Shippers, forwarders expect “chaos” in peak season

by Emily Atkins

More than half of freight forwarders, traders and shippers expect greater chaos in the coming peak season as compared to that in 2021.

The latest survey from Container xChange found that this year’s summer peak season cargo surge will be worse, exceeding the disruptions caused in the peak season of 2021.

Although 51 percent predicted the situation will get worse, 26 percent predicted this year’s peak season would be less chaotic than in 2021, while 22 percent expected the level of ‘chaos’ to be the same.

In terms of container sourcing strategy in 2022 when compared to pre-pandemic times, 56 percent said they had been growing their networks, 38 percent said they had agreed to long-term contracts and 25 percent said they had followed a multi-tender strategy.

More than a third (37.5 percent) said they were ensuring clients received enough inventory by shipping early in 2022. A quarter were using alternative shipment routes, and 18.8 percent were contracting long-term slot agreements with carriers.

Almost two-thirds (62.5 percent) said they were still relying on the spot market or doing nothing specific to ensure shipments reach clients.

Covid lockdowns in China

For 58 percent of respondents Covid lockdowns in China had made it hard to produce/ship as much product as planned, suggesting that cargo backlogs and unsatisfied demand are building as China’s zero-Covid strategy limits exports to Europe and the U.S.

“We are finding it difficult to forecast where we should be sending our containers and whether we will make any profit since the shipping lines are asking higher fees for SOC containers,” said Italy-based respondent Amanda Mallia, head of sales and purchasing for Oceanbox Containers Ltd.

“With China currently in lockdown and thus heavily congested, adding the peak season’s reduced demand for empty containers due to the shifting of holiday spending on services rather than consumer products, we are unsure whether it is wise to return the empties to China.”

“Predicting exactly what will happen in this year’s peak season is harder than normal because there are so many contradictory signs and intangibles,” said Christian Roeloffs, co-founder and CEO, of Container xChange.

“In terms of the supply of cargo, we’ve seen that Chinese Covid-19 lockdowns have affected the availability of cargo for export to key markets in Europe and North America. One big question is whether China is going to sacrifice its zero Covid-19 policy to get trade and its economy moving again.”

“If it does, then there’s every sign that we’ll see a substantial surge as backlogs of exports is shipped. If lockdown rules are relaxed soon and truckers are allowed to get back to work, then those backlogs will be arriving at the same time as peak season orders which could cause a lot of supply chain blockages at ports in Europe and the US where congestion is already widespread.”

“However, there are very few indicators so far that President Xi is willing to compromise health policy to boost trade. Indeed, it might not be politically expedient for him to do so with the Communist Party National Congress set for later this year when he is expected to be endorsed for a third term.”

The demand conundrum

The other side of this coin is demand, of course. Whether it is GDP forecasts, Purchasing Managers’ Index (PMI) numbers, rising inflation or consumer confidence, multiple metrics suggest demand could be deflating. So that could help offset any sudden rush of cargo from China, especially when there are also signs that consumers are spending more on services instead of products.

Elsewhere in the survey, top challenges identified by respondents aside from China’s ongoing lockdowns were container availability, depots being full, inflation, the Russia/Ukraine crisis and rising prices.