• Ships from China to Europe are fully booked.
• Lack of air freight capacity.
• Rates are sharply rising – for sea, rail and air freight transports.

Transport capacity shortage China
Container ships in the port of Hamburg: Ships from China to Europe are currently fully booked. (Photo: Dominik Luckmann/unsplash)

(Bochum, 12/03/2020) No matter the size of the company, companies throughout Europe that purchase goods in Asia and especially in China are struggling with supply bottlenecks and rapidly growing freight rates. Ordered shipments arrive late in Europe because ports are overcrowded and container ships on their way to the West are brimming with cargo. In addition, in Asian ports there has been a shortage of empty containers because the delivery volumes from the Far East to the West are currently much higher than in the other direction. Charter ships can hardly be booked because the capacities are no longer available. While some industries need lower shipping capacities others have had higher sales volumes and need larger capacities. Some ship owners have now stopped bookings for 2020 because the ships are full until the end of the year. And they have been deliberately cancelling planned departures to drive up freight rates. Insiders report that within 13 weeks, 26 departures to Europe have been cancelled.

Companies report permanently rising costs and expensive seasonal surcharges of shipping companies to the Bochum-based software provider Setlog. More than 100 fashion brands, which have a lot of goods manufactured in Asia, use Setlog’s SCM software OSCA to control their international supply chains. One of the large shipping companies offers a kind of “priority service” with a surcharge of around 1,000 US dollars, which companies can use to “buy” a place on a desired ship. However, even the surcharges are no guarantee that transports to Europe will run smoothly. “For 20 percent of bookings, even the surcharges do not help,” says Setlog’s CEO Ralf Duester. He estimates that overall only ten percent of all old contracts are still being adhered to. Short-term transport bookings are almost impossible. As a result, companies now place transport
orders from China to Europe up to six weeks before shipment.

The statistics show how much the prices on the spot market have risen:
Sea freight: In calendar week 48, the Shanghai Containerized Freight Index climbed to almost3,000 US dollars for a 20-foot sea freight container. This is about four times the value six weeks ago.

Airfreight: The backlog of shipments to Europe is sometimes six days. Some airlines charge up to 9.50 US dollars per kilogram of cargo weight, depending on the relation. By way of comparison, just a few years ago a kilogram was flown for 1.75 US dollars. The coronavirus is the cause of the
capacity bottlenecks. Because large parts of the passenger aircraft fleets remain on the ground, the so-called belly capacities are no longer available as cargo space. Some airlines have passenger planes converted to freighters without further ado. Iron Maiden singer Bruce Dickinson recently
entered this business with Caerdav. The rock musician and entrepreneur is the chairman of the company’s supervisory board.

Rail freight: To transport a container by rail from Wuhan in China to Germany, in some cases more than 8,000 US dollars must be put on the table. The reason: As in sea freight, the flow of goods from East to West is much greater than vice versa, as Frank Huster, General Manager of the
DSLV Bundesverband Spedition und Logistik (German Freight Forwarding and Logistics Association) recently explained. Furthermore, railway wagons are a scarce commodity.

To ensure that at least the costs per unit of goods are low due to the high freight rates, the managing director of Prologue Solutions GmbH, Patrick Merkel, advises companies to obtain information from suppliers about orders at an early stage and, if possible, to bundle shipments (Buyer’s Consolidation). Digital SCM solutions, which connect all supply chain partners, are the basis for fully transparent supply chain processes. This guarantees that latest information and updates can be received simultaneously without media disruption, for example when shippers
make booking changes.

Nora Breuker, Digital Marketing Strategist
Setlog GmbH, Alleestrasse 80, 44793 Bochum, Germany
T +49 234 720 285 78, n.breuker@setlog.com, setlog.com

About Setlog
Setlog Holding is a provider of customized Supply Chain Management (SCM) solutions. Its central product is the cloud-based SCM software OSCA®, which is used by over 150 brands in the apparel, electronics, food, consumer goods and hardware sectors. With the help of OSCA®, companies
connect with their customers, suppliers and service providers to optimally coordinate their supply chain, accelerate processes and efficiently manage supply chains. Setlog GmbH is a 100 percent subsidiary of Setlog Holding AG. The company was founded in 2001 and is today one of the leading providers of SCM software with over 40,000 users in 92 countries.
The software company employs 60 p