Intermodal surcharges, State of the Industry, Trade Outlook and Operations Update July 7, 2021

Intermodal Surcharges and State of the Industry 
The biggest question is “when will it end” when shippers in all industries continue to experience massive freight delays and steep penalties for those delays. In case you missed it, here is a deep dive from Hillebrand’s global procurement team on what are the driving forces are behind the ongoing crisis and where it can possibly be headed.

At the core, the unpredictable spikes in demand across multiple industry sectors (restaurants, hospitality/travel, home furnishing, groceries and consumer goods) have completely upended former logistics patterns. There are congestion bottlenecks at every major port and, which in turn impacts the supply of equipment (containers, chassis) and the routine flow of goods to and from terminals, rail hubs and warehouses.

According to industry research group Sea-Intelligence ApS, in the first five months of 2021, 695 vessels were over a week late in arriving to US ports. Compare that with a total 1,535 late arrivals total from 2012-2020, and 8 year period (!) for a perspective of the sheer scale of upheaval in the shipping world.

Due to the congestion in the ports and intermodal networks, carriers have announced new surcharges on US truck/rail moves for August in the range of USD 350 as “Emergency Intermodal Surcharges and On/Pre-Carriage Congestion Surcharges“. This applies when it is the carrier’s responsibility to coordinate the truck and/or rail moves.

Warehousing and last mile operations are reflecting the same unpredictable volume peaks – capacity is tight and appointment windows can be booked solid as much as two weeks out. The need for chassis units is so high now that truckers that typically work with the standard drop/pick procedure cannot afford to have chassis tied up with container pre-pulls. For inbound freight from ports this is having a dramatic impact on detention and demurrage.

Domestic freight supply and movement has also been heavily impacted as well – read more in this recent post from Hillebrand’s procurement team in New Jersey.

Europe Westbound
Capacity and equipment remain at critical levels and carriers have implemented rate increases as of July 1st.
Shipping lines are skipping scheduled vessel calls at Rotterdam and Le Havre on transatlantic services due to congestion levels and new blank sailings (cancelled sailings by carriers to realign schedule integrity) will reduce space to the US West Coast weeks 29-31.

North America to Europe 
Carriers continue to void sailings to try to improve the schedule reliability in their networks. While space and chassis supply is tight on both costs and at rail ramps, add additional two weeks for cargo moving via the West Coast. The European Union is preparing for an import surge, even as all available industry capacity is already deployed. Capacity can only come by diverting other trade lanes or via extra vessel loaders. Read more in this article from the Journal of Commerce.

Oceania / New Zealand
Industrial action in Australia by port labor is creating delays of 6-7 days on average at Sydney. The disruption affects all landside / rail operations and ocean carriers are changing port calls and schedule with little notice to skip Sydney port calls due to congestion. Note vessels schedules in this region are already recovering from the shutdown in Southern China as this stops the normal circulation of vessels and equipment.

New Zealand export bookings have been further delayed by the congestion and vessel schedules at the main port of Auckland. Carriers are omitting port calls or have shortened receiving windows and cargo is getting rolled to subsequent vessels. Alternative routing of cargo from Auckland to Tauranga via the rail is building a backlog with the increased demand. In the south, Nelson port is also full and feeder vessels moving cargo to main export ports are full or cancelling port calls. More exports are shifting to trucking delivery to main ports and this is reflected in rising rates and tightening capacity.

South America / Central America Transshipment hubs
Services from South America to the US West Coast that transship in Central America are delayed from the bottlenecks at these ports. These hubs are overloaded with cargo from Asia moving to the US West Coast and the situation is expected to worsen as we move into peak consumer demand periods for the US (back to school and holiday shipping season). As a reminder, expect winter weather delays and freezing temperatures for cargo moving across the Andes mountains from Mendoza Argentina to Chilean ports.

Impact of Heat Waves on products in transit
The recent heat spikes in the US Pacific Northwest and Europe are a reminder that now more than ever because of the extended delays at all ports, cargo protection with Hillebrand VinLiner insulation (sea freight) and temperature protection (road / rail) is essential. Read more about impact of transportation on product quality here.

For more information on pending or planned shipments, please reach out to your Hillebrand representative to discuss the best possible arrangements for transport, warehousing, insurance, and customs compliance needs.