. Pick up of empties and delivery of ladens
As shipping lines only start to release S/O when the terminals have given them the date for deliveries of ladens, time available for pick up of empties and deliveries of ladens are tight. For some ports, we can arrange to get help from shipping lines to allow early pick up of empties but the ladens cannot be delivered to the terminal so we have to find a depot for accepting the laden for temporary storage till the ladens can be delivered to the terminal. Of course there will be quite some local costs to be paid for this arrangement, such as detention charge of container, temporary storage and delivery of ladens to Terminals.
4. Shortage of equipment
Similar to situation in Q4 last year and also early this year before the CNY holidays, shortage of equipment is a problem.
As far as carriers are concerned, most POLs are now having problems with supply of 40’ and 40’HC. This means customers will have to use 20’GP, 40’GP or 40’NOR (if available). For shippers who can only use 40’HC, they will have problems.
5. Way port space + Backlog in Singapore
Cargo going to Fremantle are all transshipped via Singapore.
Carriers are carrying cargo to Fremantle using way port space available.
Each POL is given way port space (TEU/DWT) based on different routes/service.
Because of the strong demand on space to Europe and other West Bound trade lanes, the way port space available is getting less and less.
Carriers are having problems of backlog in Singapore and so carriers are implanting very strict administrative measures to limit acceptance of cargo to Fremantle (also cargo which needs transshipment via Singapore).
6. Release of space/equipment
As explained before and due to reasons as explained above, Carriers have taken away the authority of space/equipment release from the sales teams at all POLs. This is now in the hands of a special divisions called the “Space/allocations release team”. These teams report to the HQ, not the POL office. This makes it more difficult for us to get the required space and equipment as we had managed to do in the past.
7. Reduced sailings per month/POL
As a result of all delays, etc., Carriers nowadays can hardly provide us with a weekly sailing from all POLs.
Most of the POLs can only offer 2 to maximum 3 sailings per month. For some POLs, there is only 1 sailing per month.8. Upcoming rate increases
We should be well prepared for drastic rate increases in the coming months.
I think we should not be too surprised to see rates exceeding USD8000/40’HC in the coming 2 months.
While not every supplier sourcing products from China is impacted, plenty are. Buy carefully, and have a plan b.