International Maritime

container ? When you factor in the price of shipping that box and the number of items inside , it sometimes doesn ’ t make sense to ship .”

Trapped on the spot market

Still , delaying shipments is not possible for many European importers that are locked into seasonal ordering patterns or have fast-moving consumer goods or promotional items with a rigid timeline . That makes it frustrating to be trapped on such an expensive spot market , the retail logistics director said .

“ The added ocean shipping costs are our greatest problem ,” he said . “ Every carrier has cut our allocations — often by 80 % — and in return they ask for prices of $ 9,000 per FEU when the negotiated rate was $ 1,500 . That simply kills all our calculations and then the price to the end-customer or the retail store needs to be increased for a product , and we are not competitive anymore .”

The Red Sea-related disruptions to shipper supply chains has once again exposed the shortcomings of container shipping contracting , according to James Hookham , director of the Global Shippers ’ Forum .

“ For shippers , the Red Sea crisis has further confirmed the ongoing fragility of global maritime supply chains ,” Hookham said . “ While acknowledging the scale and significance of diverting ships around Africa , the longevity and the worldwide extent of the disruption has surprised many .

“ Some market participants have stopped shipping their cargo because they are not willing to pay these rate levels .”

“ The ‘ old normal ’ will prevail as long as the lines continue with their traditional ‘ charge and cancel ’ habits ,” he added . “ It will take a fundamental shift in approach to service provision and price guarantees on the one hand and volume commitment and loyalty on the other to move the dial here . Not impossible , but not by this peak season .”

Dan Krassenstein , global supply chain director for industrial packaging firm Procon Pacific , said carriers have been skirting their contractual obligations by “ not providing the timely space and service as reasonably expected .”

“ Sure , some of the geopolitical events — Houthi attacks in the Red Sea and US threat of increases in import tariffs on Chinese goods — have caused longer transit times , increased need for vessels and equipment , and higher demand , causing an earlier ramped-up peak season ,” Krassenstein told the Journal of Commerce . “ However , both issues were known considerations a few months ago , so there ’ s no excuse for the lack of carrier performance . Rather , it was contracting in bad faith .”

email : greg . knowler @ spglobal . com

COMMENTARY

By Jeremy Masters

Ocean carriers face some interesting choices as alliance allegiances shift and unexpected challenges , such as diversions away from the Suez Canal , alter their ship operating systems .

Of course , attention is automatically paid to which ports are directly served and the key benchmarks of frequency and transit time .

There is , however , a bigger question hanging over both the original and the currently redesigned deployments : How do you build a robust , resilient system in the face of operational and geopolitical disruptions that throw conventional container shipping networks into disarray ?

Asia – Europe carriers , for instance , are grappling not only with significantly lengthened transit times but also a degradation in schedule reliability caused by port congestion at both ends of the trade .

We may be going through a particularly difficult period in world history ; over the last four years , the industry has faced pandemic-driven disruptions , wars in Europe and the Middle East , attacks on shipping in the Red Sea , and drought-related draft and transit restrictions at the Panama Canal .

No easy solutions

The Red Sea crisis has shown that one way to partially circumvent a major disruption is to throw more ships into the pot , which makes both individual services and the larger carrier networks nimbler and more flexible .

This is not necessarily a recipe for overall success , however . It ’ s not easy to procure ships in a hurry , and the price of doing so in the charter market rises rapidly as demand increases . There are also negative knock-on effects to other trades ; as ships and equipment are sucked away to help fill holes in disrupted lanes , reliability suffers in less prioritized trades .

And irrespective of the success of chartering more ships or pulling them from other trades , the collective effect of multiple redeployments and schedules being off berthing window is congestion , which creates the kind of downward spiral in schedule reliability and effective net capacity we see currently in the Asia-Europe trade .

Likewise , maintaining a “ buffer ” of excess ships ready to be deployed at a moment ’ s notice is a luxury most carriers cannot afford , unless they get

20 Journal of Commerce | July 29 , 2024 www . joc . com