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Container Availability: From Shortage to Congestion?

container availability

Container Availability: From Shortage to Congestion?

Container ports all over the world, with the exception of China, are faced with imminent congestion when a multitude of boxes sent for shipment from factories in Asia arrive at their import destinations. As the infection rate of the COVID-19 in China declined and production resumed, a large number of containers that had piled up in China have finally sailed to Europe and North America. 

With Container Availability Index (CAx) values of 0.17 (20DCs) and 0.33 (40DCs), it seems like the Port of Shanghai is back at full productivity. In the past couple weeks, containers had piled up – CAx values of greater than 0.6 indicate a surplus of equipment – due to multitudinous blank sailings, something that would normally not happen often. Being able to forecast the development of the next 3 weeks, the CAx values for Shanghai will decrease from 0.41 for 20DCS in week 14, indicating that equipment will become more scarce again.

However, the effects of COVID-19 have dramatically affected consumer demand in the US and Europe. Buyers have begun to cancel orders as most of these countries are now in a severe lockdown situation and warehouse capacity is being maxed out. The incoming containers are most likely causing congestion, and incurring storage and demurrage charges at, for instance, the Port of Los Angeles or the Port of Hamburg.

With CAx values of 0.38 (20DCs) and 0.57 (40HCs) for Hamburg and values of 0.82 (40DCs) and 0.3 (40HCs) for Los Angeles, the Container Availability Index also forecasts increasing equipment volumes in these ports. The forecast takes millions of containers tracked through Container xChange into account, helping shipping companies make container sale, lease or repositioning decisions. 

The next couple of weeks will tell us if the COVID-19 situation eases in the western world. To remain competitive, especially European freight forwarders and shippers are expected to increase their usage of SOC containers in order to avoid demurrage charges. 

equipment

Report: Shortage of Equipment in the US & Northern Europe

Equipment imbalances and empty container repositioning is a problem that accounts for $20 billion for the shipping industry annually, but due to the Coronavirus it got even worse for most carriers or NVOs. Especially in the US or Europe, companies are starting to experience frequent equipment shortages. This is a direct result of the ocean carriers’ blank sailing strategy which is triggered by the low/no volumes on major shipping routes. Based on ocean carriers’ comments and the Container Availability Index (CAx), it is expected that this trend will continue, if not only worsen.

The CAx forecasts supply and demand in container logistics for most of the biggest port locations for up to three weeks. It takes millions of containers tracked through the Container xChange online platform into account and shows that compared to 2019, containers are piling up in China. It shows values of 0.47 (20DCs), 0.94 (40DCs) and 0.71 (40HCs) for week 10 in Shanghai, China – a plus of 47% compared to week 10 last year.

Usually, it’s the other way around, but now we have a deficit of containers in North America and Europe, CAx values for Hamburg, Germany dropped by 33% to 0.07 (40HCs), 0.45 (40DCs) and 0.47 (20DCs). For Los Angeles, US, with CAx values of 0.25 (20DCs), 0.19 (40DCs) and 0.11 (40HCs) and Chicago, US with 0.02 (20DCs), 0.01 (40 DCs) and 0.11 (40HCs) it’s even worse and the forecast says it will not get better soon.

As a result of the blank sailings, it forces mainly NVOs to hold empty equipment longer than usual, incurring more demurrage & detention charges as well as chassis fees or repositioning equipment, where available, in addition to possible interchange fees. Additional surcharges and costs include Peak Season Surcharges (PSS), Container Imbalance Surcharge (CIS), Congestion Surcharges (CNS) and General Rate Increase (GRI). Feel free to use the CAx to find out about the equipment available in your port location.

A solution for how the problem can be tackled is the neutral online platform Container xChange. It lets NVOs identify partners for repositioning or find SOC containers to completely avoid demurrage & detention charges initially because shippers owned containers have just to be returned at the partner’s depot. Just type in your locations and find new partners in more than 2500 locations online.

digital

Digital Collaboration: Get ahead, fast.

Recently at a conference for freight forwarders everyone jointly agreed: if you’re the fastest to quote, you win the customer. What astonished me was what I heard in a conversation afterwards! “We are working in shifts now, 16 hours per day, to make sure we can quote fast and win new deals,” said one of the present forwarders. I was surprised that putting in more hours to send emails back and forth is a better solution for shipping companies than digitizing collaboration and automating tasks. The banking system solved this issue years ago with the introduction of the SWIFT system: a standardized banking system that enables companies which had never worked with each other before to transfer money on a global scale at no risk. 

In shipping, we’re still way behind the curve. The newly formed Digital Container Shipping Association has taken the first timid steps to promote data standards in shipping because they believe in close collaboration between the different stakeholders. The underlying rationale for this collaboration is typically 2-fold: (a) Margins are still depressed due to overcapacity and (b) customers demand more and more streamlined services. Although costs for technology are consistently decreasing, our industry is generally considered to have been slow to adopt digital approaches. Of course, companies collaborate across company borders, mostly through emails and networks; but isn’t it extremely inefficient and unscalable, especially in times where this could be automated to be done within seconds instead of days? 

What holds SMEs back from digital collaboration? 

We have noticed that especially small and medium-sized companies are either stuck in their traditional mindset or simply don’t know how to start with digital collaboration. Why is that so and how do companies overcome this conundrum? 

Companies are afraid to share their data 

People have to overcome their traditional industry mindset first, as a highly competitive attitude makes collaboration with competitors exceedingly difficult. Most companies don’t want to share their data because they think it’s their secret and crucial for their business – but most “data” is non-sensitive. Consider container movements, position updates forecasts and contact information of local agents. Of course, crucial information about e.g., my commercial terms with my vendors should not be openly shared! However, sharing operational data means exchanging information that you can leverage to increase service offerings, internal processes and ultimately create quotations in less time. 

Even if companies are willing to collaborate, they don’t know how to get started 

Lack of existing data standards, limited capacity or scary data security questions – the list of potential challenges of data sharing is long (as for every new project!) and only a limited number of people in logistics have “been there, done that”. 

However, in the end, it comes down to what you want to achieve/solve in the first place: How do you get your customers love working with you? How do you create quotations in less time to win more business? We suggest defining your most important targets and metrics first, and reverse engineer a good solution from there. 

Now: How can you get started? 

To get started with data sharing, finding out what you want in the first place is only the beginning of a long journey. To make it a little bit easier for you, try to answer the questions below for your own business (take a screenshot or copy into a word doc): 

-What are my main pain points?

-What is particularly crucial for my customers?  

-What data describes the problem the best? 

-How well is my data organized? 

-What data is non-sensitive? 

-What additional data do I need? 

-Who has it? How can I get that data? 

-Who (of my partners) would need my data to become better? 

-Does it make sense to work with them? 

-What integrations and/or technology would that require? 

There is no one-size-fits all solution as you can see! It’s about you and your specific business model. Only after you’re able to answer these questions you can think about the next steps: design use-cases/MVPs (Minimum Viable Products), and test setups and data integrations. 

With missing IT capabilities or resources, building integrations can oftentimes be hard because you need to manage numerous data standards and interfaces. In most cases, a 3rd party technology provider can help you as a connector in the industry. Such technology companies can not only translate different data formats into one language, but they also anonymize data to increase trust and reduce perceived risks for you: You still own your data and it is 100% up to you what part of your data you want to share to reach a certain goal. Moreover, working with 3rd party technology providers has another advantage for you: they help you develop a proof of concept at low costs! 

Of course, it requires a certain level of commitment, but working with a connector lets you test with a well-defined problem and a limited group of stakeholders to develop a workable solution. For freight forwarders, it could be the integration with a selected list of carriers to enable instant online quotes/ bookings for their customers. For equipment managers it could be integrating their equipment management system with a tracking provider to automatically receive container status updates such as pickups, drop-offs, delay warnings and ETAs. 

Once the proof of concept has been demonstrated, the collaboration could then be expanded by bringing in additional stakeholders or addressing related problems with similar approaches. Being able to create quotations faster is only one challenge – several other topics including internal organization, equipment management or communication with external stakeholders can also be targeted with an open mindset and the courage to test new things. We encourage you to start right now! 

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Christian Roeloffs is the founder and CEO of Container xChange – an online platform that creates transparency on supply and demand in container logistics. More than 300 container users and owners such as Seaco and Kuehne+Nagel use the neutral online platform to find SOC containers in 2500 locations and identify partners to avoid empty container repositioning.