Global Market Dynamics Change, and Cargo Consolidators Turn to FCL

Pandemic-related supply chain disruptions have reportedly boosted less-than-container-load (LCL) NVOCCs and traditional cargo shippers. But the then acute problems of supply and ship space shortage seem to be receding in some areas as ocean capacity exceeds demand and freight rates are now lower than before the coronavirus.
Mumbai-based neutral cargo consolidation services leader Allcargo, the parent company of ECU Worldwide, reported almost flat full container load (FCL) business compared to the high growth rate of recent years, while its core LCL business slowed as volumes declined. As a result, India’s NVO heavy-duty series appears to be doing everything it can to maintain volumes in a tough market environment by working closely with its loader tractor customers around the world, company officials noted.

LCL volumes across its global network fell 4% in September from 1% less than a year earlier, the data showed, even as German consolidator Allcargo Belgium bought additional stakes in Fairtrade, which it bought in January. Allcargo spokesperson said that Month after month, they have seen a broader decline in their key geographies of APAC, Europe, the Americas and India. In the second fiscal period (July-September), commercial activity decreased by 3% per year, to approximately 2.3 million cubic meters than 300 offices in around 180 countries across ECU. Their near-term expectations of a weak demand outlook and declining revenues remain unchanged. But not all companies report the same trend. DSV said that LCL is a strong part of its business. CEO Jens Bjorn Andersen stated that they have worked harder on LCL products than before, and it’s been eye-catching. But there’s also a structural reason for that – deliveries are smaller. The real KPI for them is the number of invoices and the key to that is the number of shipments.

Allcargo FCL numbers improved at a respectable pace, with September volumes up 3% year-on-year and up 1% from August. Second quarter FCL volumes were flat year-over-year at around 153,000 TEUs. It noticed that improvements in Europe and APAC were offset by negative trends in the Americas and India. The LCL demand from other Indian cargo shippers has also clearly slowed. Jitendra Srivastava, Managing Director of Mumbai-based Triton Logistics and Maritime, told The Loadstar that the short-term outlook for the cargo console business remained challenging as cargo owners wanted more flexible delivery options with faster transport and equally competitive pricing. He further added that the shippers are increasingly opting for full container loads (FCL) due to the attractiveness of lower freight rates, therefore, demand for FCL shipments is poised for continued growth due to faster transit time, lower risk of damage and greater flexibility.

While this change can be seen in global trade, trade between India and Europe is particularly affected due to the size of the market. According to analysts, FCL rates between India and Europe cooled this month to $600/teu from Nhava Sheva / Mundra to Felixstowe / Rotterdam, down 8% from late September.
In addition, West Indies and Mediterranean prices fell 30% to $550 per teu, down from $800 three weeks ago, due to continued declines. It is believed that the LCL market may tighten further shortly.

Joy John, head of sea and air transport at Mumbai-based freight forwarder Jet Freight, admitted that the LCL segment has lost momentum due to supply disruptions caused by Covid. He told The Loadstar that with lower destination costs and other inherent benefits, it only increases the value for shippers to convert LCL shipments to FCL.

In addition, in connection with the increase in air cargo volume and the cooling or stabilization of airline prices, some LCL customers also had the opportunity to switch to air cargo, especially priority shipments.
Although container handling is a more complex form of logistics where multiple shipments are packed into a single container under a single contract of carriage, LCL service is generally considered more profitable – at a cubic meter rate – due to the higher cumulative freight and other additional volumes. At the height of the Covid shutdowns, LCL became a sought-after solution among Indian retailers to purchase smaller lots.