Shipping Companies Prioritize Supply Chain Resilience
In the face of a challenging global environment marked by complex and unpredictable geopolitical landscapes, crises have become a regular occurrence. This has made enhancing the resilience and reliability of supply chains a top priority across industries.
According to Clarksons, over 140 new container ships were ordered globally in the first seven months of this year, with total orders nearing 700 vessels—representing 18% of the existing fleet. Major shipping companies like CMA CGM, Maersk, Pacific International Lines (PIL), Mediterranean Shipping Company (MSC), and ZIM are actively pursuing new vessel orders or leasing newly built container ships through independent shipowners like Seaspan, with expectations exceeding 100 ships.
Industry leaders, such as Hapag-Lloyd’s CEO Rolf Habben Jansen and MSC’s Executive Vice President Bud Darr, have echoed similar sentiments on the importance of resilience.
Lars Jensen, CEO of Vespucci Maritime, emphasized that the large orders for new ships have bolstered the resilience of both the supply chain and the shipping industry. Jensen remarked, “Are we in a situation similar to the pandemic? The answer is yes. The circumstances are nearly identical. During the Red Sea crisis, we managed to cope purely due to luck. Without these newly ordered ships, freight rates would likely be much higher than they are now.”
Shipping giants are fully committed to enhancing supply chain resilience, ensuring their pivotal role in global trade, and preparing for future uncertainties.
U.S. Importers Boost Stockpiling
Facing disruptions in shipping, rising freight rates, and escalating geopolitical risks, U.S. retailers are accelerating orders from overseas suppliers. Some believe that factors in the Red Sea region have led to peak shipping costs, with freight rates expected to remain high in the short term.
Rick Priest, Chairman of the American Footwear Distributors and Retailers Association, noted that current freight rates are still significantly higher than they were two years ago. Additionally, several shipping companies plan to increase the cost of shipping a 40-foot container by an additional $1,000 starting in mid-August.
Meanwhile, drought conditions have obstructed navigation through the Panama Canal, and potential labor strikes at U.S. East Coast and Gulf Coast ports this fall pose serious warnings for the global supply chain.
In June, container imports at Seattle and Tacoma ports increased by 43% year-on-year, with May’s growth rate at 33%. These figures are nearly comparable to the peak season in September and October of last year.
In the first half of 2024, the Port of Los Angeles handled 4.7 million TEUs, marking a 14.4% year-on-year increase. The Port of Long Beach set a record for total throughput in June, with inbound container throughput at its highest since mid-2022. Long Beach Port’s total container volume increased by 15% year-on-year in the first half of the year.
Here is the chart showing the weekly import data for the Port of Los Angeles over the past 10 weeks and the forecast for the next 2 weeks, comparing the actual 2023 data with the forecasted 2024 data. The chart provides a clear visual of the trends and expected changes in import volumes.
The weekly import data for the Port of Los Angeles over the past ten weeks and the next two weeks shows a significant import volume of around 500,000 TEUs in July 2024 (compared to 364,000 TEUs in July 2023). During the pandemic, only two months exceeded 500,000 TEUs—August 2020 with 516,300 TEUs and May 2021 with 535,700 TEUs.
Additionally, on July 30, the U.S. Trade Representative’s Office (USTR) announced that some of the planned large-scale Section 301 tariffs on a range of Chinese imports, including electric vehicles, batteries, computer chips, and medical products, will be postponed for at least two weeks. This uncertainty surrounding tariffs is also driving importers to stockpile.
Trump’s campaign team has proposed increasing tariffs, prompting many members of the American Footwear Distributors and Retailers Association to consider bringing products into the U.S. before tariffs rise.
Opportunities and Challenges for Logistics Providers Amidst Return Surge
As global e-commerce continues to grow, cross-border e-commerce has become a crucial channel for Chinese brands to expand internationally. However, this increase in transaction volume has also brought about a surge in returns, presenting new opportunities and challenges for logistics providers.
According to Statista, global e-commerce sales reached approximately $4.9 trillion in 2022 and are expected to exceed $6.3 trillion by 2024. However, with this growth, return rates remain high. In the cross-border e-commerce sector, return rates are particularly high due to cultural differences and long logistics cycles. Data shows that the average return rate for cross-border e-commerce is between 20% and 30%, with categories like clothing and footwear having return rates as high as 40%.
Opportunities
• Growth in Reverse Logistics: The surge in returns drives demand for reverse logistics services. Logistics providers can capitalize by offering specialized services such as return processing, product inspection, repackaging, and restocking.
• Optimization of Warehousing and Inventory Management: The increase in returns has prompted retailers and e-commerce platforms to focus on optimizing warehousing and inventory management. Logistics providers can offer intelligent warehousing solutions and inventory alert systems to help clients improve turnover rates, reduce excess inventory, and lower operational costs.
• Technology Upgrades and Innovation: The complexity of returns requires logistics providers to continuously upgrade technology and innovate service models. Technologies like IoT, big data, and AI can enhance automation and intelligence in return processing, ultimately improving customer satisfaction.
Challenges
• Increased Handling Costs: The surge in returns has significantly increased return volumes, challenging the profitability of logistics providers who need to invest more resources to handle returns.
• Handling Returned Goods: Returned goods may have various issues, such as damage, contamination, or expiration, increasing the difficulty and cost of processing. Logistics providers need to establish robust inspection and sorting mechanisms to ensure proper handling.
• Customer Service Pressure: The rise in returns has intensified customer service demands, requiring logistics providers to offer faster and more convenient return services, necessitating improvements in customer service capabilities.
• Policy Compliance Risks: Returns involve complex cross-border e-commerce and international trade operations. Logistics providers must stay informed about policy and regulation changes to ensure compliance and establish effective complaint handling mechanisms to minimize risks.
As the U.S. faces a surge in returns, logistics providers should actively address these opportunities and challenges by optimizing reverse logistics operations, improving warehousing and inventory management efficiency, and enhancing technology upgrades and innovation to seize market opportunities and achieve business growth.
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