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Higher Container Rates and Tight Capacity Leading into Chinese New Year

Rates up in advance of Chinese New Year for ocean shipments of export cargo and import cargo in international trade.

Higher Container Rates and Tight Capacity Leading into Chinese New Year

Chinese New Year, which started this year on January 28, is a time in which most of Asia’s manufacturing facilities close for one to three weeks. Ahead of this period, however, businesses rush to import goods from Asia often in the midst of higher rates and tight capacity.

We asked our community if they are experiencing higher rates and tight capacity leading up to the Chinese New Year.

The results of our survey were a resounding yes with 80 percent of those surveyed indicating that they are in fact experiencing higher rates and tight capacity while 20 percent of survey respondents voted no.

Data from the Xeneta platform reports ocean freight spot rates to both the East and West Coasts of the US were on average 37 percent higher than they were in late December 2016. Although not as high as on the transpacific, the Asia-Europe route has also reported high spot rates since late December with an increase of approximately 10 percent.

Container cargo imports jumped during the final weeks of 2016, as retailers stocked up on inventory heading into the New Year. According to research firm Panjiva, which tracks trade data, US-bound seaborne shipments increased 8.9 percent in December over the same month a year earlier.

Strong holiday sales ended 2016 on a positive note for retailers as expectations for 2017 have only increased further. The period between the holiday season and the Chinese New Year is a short one this year, so it comes as no surprise that ocean freight rates have remained elevated.

Most industry analysts do not expect ocean freight rates to maintain their current levels after the Chinese New Year celebration. An interesting commentary is from Jock O’Connell, a trade economist, who said that shippers may be stocking up on inventory now in case rates rise this spring. It is possible that rates could rise as ocean freight alliances prepare to begin services in April but it remains unknown what the alliances may bring.

“I think it’s key to keep an eye on how the short-term market develops post Chinese New Year because if, as we’ve seen historically, it plummets quickly after that then it might very well rapidly change from a seller’s to a buyer’s market again,” said Xeneta CEO Patrik Berglund in a recent webinar. “If it sticks, the shippers sitting on the fence, waiting for Chinese New Year to blow over, might have lost out on the opportunity to contract, as they’ve done historically, according to the calendar year for Europe and then, as quickly as possible, for the transpacific corridor.”

Ocean freight rates are increasing and it remains to be seen how they will fare after Chinese New Year.

Katherine Barrios is chief marketing officer at Xeneta, a company which provides a database of ocean freight rates.

Hanjin collapse will affect shipments of export cargo and import cargo in international trade.

Hanjin’s Collapse: Preparing for Supply Chain Disruptions

Managing supply chain risk in today’s environment is an increasingly difficult task. Globalization, natural disasters, geopolitical concerns, and more can all strain supply chains.

With the recent financial collapse of Hanjin, we asked folks on social media if supply chains can prepare for such disruptions. The results were mixed with no clear answer as 38 percent said yes, 38 percent said no and 23 percent were not sure.

The Hanjin Collapse

The Hanjin collapse is going to cause disruption in many supply chains for a while. The U.S. Department of Agriculture has stated that Hanjin’s bankruptcy would cause shipping difficulties for the next two to three months. “The fallout of Hanjin Shipping is like Lehman Brothers to the financial markets,” said Gerry Wang, CEO of Seaspan.

Indeed, the North Carolina State University’s College of Management notes that the Hanjin collapse should not have come as a surprise. The ocean cargo market has been suffering for some time with overcapacity, low rates and a flat global market. In addition, the school notes on its blog post that “many ship builders and ocean carriers overextended themselves while the economy was growing, and these expectations resulted in a huge amount of investment that has resulted in too many ships and carriers competing for too little cargo”.

Managing Risks

Still, one cannot manage all risks 100 percent; but, instead one should strive to mitigate as much of the risk as possible. Dr. Madhav Durbha, Vice President of Industry Strategy at Kinaxis, has penned a thoughtful blog post concerning steps that businesses should take to manage supply chain risk.

“Identify – Collaborate with teams to identify risks that could potentially affect your supply chain.

“Quantify and Mitigate – Assess the probability of each risk occurring and build them into your business justification as you make outsourcing decisions.

“Monitor – Utilize technology and big data to monitor potential threats.

“Respond – Establish processes and systems that support the speed of response and collaboration.

“Learn and Improve – It is important to understand how one respond to risks. Take these learnings and add to your risk recovery playbooks or contingency processes.”

Katherine Barrios is chief marketing officer at Xeneta, a company which provides a database of ocean freight rates.

Hanjin collapse is raising rates for ocean shipments of export cargo and import cargo in international trade.

How will Hanjin’s Collapse Affect Ocean Freight Rates?

Hanjin’s big bump in the road has made for some interesting reading and writing for bloggers and press. As a company focused on the ups and downs of ocean freight rates, we can only but speculate what effect Hanjin’s drama can have on prices. So, naturally we went to our community to check the overall feeling on the topic.

We asked the social media community their thoughts on how Hanjin’s collapse will affect ocean shipping rates. Fifty percent of the respondents indicated that rates would indeed go up while 36 percent did not expect any change. A small percentage, seven percent, expects a decline while another seven percent of respondents were not sure.

As the news of Hanjin’s collapse sunk in, spot rates settled down the following week barely inching upwards for Asia to U.S. West Coast and East Coast ports. This may indicate that U.S. importers are finding space on other carriers during the peak season. Indeed, Maersk announced that it would open a new service from Asia to the U.S. west coast to soak up Hanjin’s customers. Similarly, MSC announced the introduction of a new transpacific service called Maple that started September 15.

According to Maersk, it is seeing a short-term rise in freight rates and new clients after the collapse of Hanjin Shipping Co. “The question is what will happen with the rates in the longer term. In the short term, the effect is positive, but there are many factors that can influence rates in the medium and in the long term,” a company representative said.

Indeed, the Chinese New Year holiday is January 28, so not only could vessel space tighten more in the next month or so but rates could likely increase even more as retailers look to book space before Asian factories close during the Chinese New Year festivities.

Katherine Barrios is chief marketing officer at Xeneta, a company which provides a database of ocean freight rates.

Hanjin bankruptcy has jeopardized timely delivery of shipments of export cargo and import cargo in international trade.

Will the Hanjin Grinch Steal Christmas?

By golly, it looks like Santa may just not make his rounds everywhere this holiday season. This is no joke. Shippers are reporting that Hanjin has had huge effects on their inventory with their goods stuck in a container at sea and they haven’t been able to get them all out. Well, they can get them out, but not without paying hefty costs to whoever is posing themselves in an advantageous position to help. Everyone is jumping at an opportunity to make money off Hanjin’s demise.

That said, the once starving carriers are having a heyday, though it may be temporary. Shippers are reporting globally that carriers have been breaking contracts and now claiming there is no available capacity, with the prices, you guessed it, being jacked up.

Wait, wasn’t the talk up to last month all about overcapacity? The seventh largest liner’s downfall has affected global trade with a flip of the switch. The struggle is real.

The once safe locking-in-long-term-contracts strategy at a ridiculously low price, doesn’t seem is going to hold any longer. Shippers are now being forced, in many cases, to go on the spot market with one to three months quotes not being contracted.

As the year comes to and end, the tendering/bidding season starts for many European shippers. Large-volume shippers who were once basking in their long-term contracts low rates, will get a reality check when carriers will deny renewing contracts at the same low prices as last term. Ouch.

With Golden Week (the first week of October) nearing, Chinese travelers will be ready to bust out for seven days abroad and have a shopping frenzy. That’s the expectation, at least. However, with delayed cargo, Golden Week 2016 will have enormous impact on European importers, and it may not turn out to be too golden after all.

However, the fall of Hanjin is more of wake-up call for other carriers and the industry as a whole. I would even bet that the Hanjin crisis could be just the beginning, before some real shake up in the industry starts to happen and carriers can dig themselves out of their graves.

Katherine Barrios is chief marketing officer at Xeneta, a company which provides a database of ocean freight rates.

Technology can aid freight forwarders process more shipments of export cargo and import cargo in international trade.

Is Technology a Differentiator for Freight Forwarders?

The freight forwarding business is rapidly changing as competitive threats increase and the expectation to do more for shippers is rising. As a result, forwarders are turning to technology to assist with all the changes they are facing often linking order management systems to transportation systems to customs systems and so on. It’s a daunting task and there have been some stumbles along the way.

Is Technology a Differentiator?

We posed this question to the social media community and found a clear majority, 65 percent, indicating that yes, technology is a differentiator while 30 percent said yes, but in five years, and five percent noting, no, it is not a differentiator. A few interesting comments were also offered on LinkedIn and Twitter. For example, Founder and Principal Partner at Top Management Consultores, Carlos Roca Fatule commented on LinkedIn, “It’s a matter of high investment versus low operating costs…an example would be port automation.”

Meanwhile, Hariesh Manaadiar, manager of the Shipping and Freight Resource Blog noted on Twitter, “At the end of the day, people are what sets services apart, not systems…you can call it an enabler.”

Is Technology an Enabler?

Differentiator or enabler, no doubt about it, technology is indeed having an impact on the freight forwarding market. According to a survey conducted earlier this year by research and consulting firm, Logistics Trends & Insights LLC, improving operations and efficiencies were the top reasons that freight forwarders were implementing new technologies within the next five years followed closely by improving customer services and lastly visibility.

Thanks to the advent of cloud-based technology in particular, forwarders of all sizes are achieving valuable gains within their supply chains as data obtained from the technology can be used for such strategic purposes as creating new solutions, expanding trade lanes, and more. Perhaps one can view technology as a means to enable forwarders to differentiate themselves by how they interpret their data.

Katherine Barrios is chief marketing officer at Xeneta, a company which provides a database of ocean freight rates.

Technology is aiding in the movement of shipments of export cargo and import cargo in international trade.

Smart Containers, Smarter Data, Smarter Industry

It doesn’t take much to see and experience the rapid advancement of technology in the world. Personal technologies are getting smaller, smarter, and overall more efficient but that’s not to say that technological advancement is stopping at consumer level. Far from it. Technology for the freight industry is getting a rather serious overhaul, encompassing many different levels of the industry.

While some of these changes might be slow to start, we’re approaching a precipice, a tipping point, in which the rate of technological growth will begin to accelerate. A report recently released by Lux Research, a research and advisory firm that focuses on emerging technologies, highlights a number of the technological changes that the freight industry is undergoing currently.

Smart Containers

Containers have always been the crux of the ocean freight industry, the cornerstone for the operation. Yet from their creation, we’ve yet to see many, if any, changes to the basic steel box. Recently a number of innovators and startups are changing the way we look at containers. Staxxon and Holland, for example are taking it a step further and reexamining the container itself. They are looking at a collapsible container which, when emptied, can be collapsed to save space in the event of an empty return.

The Internet of Things

This is, perhaps, one of the most reported and most important advancements for the freight industry. The internet of things (IoT) is allowing for a veritable network created not from computers as we know them, but of things, like containers, pallets, and equipment. Embedded with an array of sensors and tracking technology such as GPS and RFID chips, these things allow manufacturers, carriers, and shippers to monitor temperature, vibration, losses and location of their cargo more accurately.

Better Data: Smarter Moves

While the physical technology is progressing by leaps and bounds, so too is the information available for logistics. With better tracking and more information with each container, logistics decision makers are able to get a clearer view of their supply chain, from front to back. This level of transparency not only means a higher degree of customer service, but also allows for optimization of the supply chain, cutting away nasty snarls, tangles, and snares that would otherwise slow the operation down.

More Computing Power Means More Control

3PLs, carriers, shipping marketplaces, logistics technology companies are all taking advantage of better computing processes, offering shippers a wide array of digital tools which allows them a wide degree of control over their supply chain. Some of the more influential companies in this area include iContainers, Freight Filter, CargoSphere, and Freightos, that automate freight booking on cloud-based systems; ShipBob, Flexport, and Shipwise, that integrate data and create logistics dashboards; Shipster and Shyp, that offer pickup and packaging services; Transporteca and VeriTread that provide geo-specific heavy haul rates; Xeneta, that lets shippers compare ocean freight rates; and Shippo and ShipHawk, that help shippers calculate shipping costs.

While the freight industry has been rather slow to change it’s ways, change is coming. As the new technology begins to take hold, we’ll soon see a complete overhaul in the way companies view logistics and freight management.

It’s Not All Roses For Everyone

Though I am a technology lover and feel that tech can help all industries advance greatly, I do realize that all don’t agree that tech will disrupt or change our industry. Many feel that it is just an enabler and that human service is what makes the difference. While I don’t disagree, I do feel that our human powers alone can’t make the definite improvements and changes. Coupled with tech, we can for sure change the industry to something much better. We just need an open mind.

Katherine Barrios is chief marketing officer at Xeneta, a company which provides a database of ocean freight rates.

The internet of things is increasingly being used to track shipments of export cargo and import cargo in international trade.

Internet of Things Gains Importance in Supply Chains

The Internet of Things (IoT) is revolutionizing supply chains worldwide. Eye for Transport (eft) recently surveyed 600 supply chain decision makers to learn more about this fast growing trend.

For those unfamiliar with IoT, technology research company, Gartner, defines it as a “network of physical objects that contain embedded technology to communicate and sense or interact with their internal states or the external environment.”

According to eft’s survey, location, security and temperature are the top three types of information companies are looking to gain from IoT in their supply chain. However, as noted by eft, location is becoming a standard and in today’s environment. Companies are looking to differentiate themselves, and as a result, other types of data such as speed, humidity levels, and vibration will continue to gain in popularity.

The ability to obtain useful information is definitely important and for most survey respondents. Information to better improve customer service is the primary reason why companies are deploying IoT. Along with improving customer service, providing customers with more frequent updates on shipment pick-up or delivery and improving speed, delivery time frames are other top reasons.

IoT is also finding its way for providing real-time information and operational visibility. Barcodes are still the leading type of technology for this but survey results showed IoT use increased 19 percent. Regarding the type of shipments in which users are looking to improve operational visibility the most, land shipments received the most responses with 80 percent followed by air shipments with 50 percent and sea shipments with 33 percent. Eft notes that the growing preference toward IoT will continue as more and more companies see payback from their IoT investments. In fact, the survey found that a 24 month period is the typical payback time frame.

As IoT continues to be adopted, an interesting survey question caught our eye: What level of threat is cybersecurity to IoT strategies?

Almost half of respondents (47percent) indicated a moderate threat while 32 percent noted the potential cyber security threat was minor. Only 17 percent indicated it as a major threat. Perhaps it’s still early in the IoT adoption phase to consider such threats but as more and more embrace IoT, security will need to be taken into account.

Market research firm, IDC, estimates the IoT global market will reach $1.7 trillion by 2020. As such, supply chains are adopting this concept at a quicker rate as supply chains become more customer-centric.

When applied to the ocean freight industry, the importance of the hailed customer-centric strategy is even more prevelant, as shippers strive to make sure they have their inventory on time in their stores. With the ups and downs of the current ocean freight prices, shippers need to guarantee that their cargo is getting to the point of sale when their customers expect it. IoT capabilities during and after shipment coupled with market intelligence on rate market movements prior to shipment make for a match made in heaven for a healthy functioning supply chain.

Katherine Barrios is chief marketing officer at Xeneta, a company which provides a database of ocean freight rates.