Shippers face a host of challenges in 2019. It is imperative for shippers to engage with trusted partners to fully understand and develop contingency strategies necessary to manage changing industry dynamics.
We see four critical issues affecting shippers in 2019:
Trade policy and the economy
A long-term trade war with China could lead to material changes in liner shipping demand across a broad spectrum of commodities, introducing second and third order uncertainties. With a yet unknown outcome and timeline, we have encouraged nimbleness in transportation planning and engagement with the administration to influence policy.
Carrier consolidation affect on price and capacity
With a more coordinated curbing in carrier capacity, 2018 produced one of the most significant run-ups in short-term rates. While 2019 will see significant tonnage increases, it is imperative for shippers to protect themselves from future upside price swings and the procurement of adequate capacity through a formal detailed procurement process.
Increased variability in performance dues to infrastructure and service levels
Service levels across carriers, ports, rail, and trucking remain challenging. Inadequate infrastructure investment, driver shortages, the increased frequency of significant weather events, and the impacts of the interconnected nature of our national infrastructure cannot be quickly improved upon. Shippers must include technology-based planning, analytics, and cargo visibility in their operations to effectively identify and manage supply chain the resulting disruptions.
IMO 2020
The application of the low-sulfur fuel regulation and its effect on ocean freight needs immediate review and analysis. Shippers entering contracts this year will bear the burden of five months of “new” fuel formulas for 2019-2020 trans-Pacific contracts. Shippers must work with industry experts to ensure that the applicable fuel surcharges are fair, accurate, and transparent, i.e, the fuel surcharges should accurately reflect the new cost basis of low-sulfur requirements, and nothing more.