Lighter loads through Panama Canal and schedule reliability are two effects hitting ocean freight; ‘We should not underestimate weather.’
Today is Earth Day, the annual global event that seeks to raise awareness about protecting the environment. And this 49th anniversary of Earth Day comes as concerns mount about how climate change is affecting the planet.
Nearly 1,000 people were arrested in London after the week-long “Extinction Rebellion” protests that flared up throughout the city. The protestors, who are asking governments to speed up efforts to reduce global carbon emissions, vow to continue their protests at other sites through the start of week.
It is extremely difficult to separate natural variability from actual climate change. But weirder weather is hitting the logistics industry in terms of lower reliability.
The trans-Pacific shipping market saw on-time Ocean Network Express Chief Executive Jeremy Nixon told an audience at a conference last month in California that a record number of typhoons in the Pacific Ocean last year had an impact on vessel reliability and scheduling.
“We should not underestimate weather,” Nixon said.
At the onset of the peak shipping season into the U.S., the largest port in the world, Shanghai, was closed for nine days in August 2018, compared to just one day in August 2017. Last year’s typhoon season was so intense that Shanghai had to close for 27 days during the period between April and August 2018. “Almost one month out of five months last year, the port was closed,” Nixon said.
But a lack of water also presents problems to shipping. Panama’s traditional dry season is coming up drier than usual due to the El Nino effect in the Pacific Ocean. The lower rainfall has forced the Panama Canal Authority to reduce for the fifth time the maximum allowable draft for ships that use the wider “Neopanamax” locks that opened in 2016.
The new locks were designed to allow ships with a maximum draft of 50 feet. But with less rainfall in Gatun Lake this spring, the Panama Canal Authority reduced the draft from 48 feet in March to 44 feet starting in May.
While larger container ships can still transit the canal, they have to do so with less freight. Container ships pay tolls to use the Canal based on how much freight they are carrying, resulting in $15 million less revenue for the Panama Canal Authority so far this year.
So what’s a shipping line to do with the increasing variability? Nixon said ONE vessels are using “a lot of weather predictive data” to avoid storms and other events.
Another step is to schedule services differently so that port calls will not be impacted by delays due to weather hitting one port. For example, Nixon said ONE split a vessel service that originally called on both Shanghai and Ningbo ports to separate services. That way, if one port is closed, service will not delayed at the other port.
“There’s not a lot we can do to change the weather, so we have to think more cleverly about how we design our networks and schedules so that all our services are not calling the same ports,” Nixon said.
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