Gone are the easy days of being an NVOCC or SOC box operator, when you could buy containers in any region as per the need of any particular project or specific move from one port to another without facing any obstacle in getting space from vessel operators, port congestions, and other loading issues like vessel delay, port skip, and roll-over problems.

 

Written by Rehan Khan, Director at VMR Lines

 

Today is not a piece of cake for NVOs

Even finding the availability of containers, competitive price, and get the space smoothly in various regions including China/Europe and South East Asia have become increasingly difficult for NVOs.

One of the major reasons for all these sorts of issues is COVID-19. It was confronted in 2020 due to which many countries had to implement a lockdown. It started in China and moved on to Europe, the US, and then spread to almost all countries worldwide. Travel and transportation restrictions came into effect all over the world. Leading to sales and procurement dropping drastically, and so did global trade.

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Nowadays, container shortages have become a serious problem in the logistics industries which not only affects the global shipping industry. It also has a strong negative impact on manufacturers, traders, and, of course, retail businesses as well.

Slowing down

When countries entered into lockdown their economic activities were restricted. That included the number of workers in ports/depots/warehouses/CFS which were minimized extensively. In turn, this ultimately reduced the speed of cargo, custom handling, and clearing.

On top of that, many small and medium-sized factories temporarily closed in different locations in Asia – and in large parts in China. An event that led to a large number of containers stopped and became long-aging units at terminals and inland depots with the uncertainty of the next move.

As the movement of cargo was limited, shipping lines reduced the number of ships to stabilize the cost and to maintain the freight levels considering their major cost factors with blank sailings. This is another headache for NVOs/Customers as they have limited options of sailings from vessel operators.

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Where are the containers?

But the main question still is: where are the containers and why is one not able to access them whether you are an NVOCC/freight forwarder or even a shipper?

If I analyze this situation based on my practical experience as an NVOCC I understand that:

In most cases, the containers are lying at ports/terminals and inland depots. This increases the port/depot congestions that we see for all major transshipment Hubs like Singapore/Jebel Ali/Hong Kong/Busan/Shanghai/Colombo, etc. The majority of containers are also onboard vessels for long-haul especially from China and South East Asia to the US and Europe. This means that the largest container shortage is in Asia, but Europe and the Mediterranean also face deficits.

Due to these circumstances, vessels started omitting some ports which is one of the common reasons for vessel delays. Even if containers are lying at port for loading to vessel there are no guarantees to be shifted over, instead, they stand to be rolled to the next sailing but without any surety, as the vessels right now are not being operated according to their fixed schedules.

That’s the reason containers are also being moved via one or two transshipment ports as an alternative route. Something that simply swaps the short transit time to a longer one. On the other hand whilst shipping lines were reducing the number of vessels, they were not able to collect empty containers at all.

Driving up the container prices

Considering all these current factors and due to limited container access, manufacturers have driven up the prices of new containers. The traders, who sell second-hand containers already created the hype in prices not only in Asia and Europe but almost everywhere. Before 2020, an NVOCC could easily buy those cargo-worthy containers for $800-$1200. Now, the container prices range between $2200-$2800. Likewise, have container leasing rates also skyrocketed by 30% to 50%.

Apart from manufacturers and container traders, carriers and vessel operators are also trying to secure their profits. That is particularly affecting container shortages in Asian countries.

Generally, carriers prioritize long-haul shipments from China to North America and Europe. Here, they can make more profit compared to short-haul shipments within Asia. And that’s why there are no empty containers in some regions.

The war over space

bunker adjustment factor

Vessel operators are announcing General rates increase (GRI) for their COCs and slots up to twice a month. On some routes, they even apply it on weekly sailings but still don’t make any assurance that they’ll accept bookings and space on a regular basis. Exactly this causes the ultimate war of space between NVOCCs. As NVOs are compelled to buy the slots on a dead freight basis but are still subject to container availability.

In this scenario, I must appreciate the role of such platforms like CONTAINER-XCHANGE who are giving opportunities to NVOs and Traders by offering the one-way use of containers. They do so by merging two entities to act as either a supplier or user to sustain their regular move from one port to another. And that without being involved in the out-of-control current situation with buying containers at the highest prices ever.

Container xChange also gives the platform to traders and NVOs to negotiate and buy/sell containers with the best possible options with multiple offers for buyers and sellers in various locations. This includes special equipment which really helps NVOs to be part of any market, is able to play their role, and to get their share smoothly.

Yes, no need to say that this is one of the toughest times

For almost everybody engaged in the international logistics industry, this is one of the toughest times. Nobody knows when this situation will be in a streamlined condition as according to some organizations and resources they anticipate that it may continue until the end of this year.

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But…

…We all have to survive and try to sustain our services, especially for NVOs/Forwarders if we accept and face the current situations based on reality.

At this point, all we can do is to explain the current logistics problems and situations to our customers to get their understanding. And do our best by focusing on what we can control rather than looking at something we are unable to control.

Though I am uncertain as to when we will have to face this situation and when the pandemic will be eventually disappeared. However, being an NVOCC as VMR LINES, I am confident to play my positive role to offer our services in every way possible, even if it means reducing the volume of our services to some extent, but never compromise on its quality. And whatever we do, we must try to deliver our 100% to our customers, partners, agents, carriers, and vendors by staying positive and upholding our Brand Image and VALUES for which we are not ready to let them down in any condition.

 

About the author

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