[Logistics Update] Nov 1st: Rate hike on South America route; US East Coast congestion leads to carrier suspensions; trends in US overseas warehouse growth.

Price Increase on South America Routes Starting November 1

Hapag-Lloyd has announced a General Rate Increase (GRI) for cargo shipped from Asia to the west coast of South America, Mexico, Central America, and the Caribbean, effective November 1, 2024. This rate adjustment impacts dry cargo in 20-foot and 40-foot containers, including high-cube and 40-foot non-operational refrigerated containers.

20-foot dry container: $2,000
40-foot dry container: $2,000
40-foot high-cube container: $2,000
40-foot refrigerated container: $2,000

This increase applies to cargo originating from various Asian countries, such as China, Japan, and South Korea, destined for South America, Mexico, Central America, and the Caribbean. Hapag-Lloyd has noted that this rate change will be effective until further notice, making it essential for shippers to factor in these adjustments when planning future shipments.

East Coast Congestion and Ongoing Sailing Suspensions

East Coast ports are grappling with lingering congestion following the recent three-day strike, creating an ongoing bottleneck that has significantly impacted shipping operations. According to Sea-Intelligence, the incident has already resulted in at least a week’s lost capacity. If clearing backlogs extends further, the capacity loss on the Asia-to-East Coast route could range between 17% and 40%.

2M Alliance Suspends Sailings

In response, MSC and Maersk, members of the 2M alliance, have announced sailing suspensions on East Coast routes. These adjustments affect the Asia-to-East Coast and Gulf Coast routes, with delays stemming from both port congestion and prolonged ship turnaround times. As a result:

• Ship turnaround times are extended due to delays in loading, unloading, and returning vessels.

• Capacity adjustments are being implemented, further reducing availability on already impacted routes.

This situation highlights the need for shippers to consider alternative routing or scheduling options to mitigate delays and maintain supply chain fluidity. Shipping companies are continuously monitoring the congestion levels, but as the backlog clears slowly, ongoing adjustments to sailing schedules are expected, affecting service efficiency across the Asia-to-East Coast corridor.

Impact of Sailing Suspensions

• MSC: Announced suspensions on several flights from Asia to the East Coast and Gulf Coast due to worsening port congestion, impacting timely returns for the next round of cargo shipments to Asia.

• Maersk: To optimize its shipping network and reduce congestion, Maersk has also canceled several sailings, particularly on routes heavily affected by operational limitations on the East Coast and Gulf Coast.

These suspension measures are expected to continue affecting capacity and could lead to a short-term increase in freight rates.

Trends in U.S. Overseas Warehouses

Los Angeles stands as a primary logistics hub in the U.S., processing over 40% of the country’s import cargo. The logistics landscape here includes a considerable number of overseas warehouses, particularly those established by Chinese entrepreneurs, which are expanding rapidly. Currently, the area is home to approximately 3,000 overseas warehouses, 500 trucking companies, and over 200 customs brokers, creating a strong logistics ecosystem.

Growth Potential of Overseas Warehouses:

• Warehousing and Distribution: With rising global logistics demand, e-commerce platforms increasingly utilize semi-managed overseas warehouses. This approach enables flexible handling of small parcel drop shipments and relieves some storage pressure from fully managed models, allowing for customized logistics services. This model helps e-commerce businesses scale operations efficiently and respond quickly to changing market needs.

• Air and Sea Transport Capacity: Air freight capacity is nearly saturated, with a global fleet of approximately 650 freighter aircraft and limited growth expected in the next 5-10 years. Consequently, air freight costs remain high. Simultaneously, demand for sea freight continues to rise, positioning overseas warehouses as essential infrastructure for e-commerce and logistics companies aiming to bolster supply chain strength.

• Information Technology and Automation Development: As demand for large warehouse spaces, particularly those exceeding one million square feet, increases, so does the need to improve operational efficiency. Advanced automation technologies can significantly mitigate labor shortages and optimize warehouse functions, giving businesses a competitive advantage in a fast-paced market.

In the future, overseas warehouse businesses capable of integrating intelligent technologies and achieving profitability are likely to lead the market. This trend not only accelerates the logistics sector’s growth but also strengthens the supply chain foundations for international trade, providing more resilient logistics support.

How Wakool Transport Can Assist

Addressing Freight Rate Increases and Suspension Challenges:
1. Flexible Transport Solutions: With recent freight rate increases by Hapag-Lloyd and other carriers, Wakool Transport can support clients in managing costs through adaptable route planning and a range of transport options to minimize the impact of rising freight expenses.
2. Mitigating Suspension Risks: To address disruptions from East Coast port suspensions, Wakool Transport offers emergency solutions to reroute shipments to alternative ports, such as those on the West Coast or in Mexico, ensuring uninterrupted cargo flow.
Supporting Overseas Warehouse Development and Supply Chain Optimization:
1. Overseas Warehouse Management: Wakool Transport provides advanced overseas warehouse management systems that deliver tailored storage and distribution solutions for e-commerce and other businesses, allowing flexibility to meet varying order demands.
2. Automation and Technology Applications: By investing in warehouse automation, Wakool Transport enhances operational efficiency, mitigates labor shortages, and lowers costs, providing clients with a competitive advantage in a dynamic market.
Responding to East Coast Congestion and Transport Disruptions:
1. Global Logistics Network: Leveraging Wakool’s extensive logistics network, clients can adjust transport strategies in response to port congestion. Wakool’s robust storage and transport resources facilitate the transfer of goods to alternative ports, reducing delays and maintaining supply chain stability.

Conclusion

Wakool Transport offers a comprehensive suite of solutions to tackle challenges like freight rate hikes, port congestion, and the growing demand for overseas warehouses. By providing adaptable logistics options, Wakool helps clients maintain stability, control costs, and enhance operational efficiency, ultimately strengthening their position in a competitive market.