For international shippers, 2021 was a difficult year, as the pressures have been relentless, with logistics teams suffering sustained and systemic global supply chain disruption, says Drewry.
More specifically, Philip Damas, Managing Director, Head of Supply Chain Advisors, noted that port congestion, cargo delays, chronic capacity shortages, breaches or near breaches of shipping contract commitments and ocean freight rates surged to extreme levels.
Unfortunately, fundamental structural market vulnerabilities remain and for international shippers, supply chain resilience is a particular concern
said Mr. Damas, describing the four potential new disruptors, shipping and logistics management teams should anticipate and prepare for in 2022:
#1 Another dispute between the ILWU union and US West Coast port employers
This will push back by weeks or even months the reduction of congestion at US West Coast ports, affecting global carriers’ schedules and the ability of ports in Asia to handle unscheduled ships or bunched ships affected by problems in the US.
#2 The pandemic weakening additional parts of the global container shipping system
China’s current zero tolerance Covid policy makes it likely to shut down, and without prior warning, more/secondary ports, more barge operations and more feeder operations as new cases arise. Further lockdown measures in other countries also cannot be ruled out.
We fear the prospect of more dislocations / lack of coordinated asset deployment between ocean carriers and rail carriers in the US, in particular. Seafarer shortages and travel restrictions may worsen with any surge in cases, which will further limit the number of sailings shipping companies are able to make to meet demand
according to Mr. Damas.
#3 Flash points between the ocean carrier industry and the forwarder/NVO sector
Drewry isstarting to see that some ocean carriers are withdrawing from NVOCC relationships and others are making it difficult for NVOs to offer carrier-like fixed contract rates to shippers under preferential “named account” terms agreed in advance with the ocean carriers.
In fact, many are now offering shorter term and varying premium rate levels in return for finding space and equipment solutions. Medium and small NVOs may find themselves excluded from BCOs’ large annual ocean tenders.
#4 Difficulties dealing with MQCs and widespread disputes about MQCs
More BCOs will have to accept the new reality of the market:
You cannot expect to ship 10 containers one week, 50 containers the next week, and hope to get 100% capacity for both weekly volumes
mentions Mr. Damas.
Carriers and NVOs are already telling BCOs that their capacity in 2022 will be the contractual Minimum Quantity Commitment per annum “divided by 52”. Whilst capacity constraints have been a common theme for 2021, for 2022 we see the additional constraint that full or high payment of the freight will be due when the capacity is not used by the shipper.
The majority of BCOs are not organized to manage this type of volume commitment. Disputes will spread in 2022 about how to deal with excess volume above weekly MQC and deficit volume below weekly MQC and about associated penalty clauses
Drewry believes.