The End of ‘Peak Shipping Season’: How Shippers Should Plan for a Post-Pandemic Era
March 1, 2023 Uncategorized
From August to November every year, peak season is the time of the year when the international freight industry is at its busiest. The demand for goods and shipping services is usually at its highest, as every business is attempting to stock up on inventory before the prime holiday period.
However, the traditional notion of the ‘typical’ peak season is all but disappearing. This is primarily the result of a fall in consumer demand, due to the underlying concern that the world is about to enter into a global economic recession. This has led to an increase in ‘blank’ sailings and ‘port omissions’, causing added frustrations for businesses around Australia.
In this article, we’ll detail the traditional understanding of the peak shipping season, and explore how peak season will look a little different in 2023 due to fears of an incoming economic dive.
The ‘original’ peak shipping season
In the shipping industry, traditional peak season usually coincides with holidays – when retailers need to stock up on inventory in time for a gift-giving shopping spree. The most significant peak season holidays are Halloween, Thanksgiving, Black Friday, Christmas, New Year’s Day, Chinese New Year, and Valentine’s Day.
But just before and during peak season, retailers often struggle to secure space on both aircraft and vessels to transport their goods, so will usually have to get creative to secure their supply chain. This is a time when shipping rates soar and the amount of available cargo space dwindles, resulting in some shipping companies needing to use larger vessels, add additional sailings or pay often exorbitant rates to secure any space at all.
Many businesses and shipping companies plan for peak season well in advance to ensure they have enough inventory, resources, and capacity to meet rising consumer demand. However, the supposed peak season is looking to be different in 2023.
Blank sailings and port omissions – an increasing trend
We are now seeing an increasing trend in every shipper’s worst nightmare – blank sailings and port omissions, which can significantly disrupt the international flow of goods.
The statistics from recent years, especially since the onset of the COVID-19 pandemic, tell the story. In February 2020, a record 105 cancellations were reported across the Transpacific and Asia-North Europe & Mediterranean lines.
However, this trend over time appears to be increasing in light of a bleak global economic outlook.
A blank sailing is the cancellation of a scheduled sailing (or part of a sailing) of a commercial vessel, such as a container ship or a cargo vessel, on a specific route during a certain period of time.
It can happen for various reasons, but the predominant reason in recent years has been unexpectedly low demand for cargo transportation. The low demand will often force the carrier to consolidate shipments from various vessels.
When a shipping company cancels a sailing, it means that the vessel will not operate on a particular route or port during that time, and the cargo that was scheduled to be transported on that vessel will be delayed or rerouted to another vessel.
In December 2022, it was reported that 117 sailings between December and January were cancelled by the major shipping lines largely due to weak demand and over capacity.
On occasion, vessel operators will decide to omit ports from their schedule and offload their cargo at another port instead. This is due to a considerable drop in consumer demand for goods, resulting in falling demand for shipping services.
A combination of rising energy costs and gloomy economic sentiment have all translated into a slowdown across multiple Western economies. Inflation levels in the U.S. and in Europe, for example, are at 8.3% and 7.4% respectively (which are at record highs). It, therefore, isn’t surprising that container trade growth has declined, with Maersk reporting import volumes falling recently across North America and Asia.
In October 2022, it was reported that U.S. shippers alone are experiencing a 20 per cent drop in orders for ocean freight. Meanwhile, ocean carriers are cancelling up to half of their sailings in order to rebalance capacity. The price of freight has dropped significantly, including by 80% on a route from Asia to the U.S. west coast.
Why ‘peak’ season is changing in 2023
Falling consumer demand and upcoming recession fears are two of the primary reasons why we are likely to see a changing ‘peak’ season in 2023 and beyond.
According to the World Bank, the world may be approaching a global recession this year as well as multiple financial crises. Central banks across the globe are raising interest rates at a rate we have not seen in around 50 years in what is effectively a ‘war against inflation’.
As a consequence, consumer demand for goods across the world is expected to dwindle (as is retail sales growth). People are generally expected to hold onto their wallets as much as they can, while S&P Global Market Intelligence predict growth in retail sales of 0.5% in 2023, which is a decline of 0.1%.
According to Phil Orlando, the chief equity strategist at Federated Hermes:
“If the consumer is pulling in their horns, then to a significant degree that is going to contribute to slower economic growth and maybe recessionary growth”.
How shippers can avoid delays in the 2023 peak season
Even though shipping season may not be as much of a ‘peak’ as it has traditionally been, it is still vital for shippers to do everything they can to avoid delays within their supply chain.
If you’re a business in Australia planning to import goods from overseas, here’s what you can do to stay ahead of the curve.
Book enough lead time
Allow at least one to two weeks for any unexpected delays in your shipment. If you’re opting for sea freight, make sure to have a buffer of one week at either end. If you’re planning to transport your goods via air freight, allow five days to a week as a buffer period.
Ensure you have your documentation correct
Incorrect or incomplete documentation could cause significant delays in your shipment. Avoid any setbacks by securing your documents beforehand. You may also want to consult with an expert freight forwarding company to see if you’ve missed any important paperwork.
Your essential cargo documents are:
- Bill of lading (BoL) – contains information regarding the terms and conditions of carriage for your goods.
- Commercial invoice – contains details about the buyer and seller, descriptions of the products, and their commercial value.
- Packing list – outlines how your cargo is packed and includes the weights, dimensions, and specific instructions for each item. Having a detailed packing list saves a lot of time and resources during routine inspections.
- Packing Declaration – this is a requirement for any importer transporting goods via sea freight into Australia. It is a document detailing what type of material was used to pack the cargo.
- Certificate of Origin – this document details the country of origin of your goods for shipment.
Hire an experienced freight forwarder
Re-routed cargo, incomplete documents, and blank sailings are not just a hassle but have the potential to significantly eat into your bottom line.
If your goods end up in an unexpected port overseas, or held at customs due to incomplete documentation, or are stuck at a terminal because your sailing has been cancelled, your costs can escalate much faster than you realise.
It is therefore vital to consult a reputable freight forwarder to make sure that all your paperwork is complete and that you have all the resources you need when something unexpected happens to your cargo.
A reputable and experienced company would also be proactive and keep you up to speed when dealing with tricky situations such as re-routed ships or closed ports.
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