Continued congestion at major ports—both in supplier as well as importing destination countries—which are seeing their largest backlogs this year, along with demand exceeding supply would mean that freight rates—both ocean freight and air freight—will remain higher than the normal, according to Niki Frank, CEO South Asia and CEO India at DHL Global Forwarding.
“During this time of the year, most companies are setting their budgets for 2022. When speaking to many of our customers over the last few weeks, I observed that most of them have a realistic expectation of the freight market for the coming year. Unfortunately, some customers are still pretty naively expecting a ‘return to normal’, Frank said in a comment on LinkedIn.
“In my view, there is no ‘normal’ anymore and we should rather talk about a ‘new reality’. And at least for 2022, this reality will be continuously elevated freight rates due to demand exceeding supply, both in ocean freight as well as in air freight,” he added in the comment.
To ease the container ships’ congestion, the US government has recently decided to shift the Port of Los Angeles and the nearby Long Beach port to a 24-hour seven-days-a-week schedule. The two California ports, which handle 40 per cent of all cargo containers entering the United States, have faced problems for months. The Joe Biden administration hopes that the night-time operations will help break the logjam and reduce shipping delays, and will also unlock capacity in the rest of the supply chain, including highways, railways and warehouses.
Meanwhile, the passing of typhoon Kompasu through the South China Sea this month disrupted activities in Shenzhen and Hong Kong—two of the busiest ports in China, adding to the already existing backlog. If experts are to be believed, the congestion at these two ports is likely to extend until the Chinese Lunar New Year holiday, which falls on February 1, 2022.
At present, the average time for goods from Asia to reach their destination in the US is over 70 days, i.e. about 80 per cent longer than pre-COVID times. So, unless the speed to ship goods increases, some of the deliveries may not reach the American shores in time for the holiday season.
As cargo ships wait on both ends of their journey to get unloaded and loaded, it is adding to the turnaround time, further adding to the shortage of shipping containers. This is leading to hike in freight charges. In view of this ‘new reality’, DHL Global Forwarding India has introduced, Frank said, “some new innovative solutions for our customers that help them get planning certainty, guaranteed space and equipment at affordable and long-term fixed rates.”