Navigating Ongoing International Capacity Challenges

February 9 / US
Navigating Ongoing International Capacity Challenges

By: Mollie Bailey, Director, International, Transplace

International transportation is dealing with ongoing challenges of tighter capacity. From import space and export space tightening up and a hot drayage market causing capacity constraints to volatile air freight rates – international transportation has had its share of challenges the last 10-12 months.

Carrier Consolidation, Heavy Holiday Season & Chinese New Year Impacting Import Space

Starting with the roll out of new ocean carrier alliances that came about last spring, the realignment of carriers partnering together through vessel-sharing has impacted the supply and structuring of vessels available for international shipments. Demand in conjunction with the realignment of available space has led to rates being resilient in this peak import season. In addition, looking back to the summer of 2017, the June-August peak that typically happens was slower than anticipated. Rates fell as we headed into fall, but then starting building again as we got closer to Thanksgiving thanks to more demand later than we normally see in the traditional peak season market. Driving this was strong imports – especially for retailers.  The 2017 holiday season was very strong and that’s carried through into the new year as we prep for the Chinese New Year, which begins on February 16 and marks the start of the Year of the Dog. Import space out of Asia to the US continues to be tight. Thanks to positive retail sales, retailers are having to quickly restock to ensure they have enough inventory. While rates haven’t been too outrageous, we are seeing some carriers turning down bookings.

As an advocate for our customers, our goal is to be proactive and informative in sharing industry trends and daily shipping reality.  That means communicating early and often about container space needs due to capacity constraints caused by the carrier restructuring, heavy retail season and the pending Chinese New Year. One way we’re working with customers is to request they share their inventory forecast data. Sharing this sort of information helps us be proactive with our international transportation partners in order to get the space our customers need.

Getting Ahead with Export Space

Export bookings have also been tight on capacity, and certain export trade lanes have required advanced booking to ensure space. One best practice we recommend is booking 3-4 weeks in advance to secure required export space. Other activities that can help exporters is by enhancing their visibility and forecasting their volumes and production dates. The more time in advance you can book export space, the better off you are at ensuring you’ll be able to meet the required sailings and thus the delivery requirements for your overseas customers.

Drayage Capacity Issues Remain

There are also major issues with international container drayage capacity. Similar to what’s happening in North America when it comes to long-haul domestic capacity, which has been affected by driver shortages and the new ELD regulations, strong imports and exports combined with heavy port congestion and an inadequate supply of trained drivers is causing this market to tighten up.

Soaring Air Freight Rates

While air freight is another mode of international transportation, it is an expensive option right now. Rates have skyrocketed over the last few months and only the highest bidder of ridiculously high rates can get space – although the market has recently been showing some signs of stabilizing, especially post-Chinese New Year. From 2008 until about mid-2017, air cargo had been in a pretty prolonged recession and airlines had taken capacity out of the market – reducing air cargo shipping lanes. But demand started to pick up this summer and rates have gone through the roof.  Why? Thanks to an increase in ecommerce. This has driven quite the demand for air freight. The market came back quicker than expected and airlines haven’t been able to bring capacity on line as quickly as needed.

One workaround for moving goods via air is for companies to broker exclusive agreements with capacity providers. A disrupter in the industry, Amazon has created its own workaround by investing in strategic partnerships and contracting  significant blocked space percentages  with air freight carriers.

Overall, international transportation has its own share of capacity constraints. The challenges felt over the holidays – and what we anticipate experiencing due to the Chinese New Year – are affecting all lanes everywhere making it difficult to get space. Make sure you’re working with a provider that knows how to navigate these different international shipping challenges so you get the space you need and you don’t keep your customers waiting.

Tell us what you’re seeing when it comes to international transportation capacity challenges in the comments below.

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