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Portcast Insights
Kostiantyn Bankovskyi
November 2, 2020

Report: Ocean Carrier Reliability Drops While Freight Rates Increase

We explore the reasons for poor carrier performance and what you can do to secure your shipments on time.
Ocean Carrier Reliability

Shipment delays, a common occurrence in the shipping industry, have worsened this year due to various reasons such as the COVID-19 pandemic and the increase in E-commerce shipments. According to a Mckinsey report, 48% of container ships were more than 12 hours behind schedule on average pre-COVID-19.

Based on the data we will show in this report, we have observed more shipments being delayed, with longer delays.

In contrast, freight rates have increased by upwards of 40% from January to October 2020. According to Ocean freight rate benchmarking platform Xeneta, the increase in Ocean freight rates is expected to continue at least until Q1 2021.

Shanghai Container Freight Index Chart
Image taken from Shanghai Shipping Exchange

The Shanghai Containerized Freight Index (SCFI) is the weighted average spot freight rates of 15 individual export routes from Shanghai, with a basis index of 1,000 points. From the above screenshot of the SCFI taken on 16th October, freight rates have been below 1,000 points for most of 2019. In contrast, freight rates have been steadily increasing since the start of 2020 to exceed 1,400 points.

This means shippers are paying more but receiving lower service levels.

Let’s look at the historical data for carrier on-time reliability across regions, reasons for the inaccuracies of vessel schedules, and what you can do to secure your shipments on time.

Carrier On-Time Reliability Has Decreased by 46% Compared to Last Year

Vessel schedule reliability chart

By comparing the average schedule delays from January to September this year vs. the same time period last year, Portcast observed that reliability has dropped by 8 hours per voyage on average. After bottoming in May, schedule delays increased from June and have peaked in September this year. The extent of schedule delays has differed by region.

Carrier On-Time Reliability in Europe

When comparing average carrier reliability over the last 6 months (Mar 2020-Sep 2020) vs. the same time period last year, Portcast observed a 64% increase in schedule delays for vessels arriving in European ports.

Europe vessel schedule error chart

From January to September this year, the average delay has been 23 hours, with sharp spikes seen in February (39 hours) and May (33 hours) this year. This can be attributed to a few external factors.

Firstly, the February lockdown imposed in China due to the COVID-19 pandemic was enforced with little to no prior notice. Many carriers sailing from China to Europe had to make last-minute adjustments, which affected on-time reliability.

Secondly, container traffic to Europe increased in May, with 33,000 TEU of containers shipped to Europe, which is 2.4 times the figure in May last year. While carriers started reinstating blanked sailings and resuming suspended services in May, the increase in capacity was not enough to keep up with the spike in demand.

In September, carrier on-time performance dropped by 13% from August, with an average delay of 25 hours per voyage. Compared to September 2019, schedule delay has increased by 60.06%.

Carrier On-Time Reliability in Asia

From January to September this year, carriers that arrived in Asia ports performed worse than carriers in the European ports by 54% on average. Carrier performance was poorest in February and September, with an average delay for September at 60 hours per vessel per voyage.

As mentioned previously, this can be attributed to the February lockdown imposed in China due to the COVID-19 pandemic and the October Golden Week holiday. When doing a year on year comparison, we find that carrier performance in Asia ports was at its lowest in September last year as well, suggesting a correlation between the Golden Week holidays and carrier performance.

Asia vessel schedule reliability chart

With many shippers wanting to transport shipments before the week-long holiday in China, customs clearance in China took longer, leading to longer delays. In addition, last-minute changes made by carriers to the number of service lanes and voyages affected carrier performance.

In contrast, the carrier on-time reliability was at its highest in February 2019 in comparison to poor carrier performance in February 2020. This was likely due to the February lockdown in China which underlines China’s huge impact on the global supply chain and shipping industry.

Why Are Shippers Paying Higher Freight Rates for Poorer Schedule Reliability?

Historically, shippers have had to deal with poor schedule reliability due to various factors which will be outlined in this section. Unfortunately, schedule reliability has worsened this year while freight rates have increased dramatically, leading shippers to pay more for less value.

To analyze the cause of this situation, we will be looking at two factors, namely the reasons for poor schedule reliability and the cause of higher freight rates this year.

Why Has Schedule Reliability Worsened This Year?

Vessel schedules are static and are not updated in real-time. On average, 48% of ships are more than 12 hours late due to disruptions along its voyage. Multiple external factors can disrupt a ship on its voyage, such as adverse weather, port strikes and customs clearance, to name a few.

These changes happen in real-time and are not updated frequently in the vessel schedules, which makes the vessel schedules an unreliable source of container ETAs. The COVID-19 pandemic exacerbated the inefficiencies of shipping, with country lockdowns and more stringent custom clearance contributing to lower schedule reliability.

With staggered working hours in the port as part of measures to curb the pandemic, fewer staff are allowed to work in ports at any one time. Lower efficiency in container handling has led to containers staying in ports longer than usual and more delayed shipments.

Strong Demand and Container Shortage Push Freight Rates Up

Even with cancelled services restored and new service lanes added by carriers, demand has managed to push freight rates up. With more consumers turning to online shopping during the lockdowns, demand for goods has not dropped, as consumers are using travel expenses to purchase goods instead.

In addition, equipment shortages and the reduction of vessel capacity were observed in certain regions. This created a low supply and high demand situation, which resulted in ocean freight rates increasing immensely. Furthermore, trade imbalances between countries have led to container shortages and surpluses across different regions.

With a substantial period of time required before empty container repositioning restores balance for container availability, freight rates are expected to remain high well into the first quarter of 2021.

Compare Carrier On-Time Reliability and Improve Your OTIF Performance

It is now more crucial than ever for shippers to have access to data on carrier on-time performance. Knowing how each carrier performs for specific shipping lanes puts you in a stronger position with carriers when negotiating for lower freight rates.

While pulling live data feeds of the vessel’s location provides better visibility than vessel schedules, it is still insufficient. To build a proactive supply chain, various external factors as mentioned previously have to be taken into account simultaneously. How can you input all these data points in real-time to accurately predict the container ETA?

Predictive analytics brings together these data points to speak the “same language” for actionable insights.

By combining machine learning technology with the data points in real-time, accurate insights and predictions can be drawn from the data. Alternative shipping routes can be provided when ports become unavailable, shipments at risk of being delayed identified a few days in advance.

At Portcast, we provide you with the historical performance of carriers and their expected performance for specific trade lanes based on your shipping operations. Feel free to reach out to us for a demo to find out more.


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