EXPEDITORS INTERNATIONAL OF WASHINGTON INC (EXDO)
APEX SHIPPING CO (AMAW)
CHR ISTAL LINES (CHSL)
ORIENT EXPRESS CONTAINER CO INC (OERT)
HONOUR LANE SHIPPING LTD (HNLT)
BLUE ANCHOR AMERICA LINE (BLUE ANCHOR LINE) (BANQ)
FLEXPORT INTERNATIONAL LLC (FLXT)
HECNY SHIPPING LIMITED (HYSL)
DANMAR LINES AG (OMAL)
DEWELL CONTAINER SHIPPING (DWCH)
ORIENT STAR TRANSPORT INTL LTD (OSTI)
CHINA INTERNATIONAL FREIGHT CO LTD (CHQF)
SEAMASTER LOGISTICS INC (SMMB)
MCL-MULTI CONTAINER LINE INC (MCLM)
UPS ASIA GROUP PTE LTD (UASI)
TOPOCEAN CONSOLIDATION SERVICE (LOS ANGELES) INC (TOPO)
SCHENKEROCEAN (HONG KONG) (SHKK)
DT LOGISTICS (HK) LTD (DLHT)
SAFROUND LOGISTICS CO LTD (SFOK)
DSV OCEAN TRANSPORT A/S (DFDS)
COHESION FREIGHT (HK) LIMITED (COHE)
TRANSLINK SHIPPING INC (TLKP)
FEDEX TRADE NETWORKS TRANSPORT & BROKERAGE INC (FTNV)
PUDONG PRIME INTL LOGISTICS INC (PPIL)
CITY OCEAN LOGISTICS CO LTD (CTYO)
US UN ITED LOGISTICS (NINGBO) INC (UU LN)
JOO SUNG SEA & AIR CO LTD (JSSY)
PYRAMID LINES (PYRD)
SINO CONNECTIONS LOGISTICS INC (SINO)
KINTETSU WORLD EXPRESS INC (KWEO )
THI LOGISTICS CO LTD (THGL)
GLOBAL TRANSPORTATION CORPORATION (GBOR )
RS LOGISTICS LIMITED (RSLC)
ROUND-THE-WORLD LOGISTICS (USA) CORP (RWRD )
STAR ASIA INTERNATIONAL INC (SABC)
ALL-WAYS FORWARDING INTERNATIONAL INC (AWFD)
NIPPON EXPRESS CO LTD (NEDF)
LF LOGISTICS USA LLC (LFFV)
AIR TIGER EXPRESS (ASIA) INC (ATXF)
LAUFER GROUP INTERNATIONAL LTD (LUFR)
UNIQUE LOGISTICS INTERNATIONAL (HK) LTD (UNQL)
DSV OCEAN TRANSPORT (DSVF)
NINGBO PORT SOUTHEAST LOGISTICS GROUP CO LTD (NPSC)
BLUE WORLD LINE (BWLE)
YUSEN LOGISTICS (AMER ICAS) INC (YASV)
RAMSES LOGISTICS CO LTD (RLCL)
EFL CONTAINER LINES LLC (EFLR)
BRILLIANT GROUP LOGISTICS CORP (BGPL)
ASF GLOBAL LLC (ASFN)
As 2020 gives way to 2021, ocean freight demand continues to replenish inventories from a busy holiday season, inventory build-up ahead of the Chinese New Year manufacturing closures in February and supply just-in-case inventories as COVID-19 continues around the world.
The Shanghai Containerized Index ended 2020 with the index down $61 to $4,018 per TEU for US West Coast Ports and down $148 to $4729 per TEU for US East Coast Ports. While a slight dip in average spot rates was welcomed news, the likelihood is high that the already steep spot rates will increase at least throughout the first quarter of the new year as containers remain scarce and US import demand remains high.
Indeed, in a Dec. 28 CNBC interview, “It’s all the change in the American consumer,” Port of Los Angeles Executive Director Gene Seroka said. “We’re not buying services, we’re buying goods.” Year-to-date through November, total TEUs at the port are down 2.99%. However, the story is in the imports, up 25.17% so far for the year.
Meanwhile, on the east coast, year-to-date through November, the Georgia Port Authority has reported total TEUs on par with 2019 TEUs while loaded imports are up 1.7%.
The US ocean freight market story seems to be mainly on the West Coast thanks to Asian exports; however, as bottlenecks occur at US ports on the West Coast, the entire inland supply chain has and will continue to struggle with capacity shortages and delays through to the final-mile.
As a result, shifts from West Coast ports to East Coast ports are occurring, according to some publications. Over 60% of the US population resides east of the Mississippi River, which could be beneficial for ocean freight movements by positioning TEUs closer to customers and potentially reducing transportation costs, improving transit times, and speeding up the final mile.
The latest Port Tracker from Hackett Associates and the National Retail Federation (Dec. 9) suggests positive year-over-year monthly increases through April. However, keep in mind that for March and April, year-over-year comparisons are easy positive gains due to the coronavirus pandemic occurring in March. A clearer picture of the US ocean freight market will not emerge until the second half of 2021 or actually in 2022.
Seroka noted in the CNBC interview that Los Angeles’ cargo volume is up 50% in the second half of 2020 compared to the first half of the year. As noted earlier in this article, strong monthly inbound TEUs were due to many reasons, including delays from earlier in the year when Chinese manufacturers were closed due to the Chinese New Year and to COVID-19. However, once these manufacturers reopened, the virus had spread worldwide, shutting down businesses, some temporarily and others permanently. To survive, many of these businesses shifted to online selling, which tends to have a different set of logistics requirements and, as a result, caused retailers, manufacturers, logistics, and transportation providers to stumble from lack of forewarning and preparation.
Risk mitigation and agility are valuable lessons that many retailers, manufacturers, logistics, and transportation providers learned in 2020. How they translate and implement these lessons in 2021 will determine the winners and losers as trade continues to be reshaped quickly by COVID-19.
Whether the freight forwarders like it or not, the year of the pandemic has not brought any more clarity to their future.
In light of the many stresses experienced by the supply chain and logistics planners, no freight forwarder managed to distinguish themselves by modifying their services or attempting to differentiate themselves from their competitors in the eyes of their customers. As a result, for all the freight forwarders’ talk of agility, flexibility and differentiated customer care, no shipper changed their view of the value of the freight forwarders to their supply chain operations. Unfortunately for the freight forwarders, finding the cheapest way of getting cargo from A to B is getting easier and easier by the day.
For the clues on their future, the forwarders should be looking forward to the disappearing act performed by the travel agencies. The pandemic conveniently provided proof of superiority of digital marketplaces over physical presence in the game of finding the lowest price of something. Just walk through your neighbourhood and look at the abandoned offices of the travel agencies, while investors in Airbnb and Booking are gleefully rubbing their hands.
While the incumbent freight forwarders attempted to replicate the low cost, low overhead simplicity of the digital marketplaces, they also hang on to their legacy business model and all its limitations preventing significant cuts to unit costs. How difficult that is, just look to the value of Amazon and Walmart over the period of the pandemic. Both attempt to provide commerce at the lowest cost, but the digital platform play with tiny attachment of hard assets is clearly much more valuable than the brick-and-mortar play with its small digital commerce attachment.
That is also the reason why venture investors keep piling into logistics digital marketplaces, where demand and supply is aggregated, transaction costs are low and revenues per employee far exceed what even the best traditional freight forwarder can ever generate. The freight forwarders’ argument for survival is of course that the B2B business is too complicated for digital platform players, but the message, if any, has not discouraged the disruptors from chipping more customers off the incumbents’ old block. Countermeasures in form of updated digital portals are too simple “me too” tools to build significant moats against the digital invaders. Ossified internal processes requiring awkward and expensive retrofitting of digital solutions are also proving a major challenge, as demonstrated by widely publicized write-offs of IT investments by major logistics companies.
If digital plays are not enough to ruffle freight forwarders’ feathers, even more pressure will continue coming from the seafreight carriers building up freight forwarding capabilities through acquisition of both digital and hard assets. They will keep cutting freight forwarders to size, as they were much faster appropriating the most important asset in the service game: the data. While the freight forwarders are still debating value of a common, shared data store, their data is already being leveraged in the two platforms owned by the carriers: Datalens and GSBN. As if the threat from the carriers was not enough, watch DP World building out from their traditional port business into hinterland logistics and seafreight lines. DP World is behind in the digital race, but that is just the matter of finding right acquisition target in possession of integrated digital platform.
As the pressure builds, expect more consolidation among the freight forwarders in 2021 and inevitable job losses as the acquirers fund their acquisitions by cutting people and asset-related expenses. That is an inevitable price to pay for hanging back and hoping for the best.