Ocean carriers have different names for it — overbooking, fall down, phantom bookings — and it’s driving them crazy.
Shippers, especially those exporting to Asia, reserve more slots on a vessel than they intend to fill, just to ensure their containers make it on the intended voyage. Sometimes shippers book the same shipment on two or three carriers, hoping one of them will accept the cargo.
The problem, shippers and carriers agree, results from the tight vessel space that has existed in the westbound trans-Pacific trade since last year when carriers began laying up strings of ships for the post-Christmas slack season in the Asia-to-U.S. trade. At the same time, U.S. exports, benefiting from the weak dollar, were increasing rapidly, creating demand for more space than carriers had deployed.
Overbooking is not confined to the trans-Pacific, said Mary Ann Kotlarich, a spokeswoman for Maersk Line. “In some situations, carriers experience up to 20 to 30 percent of their bookings not turning up either because the cargo has been loaded with another carrier and the booking was never canceled or because the production of the goods is being delayed,” she said.
Carrier executives have warned their customers that overbooking only makes the space shortages worse. Carriers later this spring will bring vessels back into the Pacific for the busy summer-fall shipping season, so space will be more plentiful.
Shippers, at least those in the U.S. export trade to Asia, say they need relief now. They emphasize that the practice of making multiple bookings is a direct result of the capacity shortage in the Pacific.
“I would not say this is necessarily the carriers’ fault, and it certainly is not the shippers’ fault,” said Peter Friedmann, executive director of the Agriculture Ocean Transportation Coalition. “It is a reflection of insufficient capacity to handle global demand for U.S. exports.”
Trans-Pacific carriers deploy vessels based on projections for U.S. imports from Asia. Because imports tend to be high-value consumer goods that command better freight rates than the low-value commodities the U.S. exports to Asia, carriers say their deployment decisions must be based on import volumes.
Carriers experienced sporadic problems with multiple bookings on import lanes the past month as factories in Asia rushed to fill their orders before shutting down for a week or two for the annual Chinese New Year celebration. But with the rush over, eastbound space shortages and instances of multiple bookings are expected to ease.
That is not the case with U.S. exports to Asia. Friedmann said capacity shortages in the westbound Pacific “will be systemic for the next decade.”
Resolving the capacity shortage and the subsequent problem of overbooking in the westbound Pacific will not be easy. Carriers could, if they wished, penalize shippers who do not fill their bookings, but that would only create ill will with customers.
Carriers ask that their customers immediately cancel any unneeded slots they have reserved in order to give the lines time to turn that space over to other customers, said Joe Alagna, vice president of sales at China Shipping Container Line.
Some shippers notify carriers out of common courtesy, and with good results. “When you do that, they really like you,” said Bob Weiss, independent administrator of the Food Shippers Association of North America.
Shippers, however, say many carriers do not follow their own advice about keeping an open line of communication. He cited a recent example where one of his members booked space on a voyage several weeks in advance, but the voyage never happened.
When the shipper called the carrier to complain, Weiss said the carrier representative responded: “We’re making vessel changes all the time, but I’m the only person in the office so don’t call any more.”
Friedmann questioned whether this problem can ever be resolved unless shipping lines forecast demand more accurately and deploy enough capacity to meet that demand. Agricultural shippers met Feb. 18 in San Francisco with the Westbound Transpacific Stabilization Agreement, a discussion group of lines that carry U.S. exports to Asia, and shippers were informed that carriers this year are forecasting a 7 percent decline in U.S. exports.
“That generated a collective gasp from our AgTC attendees who believe that the true forecast is just the opposite — a significant, even double-digit increase in export sales,” Friedmann said.
Contact Bill Mongelluzzo at email@example.com.