Now ocean freight carriers are experiencing a doozy. Today, blank sailings are on the rise and container bookings from China to the United States have fallen off a cliff. The impact of U.S.-China trade tensions and tariffs on global supply chains and shipping schedules is significant. That overall shift is particularly hitting some of the biggest product categories, including apparel, toys, furniture, and sports equipment. Now, industry experts are sounding the alarm that such steep tariffs will needlessly devastate the industry’s supply chain. With every passing month that the amount of containers shipped to the U.S. continues to drop, their fears get more dire.
Recently, shippers both here and abroad have pinpointed blank sailings as a major concern. These cancellations were used with greater regularity during the COVID-19 pandemic when container rates skyrocketed to record highs, peaking at $30,000. Ocean carriers blanked sailings far in excess of what was called for during this period, adding fuel to the continued crisis.
The more sailings that get canceled, the cheaper the containers get. This drop is the result of ocean carriers consolidating their vessel routes—a process known in the industry as “vessel strings.” A great example of this fine-tuning is the ONE service. It routes through China to North American ports such as Vancouver and Tacoma.
Alan Murphy, CEO of Sea-Intelligence, pointed to the unknowns of what carriers would do with future vessel schedules.
“We have no way of knowing how significant this drop in orders will be on vessel schedules,” – Alan Murphy, CEO of Sea-Intelligence.
Additionally, he commented on how this trend has affected the transpacific trade routes.
“There are no models to extrapolate this. What I can tell you is the majority of containers on the vessels servicing the Asia to U.S. trade routes is China. We won’t go to zero containers, but we will see a decrease in containers and as a result, in the future we will see a massive raft of blank sailings announced.” – Alan Murphy, CEO of Sea-Intelligence.
The World Trade Organization has sounded alarms about the outlook for global trade, stating it has “deteriorated sharply” due to tariffs implemented under former President Trump’s administration. Freight traffic is dropping dramatically. The latest estimates are for between 640,000 and 800,000 fewer containers. Logistics companies and the ports processing this freight will surely face significant operational hurdles in turn.
Each fewer container reduces work for the port’s cranes, and cuts future revenue the port will earn from the container’s fees. Furthermore, logistics firms will see fewer container pick-ups and drayage/tramp service provision by trucks and rail as demand fades. The consequences would be felt across the entire supply chain, impacting each mode from warehousing to last-mile delivery.
Peter Sand, the chief analyst at Xeneta, acknowledged the conundrum. Pressure was building in the market.
“The fact that the lower end of the market has been rising shows the heat is on,” – Peter Sand, chief analyst at Xeneta.
He noted that freight shipping costs are skyrocketing for the shippers.
“Shippers large and small all have to pay up for frontloading, as the ‘pause’ made the pulling forward of freight possible again,” – Peter Sand, chief analyst at Xeneta.
Bruce Chan, director of global logistics & future mobility for Stifel, sounded alarm bells when it came to inbound containerized imports.
“That uncertainty is beginning to manifest in blanked container ship sailings on core eastbound transpacific lanes, in our view, opening the potential for a double-digit decline in inbound containerized imports as early as next month,” – Bruce Chan, director of global logistics & future mobility for Stifel.
Ocean carriers have been ordered to cut costs and streamline operations. They’re deploying a greater number of smaller vessels and opting to slow steam a growing number of larger vessels on their routes. Shippers need to fill vessels to make their return on investment. As demand for freight declines, it becomes less viable for carriers to operate larger ships if they cannot ensure full capacity.
The total number of recorded blank sailings out of China has reached 80 according to data from freight company HLS Group. This trend raises questions about future shipping stability and the broader implications for North American ports struggling with decreased freight traffic.
As these dynamics play out, industry stakeholders are in a watchful, waiting mode with the specter of changing shipping patterns and market conditions always lurking. The dynamic complexities between tariffs, changing trade policies, and where and how global shipping practices — both now and future — have cemented logistics FedEx’s prominent role.