Tag Archives: ocean shipping

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Coronavirus sparks possible force majeure

 

Force majeure is a rarely invoked clause in many contracts. It frees all parties from obligations during the time of some major catastrophe beyond their control, such as war, strikes, riots, crimes, or so-called acts of God (earthquakes, hurricanes, volcanic eruptions, epidemics, and so on).  It seems that some Chinese shipyards and ports are applying for papers from The China Council for the Promotion of International Trade stipulating force majeure conditions.

This would potentially allow ocean carriers to cancel ship runs, lengthening supply chain transit times for cargoes.  There are already long delays. The extension of Chinese New Year to give more time to adjust to the Coronavirus outbreak also introduces delays.

It’s hard to say how such a clause would affect IMO2020 compliance. Shipyards will be closed, preventing scrubber installations, and so there will be long delays in fitting out ships with required scrubbers.  This may go on a lot longer than anyone thinks, since backlogs were already long on scrubber installations.  I doubt that IMO2020 rules on low-sulfur fuel use will be changed to accommodate force majeure, so carriers will simply have to do with fewer ships than they planned for. Shippers, their customers, will take the hit.

Splash-logo-Feb-Aug-e1519814055424    FEBRUARY 4TH, 2020 Jason Jiang JASON JIANG

via Coronavirus sparks force majeure conjecture – Splash 247

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Posted on February 4, 2020 by in Shipping, Supply Chains

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Asia-Europe rollovers are back

It appears that ocean carriers are again playing fast and loose with delivery dates for cargo.  There’s a telling remark by an NVOCC source: “You might be able to book at that rate, but you have absolutely no idea when you are going to get the boxes shipped.”

Carriers still have not got the message that most shippers want their cargo when it was promised.  There might be a few that can stand a long delay, but the trend in inventory over the last 20 years has been toward rightsizing inventory by factoring in its logistics.  You can’t do that well if there is substantial variation in lead times. The formula for overall variation of inventory— measured by variance (square of standard deviation)— weights variance of lead time by the demand, but variance of demand by the lead time.

Looking at the formula, a mathematical truth deducible simply from the definition of variance and the assumption of independence of demand and lead time distributions, shows that often lead time variation has an outsized effect.

Ocean carriers can’t control the demand, but they can control the lead time. But it seems that they ought to spend more time thinking about how to help keep the customer’s overall variation low, rather than only dealing with what they alone can control.

Time to get on the supply chain thinking boat!  It left the dock years ago!

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 via Asia-Europe carriers leave boxes on quays as they eye better-paid cargo – The Loadstar

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Posted on January 17, 2020 by in Logistics, Service Management, Shipping, Strategy, Supply Chains

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Transpacific trade volumes set for further decline

Transpacific trade won’t recover for at least a couple of years, says an article in the Loadstar.

Most of the tariffs remain in place. And much trade has shifted from China to other Southeast Asia countries, like Vietnam, rather than returning to China.  US container imports from China are off by more than 8% compared with last year.  Vietnam was up 33%, to 1.4m teu; Thailand was up 18%, to 570k teu,  and Malaysia was up 27%, to 335k teu.  But total trade from the region is down.

And US consumers have already overpaid by $38 billion for goods from February of 2018 to September of 2019.  That is the typical story in trade wars; the consumer pays for the war through increased prices for purchases.  It’s a premise of trade economics; when trade is restricted, the consumer must buy at higher prices because they can’t get them from the lower-cost location.

And it’s not clear at all that the trade deal between the US and China will change that trend away from China, and down in general.  Of course, we don’t know what is really in the deal yet, or which things will actually happen.  And we know there’s been little advance on the intellectual property front, and the US has ceded the opportunity to gain support for dumping claims through the WTO.

Not a pretty picture for the Transpac trade.

logo via Transpac volumes set for further decline, despite US-China trade pact – The Loadstar

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Posted on December 18, 2019 by in Logistics, Supply Chains

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