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Shipping costs are a critical consideration for businesses involved in transporting goods. Understanding the factors that influence these costs is essential for effective budgeting and logistics planning. Here are seven key factors that can impact shipping expenses:

1. Distance and Destination:

The distance between the origin and destination plays a significant role in determining shipping costs. Generally, longer distances incur higher expenses due to increased fuel consumption, maintenance, and labor costs. Additionally, shipping to remote or rural areas often requires additional logistical efforts, leading to higher charges.

2. Weight and Size of Shipment:

The weight and size of the shipment directly affect shipping costs. Carriers typically use a pricing structure based on dimensional weight, which considers both the package’s weight and volume. Heavier and bulkier shipments require more resources for handling and transportation, resulting in higher shipping fees.

3. Shipping Method and Service Level:

The choice of shipping method and service level can significantly impact costs. Expedited or express shipping services generally command higher prices compared to standard or economy options. Additionally, factors such as guaranteed delivery times, tracking capabilities, and special handling requirements can influence shipping expenses.

4. Packaging Requirements:

Proper packaging is essential for protecting goods during transit, but it also affects shipping costs. Inefficient or oversized packaging can increase dimensional weight charges, while fragile items may require additional protective materials and handling, adding to the overall shipping expenses.

5. Fuel Prices and Transportation Costs:

Fluctuations in fuel prices directly impact transportation costs, as fuel is a significant expense for shipping carriers. Volatility in global oil markets can lead to unpredictable changes in shipping rates, affecting businesses’ bottom line. Economic factors, such as supply and demand dynamics, also influence transportation costs.

6. Carrier Selection and Negotiated Rates:

The choice of shipping carrier and negotiated rates can have a substantial impact on shipping costs. Different carriers offer varying pricing structures, transit times, and service levels. Businesses that regularly ship large volumes can often negotiate discounted rates with carriers, resulting in significant cost savings over time.

7. Seasonal Demand and Peak Periods:

Seasonal fluctuations and peak shipping periods can affect pricing and availability of shipping services. During busy seasons such as holidays or peak shopping periods, carriers may impose surcharges or limit capacity, leading to higher shipping costs and potential delays. Planning ahead and adjusting shipping strategies can help mitigate these challenges.

In conclusion, understanding the factors influencing shipping costs is essential for businesses to optimize their logistics operations and manage expenses effectively. By carefully evaluating these factors and implementing cost-saving measures where possible, companies can enhance their competitiveness and improve overall profitability in the global marketplace.

In January 2024, seafood exports to several primary markets experienced remarkable growth, with one market seeing a threefold increase.

Exports to China have tripled

As orders rebound, numerous enterprises have accelerated their seafood exports in the early months of 2024. Ms. Lê Hằng, Communications Director of the Vietnam Association of Seafood Exporters and Producers (VASEP), stated that January 2024 saw seafood exports reaching nearly $750 million, marking a 64% increase from the same period in 2023. Ms. Lê Hằng’s analysis suggests that apart from the Lunar New Year of 2023 falling in January, January 2024’s figures were still approximately 24-25% higher than usual – a genuinely positive indicator for the commencement of the new year 2024. In this context, all major products have shown significant leaps from the previous year: shrimp surged by 71%, pangasius by 97%, tuna by 57%, squid by 45%, and other types of fish by 50%.

Market-wise, the most significant surge occurred in China – Hong Kong, increasing more than threefold. In January 2024, China – Hong Kong emerged as Vietnam’s second-largest seafood importing market, trailing only behind Japan. Specifically, in the categories of shrimp and pangasius, China became the largest market this month, with exports to this region nearly quadrupling compared to January 2023. This month also marked an increased purchasing spree by Chinese importers in preparation for the Lunar New Year.

Beyond the Chinese market, seafood exports to numerous other markets also showcased significant growth, such as: the US market increasing by 63%, the Japanese market by 43%, and the EU market by 34%, among others.

Many businesses are currently expressing concern over another potential surge in shipping costs. The global container freight index by mid-January 2024 escalated to $3,407. Despite a 211% rise since October 2023, its last peak was in October 2021, reaching $11,188.60.

Thus, shifting exports towards closer markets like China is becoming a strategic focus for many Vietnamese seafood enterprises.

Facing the challenges ahead

However, when considering the broader market and seafood industry outlook for 2024, the majority of businesses recognize numerous ongoing challenges and difficulties that could slow down the recovery of production and exports.

Some shrimp enterprises have reported that the year’s beginning has not yet seen an improvement in orders due to persistent weak demand in the market. Issues such as substantial inventory levels, low purchase prices, and competition challenges with shrimp from India and Ecuador continue to persist.

While some businesses are observing more positive signs regarding orders, they express concerns over raw material sources due to the adverse season and prevalent diseases, resulting in diminished shrimp yields.

Additionally, the potential risk of facing anti-subsidy tariffs is a significant concern for US importers and Vietnamese exporting firms. Vietnamese shrimp’s relatively high price compared to other countries is causing hesitation among importers.

In the pangasius sector, there are slightly more positive signs regarding production and market trends. Orders in January and February have shown signs of improvement, leading to an increase in raw pangasius prices from VND 25-26,000 per kg in 2023 to VND 28-29,000 per kg at the beginning of this year. However, importing customers remain cautious about purchase prices. Consequently, pangasius enterprises are hopeful that exports this year will witness a modest increase compared to 2023, potentially reaching an optimistic estimate of $2 billion, a rise of more than 10% from $1.8 billion in 2023.

The seafood and broader aquatic industry are currently navigating through the impacts of several unpredictable global dynamics such as wars, the Russia – Ukraine conflict, Red Sea tensions, and surging freight costs. Specifically, for harvested seafood like tuna, squid, octopus, and various marine fish species, exports have nearly halted due to the IUU yellow card issue and challenges associated with raw material shortages.

Market demand and export prices are expected to incrementally rise, with hopes that Vietnamese shrimp will avoid anti-subsidy tariffs and that the IUU yellow card issue will be resolved. Based on this, businesses are optimistic that exports may improve in the latter half of the year, and the total annual outcome will experience slight growth compared to 2023, aiming for about $9.5 billion.

Source: Customs News

As the economy continues its recovery from the COVID-19 pandemic, various challenges are coming to light. Among them, the “2024 problem” looming over Japan’s logistics industry stands out as an issue requiring urgent attention.

In Japan’s logistics industry, overtime regulations have historically been exempted on an exceptional basis due to labour shortages. However, starting this April, annual overtime work limits for truck drivers will be capped at 960 hours. This change stems from the Work Style Reform related laws, enacted in 2018 with the aim of creating a society where workers can choose diverse workstyles. These laws have been gradually implemented since 2019, focusing on correcting long working hours, expanding flextime systems, and ensuring fair treatment regardless of employment status, all contributing to improving Japan’s overall labour environment and productivity.

While the standard annual overtime work limit is typically set at 360 hours, the logistics and transportation sector faces a higher limit of 960 hours due to the unique nature of its operations.

While these regulations are expected to improve the working conditions for drivers, the labour shortage, especially among long-haul truck drivers, is accelerating, with an estimated shortfall of approximately 14% by 2024 and 34% by 2030 if measures are not taken. This impact raises concerns ranging from decreased revenue for logistics companies, reduced income for drivers due to shortened work hours, to increased logistics costs for shippers due to fare hikes.

Ahead of the impending logistics “2024 problem”, the Japanese government formulated a “Policy package for logistics innovation” and “Guidelines for shipper and logistics operator initiatives for logistics rationalization and productivity improvement” in June 2023. These guidelines require logistics operators, shippers, and consignees to reassess industry practices and make efforts to improve the efficiency of logistics processes. Building on these guidelines, efforts by both public and private sectors to foster sustainable growth in the logistics industry are gaining momentum.

Paving the way for solutions with the ‘physical internet’
Efforts to realize the “physical internet,” which applies the packet exchange mechanism of the internet to logistics to streamline logistics systems, are gaining momentum. The concept aims to improve the utilization rate of logistics resources by sharing transportation means and warehouses among companies. This involves transporting goods through warehouses along the route to the destination using fewer trucks, reducing environmental impact and constructing a sustainable logistics system. In pursuit of achieving this by 2040, the Japanese government has formulated a “Physical internet roadmap.” It outlines concrete steps that various industries should take by 2040, such as sharing and optimizing information on goods and transportation assets using IoT and AI, and standardizing logistics materials like pallets and container containers.

One notable initiative is the “NeLOSS” system, developed by Next Logistics Japan, a subsidiary of Hino Motors. It is the world’s first automatic dispatch and loading system using quantum computers. This system aims to maximize the loading rate and productivity of logistics trucks, which are said to fall below 40%. By automating the allocation and loading of cargo using quantum algorithms, NeLOSS reduces the time-consuming manual task, which typically takes about two hours, to just 40 seconds. It instantly calculates the optimal combination for loading cargo of different shapes, weights, and temperature ranges, and transports mixed cargo from various industries using the company’s developed double coupling trucks, which are equivalent to 2.5 large trucks.

With investments from 19 companies, including Asahi Group Japan, Nissin Foods Holdings, Bridgestone, and MUFJ Bank, Next Logistics Japan strengthens collaboration beyond industries, essential for realizing the ecosystem of the physical internet. Together with 42 other companies from different sectors, they are advancing the development of transport sharing mechanisms.

Collaboration among consignees
The food retail industry is gaining momentum as they swiftly embark on logistics reforms. In regions like Kyushu, the Greater Tokyo Area, and Hokkaido, food supermarket operators have joined forces to establish study groups aimed at improving logistics. Recognizing the challenges of efficiently servicing numerous stores within the retail industry’s logistics network, these study groups prioritize cooperation over competition. Major supermarkets are collaborating to revise supply chain practices, extending order and delivery lead times and relaxing traditional rules that restrict procurement to the first third of a product’s shelf life, now eased to half. Additionally, they are exploring initiatives such as shared transportation trucks. With synchronized efforts from food retail industry players addressing both logistics efficiency and food loss reduction, these initiatives are expected to expand further in the future.

Modal shift: Increasing load efficiency while reducing emissions

Efforts to enhance transportation efficiency through modal shift, transitioning long-distance transportation from trucks to ships or railways, are gaining traction. Last September, Takeda Pharmaceutical collaborated with Mitsubishi Logistics and JR Freight to shift a portion of pharmaceutical transportation from trucks to rail. Using temperature-controlled railway containers, Takeda ensured compliant transportation with proper pharmaceutical distribution guidelines, expecting to reduce emissions by approximately 60% along transportation routes.

Moreover, Nippon Paper and Daio Paper initiated joint marine transportation using roll-on roll-off (RORO) ships in August last year. After Daio Paper ships products from its factory in Ehime Prefecture to the Tokyo metropolitan area, Japan Paper loads cargo from Chiba Prefecture onto the return trip of the same ship, bound for the Kansai region. This collaborative effort achieves both emission reduction and increased load efficiency.

Revolutionizing the logistics industry

According to the World Economic Forum’s report The Future of the Last-Mile Ecosystem, it is projected that the number of delivery vehicles operating on the roads of the top 100 cities worldwide will increase by 36% from 2019 to 2030. Seen as a crisis, the “2024 problem” presents an unparalleled opportunity to improve the working conditions for drivers, reduce environmental impact, and achieve digital transformation while responding to the rising demand in logistics.

Collaboration between the public and private sectors, innovative thinking unconstrained by traditional practices, and the adoption of cutting-edge technology will be the keys to forging a sustainable and resilient future for the logistics industry.

Source: weforum.org

Hostilities in the Red Sea intensified last week, and included the first seafarer casualties. But with most container traffic already avoiding the Suez Canal, demand easing as the market enters its slow season, and operations settling into a new routine, rates continued to ease across the major trade lanes.

Asia – North America ocean rates are down 10% from their peak, with Asia – North Europe prices 22% lower and Asia – Mediterranean rates 34% below their high in late January. Ocean logistics out of India had been the hardest hit by the Red Sea disruption, but even on this lane rates are beginning to decline and some carriers are postponing surcharges or increases that had been planned for March.

Ocean rates – Freightos Baltic Index:

• Asia-US West Coast prices (FBX01 Weekly) fell 7% to US$4,419/FEU.
• Asia-US East Coast prices (FBX03 Weekly) fell 8% to US$6,107/FEU.
• Asia-North Europe prices (FBX11 Weekly) fell 4% to US$4,313/FEU.
• Asia-Mediterranean prices (FBX13 Weekly) fell 10% to US$4,479/FEU.

Last week at TPM, Sea Intelligence’s Alan Murphy estimated that rates should settle around 1.5 to 2X above the long-term average, which would mean prices still have a way to go to their new floor as Asia – North America West Coast and North Europe prices are more than triple 2019 levels and East Coast and Mediterranean rates are still more than double.

The latest National Retail Federation report shows that North American ocean import volumes in January were 8% higher than last year and February imports were 23% higher than a year ago. H1 totals are projected to be 8% higher than in 2019, suggesting modest growth and also showing that container volumes continue to flow despite the Red Sea complications.

As ocean expert Lars Jensen recently put it, the diversions are really a challenge, not a crisis, and the extra vessels needed to service the longer routes are absorbing extra capacity and leading to a balanced market.

But when Red Sea traffic resumes we can expect overcapacity to return, rates to fall and blank sailings to increase, though not all observers agree on how significant overcapacity will prove to be.

In air cargo, Red Sea disruptions to ocean freight have led to some shift to air and increased volumes in February. And though there were reports of congestion at hubs like Bangkok and Dubai in early March, rates on most lanes are subsiding, with China – North America Freightos Air Index rates at US$4/kg last week and China – Europe rates at US$3/kg.

Air rates out of South Asia, however, where as mentioned above, ocean disruptions were the most severe, have continued to climb through last week. South Asia – North America rates have increased 43% since mid-December to US$4.30/kg and to Europe prices have climbed 67% to US$3.02/kg.

Air rates – Freightos Air index

• China – North America weekly prices fell 20% to US$3.97/kg
• China – North Europe weekly prices increased 35% to US$2.97/kg.
• North Europe – North America weekly increased 4% to US$2.08/kg.

The article was written by Judah Levine, head of research at Freightos, a global freight booking and payment platform.

In the last month of the previous year, Japan’s six major ports collectively handled 1.17 million TEUs, reflecting a slight decrease of 0.5% compared to the same month of 2022.

This was the third consecutive month of year-on-year contraction. Export volumes saw a modest increase of 1.9% to reach 619,415 TEUs, while imports experienced a decline of 3.1% to 552,103 TEUs.

Breaking down the numbers, Tokyo’s port handled 353,617 TEUs, a decrease of 5.7%, comprising 178,764 TEUs of exports (down 1.3%) and 174,952 TEUs of imports (down 9.8%).

Conversely, Kawasaki saw a significant improvement of 10.2%, processing 8,356 TEUs, with both outbound and inbound containers registering a growth of 6.2% and 15.1% respectively.

Yokohama also experienced positive container traffic, with a 4.8% increase to 243,184 TEUs. This consisted of 131,238 TEUs of exports (up 4.7%) and 111,946 TEUs of imports (up 4.9%). Nagoya saw throughput rise by 5.2% to 220,681 TEUs, with outgoing shipments up by 5.6% and incoming shipments up by 4.8%.

Moreover, Osaka’s throughput improved by 1% to 163,594 TEUs, driven by a 4.7% increase in exports but offset by a 2.5% decrease in imports. Meanwhile, container traffic to and from Kobe declined by 4.8% to 181,197 TEUs, with exports down by 2.1% and imports down by 8%.

Souce: Container News