News / TPM22: Shippers flock to LB – 'is there a way out of the supply chain mess?'

Crowds at TPM22. Credit: Brian Bourke, Seko Logistics

Shippers and BCOs have come out in force to attend TPM22 in Long Beach, California, this week and want to leave with improved visibility of the current “supply chain mess”.

It’s a supply chain crisis that has hobbled timely delivery of products to retail shelves and driven up freight rates to unsustainable levels.

Talking to The Loadstar team at the traditional ‘icebreaker’ welcoming party on Sunday evening, shippers were unanimous in their view that the current supply chain problems were unprecedented in recent decades of containerisation.

At the welcome return of the JOC-organised event on Monday, after a Covid-enforced three-year hiatus, the first two items on the agenda, following the traditional keynote address, were exactly what the supply chain doctor ordered: expert panellists giving their views on the demand outlook, and if and when some form of ‘normalisation’ would begin.

Where is container shipping demand headed? was the big question for IHS Markit’s retired chief economist, Dr Nariman Behravesh, with the many possible permutations of consumer demand softening some time in the second half of the year clouded by the unknown impact of Russia’s invasion of Ukraine.

When will the tide turn? back in favour of shippers and, not least, when will the highly elevated freight rates begin to return to an acceptable level where low-value high-cubage commodities are not priced out of the market and carriers can still make a decent return on their investments?

It was not good news from the panellists. Thorsten Meincke, board member for air and ocean freight at DB Schenker, told the audience rates could still be high two years from now.

“I don’t think that the tide will turn soon,” he said, adding that when rates did eventually decline, they would not return to anywhere near pre-pandemic levels.

He predicted small forwarders that did not have “their feet on the ground” in countries they serve would have problems convincing shippers to support them in the new capacity crunch era.

Moreover, Mr Meincke said, even larger forwarders needed to beware of placing ‘all their eggs’ in a single carrier’s basket.

“You must have multiple contracts,” he advised. “You need to have contracts with carriers in at least two different alliances,” and argued that if a single alliance blanked a sailing, “you’d be left without cover for your bookings”.

In the third morning session, debating the changing dynamics of ocean contracting, Patrik Berglund, CEO and co-founder of freight rate benchmarking firm Xeneta, drew a few gasps from the audience with data extracts showing the recent massive hikes in contract rate renewals.

Shipper panellist Becky Wu-Lee, senior manager, logistics and customs compliance, at Igloo Products, spoke for many attendees when she explained how shipper-customer relationships had deteriorated since the start of the pandemic.

She said Igloo had worked hard to build relationships with carriers, but the stock response in regard to operational and rate issues was “we can’t do anything about it; allocations and rates are controlled from head office”.

Lawrence Burns, founder and president of Lawrence Burns Consulting, agreed it was not the best of times to be a shipper, but, from his years of industry experience, he suggested having a good relationship with the local sales account manager still had its uses.

“Build your relationship with that sales person to be your advocate,” he advised.