As of mid-2024, importers shipping goods from Thailand, Cambodia, and Indonesia to the United States face significant challenges due to space shortages and rising freight rates. A combination of heightened demand, logistical bottlenecks, and global trade dynamics drives this situation.
Current Situation
Capacity Constraints:
Carriers operating out of Southeast Asia, particularly from Thailand, Cambodia, and Indonesia, are experiencing full capacity. Severe space shortages on vessels lead to significant delays. Importers struggle to secure slots on ships, exacerbating port congestion.
Rising Freight Rates:
Freight rates have surged significantly. Recent reports show a 13% rate increase per FEU for shipments to the US West Coast and an 18% rise for the East Coast. Spot rates for regional hubs have increased by over 50%.
Global and Local Influences:
Increased demand isn’t the only cause of congestion. Geopolitical tensions, equipment shortages, and global events like the Red Sea crisis contribute to the disruption. These factors make it difficult for carriers to maintain schedules and meet growing demand.
Impact on Importers
Delays:
Importers report significant delays, with some shipments postponed by months. These delays impact inventory levels, production schedules, and supply chain efficiency.
Increased Costs:
The surge in freight rates translates to higher costs for importers. Beyond the base freight rate, additional expenses such as fuel surcharges, customs duties, and port fees add to the financial burden. Importers must also consider the potential cost implications of delayed shipments, including storage and inventory holding costs.
Adaptation Strategies:
To navigate these challenges, importers should diversify their shipping strategies. Consider alternative routes, consolidate shipments to optimize space, and work with reliable logistics partners who can provide flexible solutions. Efficient customs processing and accurate paperwork are crucial to avoid further delays.
Increased Demand and Express Services
High demand from Manila and Vietnam to the US has led steamship lines to add express service options. Despite this, regular ocean freight service allocations have not changed, even with increased demand from Manila, Vietnam, and Thailand. Recent data indicates a significant uptick in freight volumes from these regions. For example, volumes from Vietnam have grown due to its booming e-commerce industry and increased foreign investments, positioning it as a significant production hub in Southeast Asia.
China Remains Strong
Even as volumes from Southeast Asia rise, China continues to dominate the freight market. The overall freight volumes from China remain robust, sustaining its position as a leading exporter to the US. This growth in freight volumes highlights the dynamic nature of global trade and the importance of maintaining diverse and flexible logistics strategies.
Outlook and Recommendations
The outlook for the coming months suggests that elevated freight rates to the East Coast will persist, largely due to the looming threat of an ILA strike. The union’s contract expires on October 31st, and negotiations have stalled. Anticipate delays and importers switching orders to other ports to avoid congestion or disrupting their supply chains. We are seeing more capacity for the West Coast, and the rates are slowly falling. However, it’s uncertain how long this will last. Importers should stay informed about market trends and be prepared to adapt their logistics strategies accordingly. Utilizing digital platforms and tools for real-time tracking and inventory management can provide better visibility and control over shipments.
The DGL Difference
At Dedola Global Logistics (DGL), we understand the complexities of international shipping and the challenges importers face. Our nearly five decades of experience, coupled with a robust network of partners worldwide, including Southeast Asia, uniquely positions us to offer reliable solutions even in times of crisis.
Our operations team in Shanghai and our solutions-based, consultative mindset ensure we find space for our customers and optimize their supply chains effectively. Our customers stay with us for many years because of this adaptability and reliability. We go the extra mile to secure space and provide innovative solutions, demonstrating the DGL difference in every shipment we handle. Trust us to navigate your logistics challenges and keep your business moving forward.
WATCH: PEAK SEASON 2024 – OUR ADVICE TO IMPORTERS (1:32)
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