Tight ocean freight capacity is likely to continue for the foreseeable future as major economies begin to recover thanks to the vaccine rollout, while globally, trucking is facing driver shortages as they migrated into other services during the pandemic.
Commenting on the market Michael Kramer, President Stolt Tank Containers said: “The last time our industry saw conditions even close to resembling the current market was prior to the financial crisis of 2008. However, it is becoming increasingly clear that the conditions we face today are unprecedented in nature, with multiple issues occurring simultaneously.”
In addition to the Covid-19 pandemic there have been several other unexpected events to deal with recently, including the Texas freeze and the Suez Canal closure both of which impacted short-term trade. When viewed globally, these multiple factors are acting together to create a very challenging market and the disruptions, shortages, and inefficient service from carriers have caused a substantial increases in costs.
Kramer continues: “Along with rapidly rising ocean freight costs, other factors are also compounding the situation. Adding to the size of our fleet and hiring additional manpower to deal with the extra work generated by blank sailings and the subsequent rerouting of tanks and rising fuel prices all add to our costs.
“Unfortunately, like many logistics companies, producers, and even customers, we have no choice but to increase our prices to offset these cost increases and to ensure supply chain stability. We have also increased our demurrage tariff rates and reduced free time included in our contracts. Forecasts indicate that the blank sailings, rolled bookings from carriers in all markets, port congestion and high demand, will continue well into the future and as a logistics provider we are not be able to absorb these, so they will be passed on to shippers.
“One advantage that I believe we have at STC is our strong long-term relationships with our customers, our ocean carriers and other vendors that are helping us move our cargo. In dealing with the unprecedented conditions, we are working with both our customers and vendors in a collaborative fashion to minimise cost increases and to digitise as much activity as possible and increase transparency in other areas of the supply chain. We have made significant investments in digitalisation in recent years and have integrated our systems electronically with both shippers and vendors to reduce waste and inefficiencies so that we are able to keep related administrative costs low.”
Customers understand that these rising expenses are something that are out of Stolt tank Containers’ control given the global freight and trucking markets, and that organisations like ours are doing everything we can to limit cost increases. Our teams are continuing to work closely with customers and vendors to plan and forecast requirements accurately and in a cost-effective manner, remaining flexible and responsive to their quickly changing needs.
Despite the challenges, there are some opportunities ahead explains Kramer. “Despite the difficult markets, it’s not all bad news for the industry. We are seeing incredibly strong demand across all geographies and sectors of the market as economies begin to rebound from the pandemic and consumer confidence improves. This is driving our customers to restock and restart, or increase, production to full capacity. We are also seeing very strong growth in demand as cargo moves from unsustainable flexibags back into tank containers, because of both the global dry box shortage and a renewed focus on sustainable supply chains by customers.
“Our focus is to remain agile so that we can deal with all of the external factors impacting our customers’ supply chains so we can continue to deliver the highest levels of service at the lowest possible cost to our customers while working to create additional efficiencies for the future.”
May 24, 2021