When we started to plan for last year's TPEB peak season, all the signs of the makings of a tumultuous peak were written clearly on the wall. Now as we look at 2019, not much has changed.
First, in 2018 threats of increased trade tariffs were looming. Yep, that’s still definitely the case in 2019.
Second, we saw no announced efforts to combat the worsening schedule reliability trends including late departures and blanked sailings. With 35 blanked sailings having already been announced in 2019 and more vessels being laid up in Q3-Q4 for scrubber installation, we can confidently brace ourselves for the worst of the worst.
Third, last year shippers thought they knew what shipping in peak season would cost but all bets were off once peak arrived. Many shippers ended up paying over $1000 in Peak Season Surcharges (only for the front-loaded cargo to sit in a warehouse for months). For 2019, many shippers have agreed to capped Peak Season Surcharges. However, as accurately pointed out in a recent JOC article, “carriers will fill limited slots with containers that pay a PSS before containers that don’t.” Ocean Carriers have also been vocal that they will, out of necessity, pass on 100% of the fuel/IMO 2020 costs, therefore the vast majority of contracts now include floating bunker. The fact is, the jury is still out in 2019 as to what impact all of this will have on ocean freight over the coming six months.
At least we're in international logistics because we love a challenge! And, even in the midst of last year’s turmoil there were still winners in the race. Making your direct service contracts as ironclad and robust as possible; that’s table stakes. There were two key things that last year's peak winners did:
They familiarized themselves with their options prior to peak. One of our member NVOCCs told us they thoroughly explored then outlined all available options for additional space during peak with their customers. We saw many BCOs testing NYSHEX during the slack season so all systems were go should they need a Plan B, C or even H during peak - and most of them did. When the struggle for space got real, they had the confidence to purchase digital, guaranteed offers at a fair market price. Not all shippers will opt for NYSHEX this season, but knowing what innovation is out there and how it works is key. We all know the definition of insanity...
They bought forward. We looked back at every available TPEB NYSHEX offer in 2018 and compared the NYSHEX Forward rate (available 2-3 months prior to sailing), with the actual market rate at the time of cargo sailing. We found that in 99% of cases, the shipper purchasing 2-3 months into the future saved money. Waiting until the last minute to look for solutions for cargo you already know you are going to have to move does not pay.
So now that we see the flashing caution lights, what can we do about it? Well, our carrier members are already putting their best foot forward for peak. You can pick up peak offers now for China base ports to all major USEC, USWC, US Gulf and even Canadian discharge ports here. If you're like a lot of shippers who are growing their footprint in Vietnam, we even have you covered here.
By the way, the secret's not totally out yet but if you think the weekly, fixed NYSHEX Forward Contract is too restrictive for you, email me and I'll tell you about our newest product, tailored to your needs - now live in beta! If you don't love it, I'll send you fun socks for your time, guaranteed.