The global container shipping industry has gone through a very turbulent time since the Covid pandemic. Early lockdowns saw huge upward swings in pricing, followed by a crash in late 2023 back to pre-covid levels, and now in 2024 a resurgence in prices. Each time there is a surge in price there is significant “noise” in the freight forwarding community, with talk of contract rates being broken, additional surcharges and longer lead times. When prices retreat, there is very little noise as the suppliers try to delay passing on price decreases. This recent article from The Loadstar details the consequences of poor or rushed shipping management damaging relationships with the end user – a result that all businesses should seek to avoid.
The backdrop to these swings in demand/supply are conflicts in the red sea limiting Suez shipping forcing boats into longer routes around Africa; the continued boom in the US economy; the faltering Chinese economy with the threat of higher US tariffs; political turbulence across the Taiwan Strait; the war in Ukraine. There is currently no end in site for these issues affecting global shipping and market sentiment, so prices will remain volatile.
Strategies companies can use to mitigate cost risk are:
• Leverage your suppliers volumes/relationships with freight forwarders for imports to obtain the best terms, however ensure the rates being on charged are in line with the market by monitoring the indices.
• For regular higher volume inbound requirements, contracts should be in place for 6 – 12 months to hedge against the price and availability risks.
• Spot buying is the most appropriate for irregular/adhoc requirements, as the feasibility of fixed rates are less likely and valuable – be ready to shop around if needed, but maintain a strong relationship with a provider by aggregating these requirements with set terms and conditions (this may also cover other shipping modes such as break bulk, and bulk).
• Contract terms and prices with the biggest freight forwarders are less likely to be broken, as they want to maintain their reputation, and have the financial capacity and experience to handle volatility and demand compliance from shipping companies.
• Follow the indices and avoid being caught up in the noise – the industry has a long history of over capacity and over reaction, and rates will always eventually revert to baseline.
If your company is struggling to normalise container shipping processes during these tumultuous times, Siecap is ready and available to assist with finding the perfect strategy, resolving roadblocks, and reducing overheads. Reach out today at https://siecap.com.au/contact-us/ to begin.