Dive Brief:
- The debut of the new Ocean Alliance and THE Alliance this week has led to chaos with exasperated shippers despairing over delays and high prices on the Asia-Europe trade lane, The Wall Street Journal reported.
- Northern ports such as Hamburg and Rotterdam have experienced particular headaches, where shippers are complaining of price demands three times higher than usual. Carriers blame the delays on an "unexpected increase" in cargo from Europe to Asia, according to the Journal.
- The European Shippers' Council, however, was unsatisfied with the reasoning claiming delays could have been avoided with better planning and communication. At minimum, shippers demand carriers to fulfill their transport obligations, The Loadstar reports.
Dive Insight:
Transport shipping has not had an easy time in recent years. Efforts to realign the industry through mergers and new affiliations have promised to set a smooth course for recovery, and yet, within the first week of service, trouble is already on hand.
It was to be expected. The industry restructuring led to the launch of 70 new services, affecting hundreds of vessel sharing agreements and leaving countless opportunities for inefficiency. But the current capacity crunch is far more drastic than congestion due to sudden congestion or ill-scheduled sailings, highlighting an inefficiency that now seems chronic to the industry: a lack of transparency.
In a recent press release, the European Shippers' Council denounced the carriers' practices, claiming they were walking back on their obligations. The council writes exports "have been waiting for up to 8 weeks" to be loaded, "carriers provide no guarantee whatsoever" all products will be shipped while spot market rates continue to rise.
"These developments are forcing many traders to cancel existing sales contracts and limit further sales," the council wrote. The council points to stock failures, 45% increases in booking prices, missed sales and extra costs from using other modes as some of the direct effects.
Frustrated, the shippers question: "Is the present situation a natural result of the market adjusting to capacity changes in the maritime sector, or is it an artificially created scenario by certain shipping lines, to increase profitability?"
Shippers have always been wary of industry consolidation, fearing it could lead to anti-competitive conditions. But the carriers' actions and history suggest the crunch is truly a symptom of poor planning and a lack of visibility, only with global repercussions.
Any supply chain manager knows all forecasts are wrong, but an extremely incorrect forecast can have damaging effects on sales, or in this case, bookings. The worst case scenario is for a shopper to enter the store, for example, and not find the product they are looking for. Customer loyalty is built on reliability of service and a minimum level of communication in times of crisis ... both of which appear to be lacking in Europe at the moment.
Shippers are desperate for a solution. "Shippers have not triggered the conditions which make the market so much volatile today and they are certainly ready to trade some of the price advantage they got in the past years against this sustainability," the council previously wrote.
Uncertainty is the worst case for shippers, after all. An unpredictable disruption in service at the logistics stage ripples down to lost clients at every stage of the chain. And in recent years, shippers have suffered many a disruption: port strikes, congestion, bankruptcies and now a severe capacity.
Recognizing this problem, several actors are suggesting solutions that would bring increased transparency to the industry. Freightos and the New York Shipping Exchange just launched distinct platforms for monitoring prices and better enforcing contracts, respectively. Meanwhile, associations continue to call for dialog and collaboration between the various actors in the field.
Regardless of how long the capacity crunch lasts, the event will add another wrinkle to the shipper-carrier relationship.
