Ocean freight consolidators and forwarders have taken comfort in less-than-container-load (LCL) volumes and services in the U.S. trans-Atlantic trades, despite the ongoing economic headwinds caused by the coronavirus pandemic.
In recent months, more American and European shippers have turned to LCL services as a cheaper alternative to air freight and a way to counter ocean carrier service disruptions involving full-container-load (FCL) transport.
“Owing to the higher FCL and airfreight charges, freight forwarders on trans-Atlantic routes are opting for LCL to meet their cargo delivery commitments,” said Marc Stoffelen, executive director for ocean freight consolidator ECU Worldwide.
“In addition, there are cargo capacity constraints at the moment and this situation is likely to continue,” Stoffelen said. “As a result, LCL volumes will remain stable in the coming months.”
Ocean freight consolidators serve as carriers to forwarders by co-loading LCL shipments from shippers into single container loads for transport by ocean carriers to overseas destinations.
These service providers were less certain of the trans-Atlantic’s market outcome when in March and April shippers on both sides of the ocean found their international business suddenly constrained by COVID-19 government lockdowns, rapidly rising airfreight transport rates and ocean carriers cutting back on their services.
“LCL volumes certainly took a hit in both directions during the peak COVID-19 shutdown period from mid-March through April,” said Greg Scott, director of LCL ocean services for forwarder C.H. Robinson.
“For imports, we saw increased shipment counts moving but at lower-than-average volumes per house bill of lading,” Scott said. “With a higher dependency for airfreight to move via passenger aircraft on the trans-Atlantic, a shift to LCL made economic sense for those who could handle the transit differences. This was especially true when airfreight rates spiked to over $10 per kilogram.”
Not the strongest, but dependable
Compared to the trans-Pacific, the trans-Atlantic was not the dominant container market, but it has been dependable to ocean consolidators and forwarders over the years.
Prior to the worldwide COVID-19 outbreak, the LCL market in the trans-Atlantic operated in a predictable pattern.
“2020 started strong and better than 2019,” said Niels Nielsen, executive vice president for freight consolidator Shipco Transport. “As European countries started to shut down in March going into April, we experienced a drop in demand. That drop lasted a relatively short period of time as we largely saw volume return during May into June.”
At this point, Nielsen said more shippers and their forwarders started switching from full-container loads to LCL services due to smaller customer orders and costly reductions in air cargo capacity.
Robert Sutton, freight consolidator Vanguard Logistics’ regional vice president of sales for the U.S. and Canada, echoed that market reaction in the trans-Atlantic. “Restricted capacity and the rate escalation with airfreight have made room for the middle lane between traditional air and traditional ocean LCL,” he said.
The traditional second-half-year surge in trans-Atlantic volumes occurs in August, followed by a decline in September and October. Freight volumes then surge again in November before declining again in December.
“Europe has always had very steady volumes through the calendar year,” Scott said. “Higher-value products have a more consistent seasonality to them. For example, automotive, chemical and consumer-retail verticals all move in predictable patterns on this trade.
“The difference in 2020 is that we have not seen that peak surge in volumes in July and August that you would normally expect,” he said. “COVID-19 uncertainty has kept those orders and higher inventory levels low, resulting in a lower late-summer surge.”
The eastbound trans-Atlantic trade, however, remains flat and the ocean carriers struggle to secure exports from North America. On the westbound trans-Atlantic leg, however, a rise in exports is underway from the European Union and Middle East to North America, but capacity is constrained by blank sailings placed on ocean carriers’ headhauls.
“From a demand perspective, that remains normal both ways,” said Carmen Gerace, chief transportation officer for forwarder BDP International’s non-vessel-operating common carrier BDP Transport. “With that being said, we have seen a good portion of our client base look to optimize [freight] spend through LCL optimization programs.”
“Rate levels on the trans-Atlantic have been stable and predictable and aren’t fluctuating as much as other trades, allowing shippers to plan their supply chain costs long term between LCL and FCL modes,” said Jens Rehder, Shipco’s vice president of U.S. LCL imports.
Direct and expedited LCL services
Freight consolidators acquire container space from multiple ocean carriers and then retail that capacity to forwarders who manage the logistics of goods shipments on behalf of shippers. These wholesalers pride themselves on providing scheduled, price-competitive LCL services, even in the face of curtailed sailings by ocean carriers and more expensive airfreight.
“Our business was handled without delay throughout COVID,” said Chris Wilson, president of freight consolidator CaroTrans Global. “Our U.S. team did an exceptional job the past six months, and I think it actually provided us an opportunity to improve certain aspects of our business.”
The biggest challenge for consolidators in the trans-Atlantic is navigating blank sailing announcements from ocean carriers.
The trans-Atlantic has much shorter transits between the U.S. East Coast and European ports, compared to the American West Coast ports serving the trans-Pacific market.
“When a [trans-Atlantic] client experiences a seven-day delay due to a blank sailing, it puts a lot of pressure on a supply chain that could be set up for only 12 days on the water,” explained Michael Troy II, chief development officer for consolidator Troy Container Line. “The demand for us has increased due to our clients’ need to find reliable weekly sailings within our mix of carriers.”
Recent actions by the ocean carriers have encouraged consolidators like Troy Container Line to launch additional direct services from various East Coast gateways, such as Chicago, New York and Atlanta, so they are not hindered by the blank sailings. “If one gateway is not offering the transit needed or has a blank sailing, we can still find a solution in other ports,” Troy said.
Some consolidators, such as ECU Worldwide and Shipco, are introducing so-called “expedited” or “express” LCL services to trans-Atlantic shippers and forwarders, a service concept that was launched earlier in the trans-Pacific to counter ocean carrier blank sailings and costly airfreight transport.
Although expedited LCL services are three to four times more expensive per cubic meter of freight than traditional LCL, they offer airfreight shippers that are currently pinched for capacity and seeing higher-than-normal air transport rates due to the coronavirus pandemic a rate that is two-thirds or three-fourths cheaper, if extra days can be allowed in the transit.
“As with the trans-Pacific express offerings, we use carriers with the fastest transit times; we offer late gates at origin CFS [container freight station] and we have dedicated drop-off lanes at the CFS to expedite that process,” said Christine Solorzano, Shipco’s vice president of U.S. LCL exports. “We guarantee top stowage on the vessel to facilitate earlier availability.”
Solorzano believes the trend toward expedited LCL will continue. “They will most likely become a standard, even as we move out of this current situation,” she said.
“This service is essential to those businesses who couldn’t get the capacity or didn’t need to purchase airfreight rates as a result of the passenger travel,” C.H. Robinson’s Scott said. “Cargo from Southern and Central Europe could take advantage of these services via Europe’s extensive LTL [less-than-truckload] network to the main loading ports.”