Ocean carriers continue to deal with uncertainty and volatility. Risks have not subsided; instead, they persist in the post-pandemic era.
External risks loom large with the typical risk that plague ocean carriers. In particular, political and economic threats have increased uncertainty and volatility.
Despite the significant risks and challenges, ocean carriers are succeeding against formidable odds.
This post will review the challenges facing ocean freight today. It will also delve into how ocean carriers overcome the odds stacked against them. With these insights, shippers can understand today’s circumstances better. And that should enable them to secure critical capacity and competitive pricing.
Persistent risks and challenges plaguing ocean carriers
You know the risks and challenges well.
Where should we start?
Let’s focus on the big-ticket items: external political and economic events. These are beyond your control.
Specifically, the war in Ukraine and inflation are the two overriding challenges. Both negatively impact ocean freight and global supply chains.
- Seaports have been put off-limits because of economic sanctions and safety concerns.
- For the same reasons as above, airspace is restricted.
- Delays have resulted from freight bogged down in Russia and Ukraine.
- Fuels, supplies, and materials are in short supply with no end in sight.
- Prices for fuels, supplies, and materials have increased, aggravating inflation.
According to a GlobalData Annual Report, the war has disrupted 130 multinational companies doing business in Russia or Ukraine. The most exposed sectors include metals and mining, consumer packaged goods, industrial goods and machinery, and pharmaceuticals. Other affected sectors comprise automotive, oil and gas, technology and communications, and financial services.
That doesn’t leave many business sectors untouched by the war. Also, these disruptions have global effects, with the EU enduring the most of them.
How ocean carriers are overcoming today’s challenges
With all those disruptions occurring, import volumes have remained strong. That is reflected in the continued backlog of vessels anchored at major U.S. ports. Also, DC Velocity reports that infrastructure-related work is adding to these backlogs.
Despite these risks and challenges, carriers are operating more effectively and efficiently. For example, total vessel losses have declined 57% worldwide. In 2021, ocean carriers lost only 54 vessels. That’s a decline from 65 total losses in 2021.
To put that into perspective, the global fleet of vessels has increased from 80,000 ships 30 years ago to 130,000 today, or 62 percent. That makes the reduction in total losses more impressive.
At the moment, flexibility is key to mitigating disruptions.
Ocean carriers also add to capacity by using non-container vessels to carry containers. Although this adds to capacity and is likely a temporary measure, it heightens the risk of shipping improperly secured cargo.
Inclement weather could affect bulk carriers as they adjust, putting cargo at risk. That said, this is a temporary measure and not in wide use, yet it adds some relief.
Also, some ocean carriers are diverting vessels to avoid port congestion. JOC.com reports some carriers diverted cargo from Charleston to Savannah. In addition, many carriers diverted their ships from west coast ports to east port coasts. That has mitigated some of the congestion issues.
But carriers are not working alone to return to normal operations. They’re getting help from various ports authority and other governmental authorities.
Increasing port capacity and increasing operational hours are other measures taken to reduce the impact of supply chain disruptions.
Last year, the Port of Savannah could only handle about 80,000 containers. Its utilization rate at the Garden City Terminal was above 80 percent. Now, because of the Peak Capacity Project aimed at increasing port capacity. By summer’s end, handling capacity will increase to 100,000 containers.
Flexibility also comes in, providing truckers increased access to ports. Turning to the Port of Houston, container terminals will be open to truckers on Saturdays. This is also a temporary measure that will remain in effect through the end of 2022.
Safer operations, adaptability, and infrastructure improvements have been key. They have allowed carriers to continue operations through disruptions. Some mitigation steps taken are temporary, while others are longer lasting.
Regardless of the risks and challenges, ocean carriers are working to mitigate disruptions. And, despite difficult conditions, the improved loss rate shows a significant improvement. Keep in mind that reduction in losses comes with a 62 percent increase in operating vessels.
How to navigate today’s challenges and minimize your risks
Ocean freight remains an essential mode of transportation. As risks and challenges increase, shippers compete for limited capacity and battle rising prices.
That makes today’s markets extremely competitive. Understanding today’s challenges can aid you in adapting to overwhelming odds.
Working alone in today’s environment is tough and ineffective. Just as ocean carriers are not working alone to achieve more seamless flows, neither should you.
That’s why working with a partner who can mitigate risks and leverage opportunities makes sense. It’s about securing capacity when you need it at a competitive price.
At American Global Logistics, we track trends in ocean freight tirelessly. We do that to mitigate risks and leverage opportunities to benefit our customers.
When you partner with us, we’ll do the same for you.
Contact us to learn more about how we can hone your competitive advantage against the odds.