Non vessel-operating common carriers (NVOs) seem to be losing the steam around less-than-containerload (LCL) activity, because shippers are able to move full containerloads with no space challenges, and at substantially low rates, according to industry sources in India.
Additionally, according to them, there is no container availability pressure, as additional equipment ordered during the pandemic had made the inventory cycle stable, despite the lengthy Cape of Good Hope detours for ocean carriers due to the Red Sea crisis.
“Right now, the LCL market is somewhat muted,” one senior executive at a major NVO in Mumbai said.
“It’s true that full containerload (FCL) activity doesn’t offer high margins, but can certainly help push overall earnings higher,” the source explained.
Indian cargo consol leader Allcargo Logistics’ Q3 (October-December) performance validates that. The parent of ECU Worldwide saw Q3 FCL volumes grow significantly higher than its mainstay LCL shipments, year on year.
LCL volumes were up just 2% while FCL trade soared 11%, which by volume stood at 2.2 million cu metres and 170,000 teu, respectively.
NVO sources generally expect this trade pattern to continue, as available ocean capacity could dramatically increase if shipping returned to the Red Sea – a prospect looking more favourable thanks to the Israel-Hamas truce.
“Given the freight cost and transit time advantages, there is greater value for shippers in converting LCL shipments to FCL,” a forwarder said, and added: “We do not see any sort of logical reasoning why LCL demand will rebound.”
There has also been an influx of capacity from the shipping alliance shakeups.
For NVOs, while consol cargo handling is a complex logistics mode, with multiple consignments packed into one container under a single contract of carriage, LCL service – priced per cubic metre – is typically a more lucrative business proposition, due to higher cumulative freight and other add-on collections, particularly delivery order and various other destination charges.
During Covid, LCL had especially become a hotly sought-after, or forcible, supply chain choice among Indian retailers for their sourcing in smaller lots amid the unbalanced supply-demand environment.
Online equipment logistics platform Container xChange, in its market analysis for February, also notes a steady downward trend in container prices.
“On a month-on-month basis, average container prices have declined marginally over the last 30 days across Asia, North America, Middle East and ISC, and Europe,” the analyst said.
“Latin America west, as well as Japan and Korea, were the only regions that recorded significant positive change in average prices for 40ft high-cube cargo worthy containers,” it added.
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