Summer State of Ocean Freight
As ocean freight professionals, we have to take in and synthesize a lot of information. On the one hand there’s the day-to-day of our business. Rates, capacity, regulation: It’s the kind of nitty-gritty that may seem unsexy to the outside world, but it’s also what makes the world economy run. At the same time, we live in the context of a broader picture: macro-economic trends, global politics and the growth of e-commerce.
As the summer hits the halfway mark, it’s a good time to take stock of where we are as an industry and to combine some of these big trends with the dollars-and-cents details that drive profits.
Rate Fluctuations Around the World
Mid-summer GRI’s are going into effect, raising rates on practically all trade lanes (one notable exception has been US-Europe lanes, where general rate increases haven’t been implemented yet). GRI’s are typically standard practice with carriers usually looking to gain from the start of peak season.
Rates have been fluctuating from week to week. Spot rates on China-US West Coast lanes, for example, rose in the second week of July but are expected to decline by about 4% this week, according to the World Container Index.
But rates are expected to trend upwards as the leading global-trade carriers look to implement hikes on all freight types beginning in August as expected ahead of the holiday peak season.
New Tariffs Trigger Peak Season
Fears about the state of global trade in the wake of escalating tariffs have led to an increase in US imports this summer. The ports of Los Angeles and Long Beach handled over 8% more freight in June 2018 compared to June 2017. While the holiday season shipping surge usually kicks off in July, the earlier start of peak season has been attributed to anxious buyers hoping to get ahead of rate hikes from newly-imposed tariffs.
Carrier Consolidation Is the Rumor That Won’t Quit
Last year, consulting firm Drewry predicted that consolidation between major ocean freight carriers would end after COSCO shipping purchased OOCL. But rumors of a merger between CMA CGM and Hapag-Lloyd have persisted throughout this summer despite denials from the parties involved.
While consolidation is a part of any industry, some predict that carrier consolidation weakens competition which in turn can increase shipping charges. According to Supply Chain Dive, in the wake of the COSCO-OOCL deal, the top seven ocean freight carriers were on track to represent more than three quarters of market share by 2021.
A Quiet Hurricane Season
Last year’s hurricane season led to changes in the ways many ports prepare for disastrous weather. But the devastating weather hasn’t appeared so far in summer 2018, and some forecasts are predicting a weak Atlantic hurricane season this time around.
2017’s back-to-back blitz from Hurricane’s Harvey and Irma had massive impacts on freight services especially in the US Gulf Coast and to Puerto Rico, the effects of which are still being felt today. Ocean freight could use a quiet hurricane season.
Amazon Prime Day Tests the Retail Giant’s In-House Supply Chain Plans
Amazon’s Prime Day promotion generated record sales for the e-commerce giant this year with over 100 million products purchased during the 36-hour event. In addition to generating massive single-day revenue, the event also served as a “dress rehearsal” for Amazon’s logistics plans according to DA Davidson & Co. analyst Tom Forte. Speaking with Bloomberg, Forte suggested the sale allowed Amazon to test their fulfillment centers and first-party delivery capabilities ahead of the more traditional holiday retail season.
Read More: Executive Report: Amazon Moves to Conquer Freight
This year’s Prime Day was not without its hurdles: labor strikes in warehouses and site crashes occurred as soon as the promotion began, showing that the logistics supply chain isn’t just about last-mile delivery. Mastery of every link will be critical if Amazon hopes to conquer freight.
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By: CoLoadX on July 26, 2018, 3:20 p.m.