LIGHT AT THE HORIZON?

SLOW RETURN TO NORMALIZING OF SHIPPING CONDITIONS

Updated 25-Nov-21

Ocean charges for reefers started decreasing sharply this month and are becoming more acceptable again for exporting frozen fish food items from China to abroad. With cargo ships finally having returned to the Port of Xingang (Tanggu, Binhai New Area), our company is again able to export its goods from this conveniently located, nearby port.

Naturally, the Port of Qingdao (Shandong province) remains an alternative port to ship from for us.

As both reefers and reefer vessel slots remain quite scarce, timely ordering is essential.

BOOSTER SHOTS

Updated 22-Nov-21

All our employees have received their vaccine booster shot (3rd injection) this month, which should help keeping the virus out of our factory; none of our employees have been infected hitherto.

Our facility has hitherto been spared from the coronavirus from a health point of view as no employees have contracted the disease, and all employees attained full vaccination by late spring.

Our business is being affected though as ocean freight costs have increased exponentially and we do not expect these to return to normal anytime soon.

COVID-19 IMPACT ON FREIGHT

Freight costs have been increasing since August 2020, with the initially small increases becoming ever larger as time passed by. Why has ocean freight cost skyrocketed? We readily identify 2 main causes:

1. Reefer Shortage. This shortage is being caused by a multitude of reasons, such as:
   1. Empty reefers not being timely returned to Asian ports by ocean carriers.
   2. Chinese imports of refrigerated goods being subjected to thorough testing for the presence of the coronavirus by customs officials. This increases the time required for proper declaration and ties up reefers.
   3. Reefers being used as regular containers as there also exists an enormous lack of available dry containers.
2. Vessel Shortage on certain routes. The number of available vessels still is insufficient to cover the strong increase in shipping demand for containers and reefers. This also has a couple of reasons, of which we identify the following to contribute to the shortage:
   1. Some vessels were initially either taken out of service as vessel owners predicted demand for goods would substantially decrease, or were used on other routes.
   2. Vessels still being tied up in front of ports worldwide due to a lack of available berthing space. In many cases harbor facilities are simply unable to deal with the increased workload due to a lack of gantry cranes, trucks, truck chassis, truckdrivers, or harbor personnel having been quarantined, etc.

Air freight rates have also increased but nowhere near as much as the increases in ocean freight rates.

WILL OCEAN FREIGHT SOON RETURN TO NORMAL?

We do not expect ocean freight to come down soon as there are no quick solutions to the above-mentioned problems.

Increase in available containers?

Construction of containers has been throttled up already but the void to fill is large, and this issue will take considerable time before being resolved. And even then, if not enough vessels are available to carry the containers, or harbor amenities to handle an extra number of vessels are not available, a larger number of available containers will not decrease ocean charges by itself.

Increase of vessels in operation?

Vessel operators are momentarily booking a record amount of revenue and as such have no financial incentive to put more vessel in operations. And even if they do, those extra vessels still need to find berths which are already heavily used.

Increase in harbor capacities?

Increasing capacity cannot happen overnight as it requires years to plan and execute.

Decrease in demand of goods?

The ongoing strong growth of ecommerce will more than likely not result in demand going down, although more countries are trying to (partially) localize production of certain goods.

Governments to the rescue?

In our opinion, the current shipping crisis requires all the above-mentioned issues (and many others not having been mentioned) to be addressed and resolved at the same time, making it nearly close to impossible unless various governments start to intervene and undertake well-coordinated actions on a global scale.