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News digest. 7 Dec

Another wave of fever in Asia. Will the disruption be as severe as before or has the industry learnt its lessons? 

While the memories of the previous lockdowns and their aftermaths on supply chains worldwide are still fresh, there is now an increasing alert of the new cases. Not only Europe is putting up its armor but Asia as well with Ningbo upgrading the emergency responses to the highest level. The virus outbreaks already caused the disruption at the port earlier this ear and the ripples of it spread a lot more farther than Asia.  Will history repeat itself or can the early measures help mitigate the risk of a shutdown? Experts believe that the new variations of the COVId-19 will emerge but to what extent they are going to affect global transportation is uncertain. Unknown variables also concern the carriers’ pricing behavior and how will the fact that the shipping sector is now more consolidated will influence the pace that rate changes with? Besides, the existing allies do not necessarily introduce positive changes. For instance, many Asian exports have found themselves lost and abandoned after Maersk decided to transform its ocean business and stopped accepting their bookings. As the result, the exporters have to go for deals with the giant’s rivals which is not a good alternative because now with short-term freight rates holding at highly elevated levels and new FAK ratesincreased by $2,600 and $3,850 per 20’ and 40’ containers respectively, operators are leaving no stone unturned to find extra loaders. In this case, operators of ad hoc sailings come into the spotlight, particularly from Asia to North Europe. Holding onto tonnage, they are being encouraged by buoyant demand and booking restrictions to make further round-trip voyages. Moreover, they advertise their ships well in advance. Meanwhile, the Port of LA and the Port of Long Beach have reported a combined decline of 37% in ageing cargo on the docks, so the authorities have again postponed the implementation of the dwell fees, this time until December 13.   

Small import businesses are in the same boat. The new customs changes between the EU and the UK coming next year are going to be tough for many of them. The new policies will include full import controls for EU goods and the UK’s largest business group, Federation of Small Businesses is signaling a lack of capacity among small businesses to handle the adopted changes. COVID cases, Christmas rush, delays, etc. make a snowball of troubles, thus experts advise firms to ensure that they have all they need to make declarations through negotiations with suppliers, consider alternative providers if it is necessary, and think about different transportation routes. Most definitely, not by air as it is promising to be an expensive variant as rates keep increasing with Shanghai to North America rates topping $14/kg this week. Can England benefit from the New Silk Road since it has been the headliner of the majority rail advanced in Europe? Not so fast. The development of overland trade has very much failed to get its feet wet in the cold waters of the North Sea mostly due to administrative procedures. In addition, little to nothing has been done in the way of new rail traffic through the Channel Tunnel either. Is it the political relation to blame? The upcoming Silk Road Summit will unveil the current state of things. Meanwhile, mitigation of the pandemic effect remains a priority, and Spain is planning to extend the reduced track access charges in its budget most probably for the last time because after the rail law is renewed, the authorities will track these charges independently. Moreover, it is going to invest 24.2 bn euros in rail infrastructure over the next five years and advance the improvements in the Mediterranean Rail Freight Corridor. Building a sufficient web of rail connections is a part of The UAE Government’s agenda too. It has announced the launch of the UAE Railways Programme, linking Saudi Arabia to the Port of Fujairah. The project is promising to be tremendous as it will be the largest one to consolidate the strength of the union for the next fifty years. Sea Port of Saint-Petersburg can also be added to the list of those improving its operations. By the end of this year, it has upgraded its storage facilities, railway infrastructures, power-engineering facilities, and repaired its berths which resulted in added kilometers of new railways and construction of two new cargo yards. 

China follows suit and spreads its influence farther in Europe thanks to the first eastbound train from Slovakia towards Xi’an using a cleaner route in terms of CO2 emissions. Overall, despite the growing concerns about the ocean freight sector due to the new virus outbreaks, China speeds up on its rail development and spans the merge of the state-owned rail companies in an attempt to secure its supply chain. 

The freight haulage sorority is about to see the new leader of green technology and it will be Canadian National that will deploy a FLXdrive battery-electric freight locomotive, the first fully battery heavy-haul locomotive in continental North America. Competition intensifies as recently DSV has unveiled a “Green Logistics” planning to take a starring role in accelerating the green transition of the freight transport sector. The company has proposed four solutions adaptable across all major transport modes.

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News digest. 7 Dec
News digest. 4 Dec

To find structure in chaos: the need for one digital space that would unite all parties from shippers to forwarders is stronger than ever. 

With all the digitalization taking place, shippers start to experience not only the benefits of it but also come across obstacles such as the lack of structure and order in the sea of numerous apps that offer shipment services. Users start complaining that in order to have their cargo delivered, they have to engage with different platforms that, in turn, are in competition with each other, which means that they all want customers’ data and the agreement to it is a very delicate subject. The good news, the solution already exists and it not only solves the problem by uniting the shippers in one digital space but also by being functional and user-friendly. Sensing the new direction of the wind, some companies try to restrict their customers to the use of their platforms but the undermined trust — some clients end up getting discounted offers while others never hear about them — makes it difficult to win loyalty from them. Besides, when spot rates decrease, the big players still stick to the highly elevated rates that only repulses shippers. However, such companies as Maersk, which is almost losing its title of the world’s largest containerline since the mid-1990s, are determined to ruin the rumors about spurning forwarder bookings next year by introducing several types of the agreement for 2022. In the coming year, the company will be focused on direct shipper contact and provision of landside and services package. In addition, the extra volume and availability will also be subject to agreements to tackle the capacity shortage. The letter is essential for the restoration of normality especially when the US ports keep breaking records in handling cargo. Although shippers have found alternative ways of getting their goods to market by air and rail as well as by chattering their own vessels, the recovery is postponed because customers are not switching to services, as it would have been expected. Due to the high demand for goods, interest rate hikes and higher energy costs take their toll on discretionary spending. As for congestion, the Port of LA and the Port of Long Beach finally report significant improvements, in particular related to the environment — the new queuing process has enabled slow-speed-steaming, increasing safety and air quality. The results have allowed the government to report that the US is ready for the holiday rush which is hopeful after such a turbulent season. 

On the other side, there are forwarders who are also dissatisfied with the “unreasonable” expectations of their counterparts. Cargo transportation is new torture with all parties involved complaining about each other, especially in the air freight sector. The rates are changing so quickly that for small forwarders it is difficult to keep their allocations on the market. There is a great problem of communication as well: opening-up passenger markets over the transatlantic only reduced the capacity (as it was taken by luggage instead of cargo) and that is something shippers did not understand — a classic “expectations vs reality” case. Meanwhile, the situation regarding air freight rates is not calming. The updates show that the ones from Shanghai to the US climbed 15-20% in November. Europe-US East Coast rates increased 10% over the month to $5.45/kg, with rates to the Midwest and West Coast climbing as well.

With the new German government tapping into responsibilities, the possibility of splitting DB into two entities for the sake of transparency that was lingering in the air for a while has not found its continuation. The company has been criticized for its service and now when the decision of restructuring it is no longer in focus, it has to find new ways for improvement. In the meantime, the New Silk Road has no intentions to be on the lookout for improvement as it is already developing at an impressive pace where the Middle and South Silk Road corridor plays the key role. Their future will be one of the topics for discussion during the upcoming European Silk Road Summit in Amsterdam. The initiative is dedicate to a cross-party forum to promote discussion and investment in all modes of transport across the North of England will also take place in the UK. By the end of the year, it is especially crucial to underline what has already been achieved and what prospects are looming over the horizon. Intermodal development is one of them and there are concerns that the EU is not pushing hard enough. Standardization and digitalization initiatives are named as the primary tools for achieving sufficient competitiveness. Zero-carbon future will also be on the upcoming agenda in Brussels.

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News digest. 4 Dec
News digest. 1 Dec

All shippers want for Christmas are contracts at a reasonable rate but when you are not the one running the show, matters become much more twisted. 

 The end of contract season is crippling behind shippers’ backs, but the prospects are not that bright because so far, it is only the shipping lines that are bathing in full glam and glory.  They are forcing shippers into long-term contracts and on some tradelines such as the transatlantic one, are refusing to open negotiations on contract renewals. It is now obvious who is running this show. The situation is spiced up with the new spike in freight spot rates by 16.3% in the month of November, and the dynamic is not promising to slow down. The same is happening with airfreight where in some directions the rates are up to $20 per kg with the prospects to remain elevated in 2022. Many shippers are now hanging right above the abyss of uncertainty because they realize that those long contracts will be secured at those impossibly high rates.  Will it be worth it to spend so much for the sake of having their cargo transported? Well, theoretically yes, if the demand stays high, but the new forecasts predict the possible ease in container demand. However, the US market is likely to remain strong because that port disruption will continue to be a contributing factor with congestion still being a significant concern. More companies start chattering their containerships to ensure that their cargo will be in time for Christmas. In order to speed up the improvements regarding cargo unloading in the Port of LA and Port of Long Beach, the government has recently stayed using the incentive of postponing the dwell fees, and it is doing it again. The results from the previous “threats” to imposing the fees have been so fruitful – the twin ports have seen a decline of 37% combined in aging cargo on the docks – that the authorities moved the date until December 6. To strengthen the positive dynamic, The CMA CGM Group will implement an Early Container Pickup Incentive Program for 90 days that will pay the importers for picking up their containers via merchant haulage from all the terminals in LA and Long Beach quickly. They will be able to use this money to offset costs incurred by tensions in their supply chains. 

Nevertheless, not all ports can recall improvements in their operations this week. The storm in Canada was so strong that 50+ ships were waiting on Monday to unload at the Port of Vancouver. The emergency alert has been prolonged as well. To solve this problem, the federal government is providing more than C$4m to prepare an undeveloped industrial site to temporarily store empty containers. In the EU, congestion fever does not leave the Port of Felixstowe either where it was originally brought by a lack of truck drivers. The situation on the road remains challenging as road freight prices reach record highs. Maersk has omitted Felixstowe from its AE7 service due to the long waiting time. In China, COVID quarantine requirements are forcing major shipping lines to suspend their feeder operations. Not all of them but only the acceptance of the cargo bound for the ports in the South China area that require the usage of the domestic feeders to reach the final destination. However, China is still getting back on track with the increased throughput that has finally risen 8.4% for the first time since the beginning of 2021. The rising volumes will require more space, thus China Harbour Engineering is teaming up with Gulf Energy in Thailand to build two more container terminals. The initiative will be beneficial for both sides. China implements it as a part of its Belt and Road initiative and the Thai government’s plans to attract foreign investment to the industrial east. The results are yet to come, but the Port of Hamburg is already demonstrating outstanding performance in handling pre-and-post-voyage railborne container transport at as much as 2.1 million TEU. No wonder it has been on China’s interest list for months as a valuable asset. At the same time, the country is benefiting from the recent acquisition of the Tianjin Container Terminal done by Cosco and China Shipping Terminal Development Co. The move is purely strategic: Сosco aims to enhance its work with the OCEAN Alliance and continue to strengthen the Group’s leading position in the Greater China region. 

China is also not going to stop its locomotive along the New Silk Road. The tiger has pounced in the direction of collaboration with France – the first eastbound train from Paris to Xi’an will carry high-end French furniture, linen products, cosmetics, and wine. The launch of regular trains has followed suit. Surprisingly such country as Poland where capacity issues regarding intermodal should have been gone for good is struggling with them. Intermodal transport is also severely affected by the lack of free tracks, congested border crossings and slow terminal processes. Experts point out the need to find a solution for a problem that affects rail freight generally, and not just a specific aspect of it. In the west, the rail industry sees a major merge of two of the largest rail operators in the US – Canadian Pacific Railway Limited (CP) and Kansas City Southern.

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News digest. 1 Dec
Across the ocean line

Maersk is reportedly in the market for a top five forwarder as huge shipping line profits – a combined Q3 ebit of $37.24bn – are expected to disrupt the logistics industry, with air cargo taking a particular interest in the outcome.

Maersk’s well-publicised acquisition of Senator, two 777Fs and leases on three 767-300Fs for its Star Air subsidiary, as well as its move into forwarding, could well disrupt the market.

Then, of course, there is CMA CGM’s decision to set up its own airline, having acquired four A350Fs, two 777Fs and four A330Fs. As owner of Ceva Logistics, like Maersk, the line is looking to become a one-stop shop.

However, in these discussions, it is often forgotten that there are two other vertically integrated airlines: Evergreen, which has ship orders which will double the size of its fleet (it ordered 24 ships for some $1bn in September, and 20 in March, for $2.6bn) owns EVA Air, which made a profit in the third quarter and currently has six 777Fs with one on order.

But there is an even closer example, one that tends to slip under the radar: NYK Line, which owns Yusen Logistics, and Nippon Cargo Airlines (NCA), which has eight 747-8Fs, and a fleet of 747-400s operated by Atlas Air.

There have been no concerns so far, however, with other forwarders using NCA. Last year, for example, Ceva operated 40 charters with NCA. But with Maersk and CMA’s more aggressive moves, will the market look more closely at other integrations?

While Maersk’s and CMA’s moves are nothing new, the amount of money and competition in the market is.

“It’s an interesting move by Maersk, especially as it moves into air logistics. It’s a fast mover and just ahead of CMA CGM,” said one senior air cargo executive. “But what will Evergreen and NYK’s countermove be to ensure competitiveness?”

The executive also noted that this vertical integration could lead to new co-operation on the ground, which could give the companies a competitive advantage over pure airline rivals – like the integrators, and the large global forwarders who compete with own controlled capacity, a growing trend (Atlas Air announced an extension of its agreement with DB Schenker).

“How will the obvious logistics synergy of operations and management – on the ground at airports, trucking, rail – be approached? Will airports and sea ports see opportunities beyond the traditional sea-air mode, and look to a synergy in processes that can really disrupt the industry?

“I think they will – but who will be the first movers?”

Earlier this year, one executive close to CMA noted that the line was likely to develop a sea-air product (although last month it pulled its air services from Dubai).

“CMA has little experience in air freight, which is totally different from sea freight. But there is room to create a solution between sea and air. CMA really deals with shippers with a need for sea and air, and it’s possible to combine those needs.

“There is a good synergy for a multimodal solution. Covid has changed the logistics needs of shippers and forwarders, so this is something quite new.”

For an integrated process on the ground, the sea-airlines might consider buying a handler – but one senior handling executive pointed out that the only way to make money in handling is through big volumes, hence the move towards large global handlers.

But the air cargo executive added: “It is inconceivable that any one of the global handling companies (presently owned by PE companies) would not jump at the chance of a strategic alliance with any one of these groups.”

The handler also questioned how vertically integrated companies would manage their rates.

“It’s better for them when it’s all their freight. When it’s other people’s freight, they come unstuck.”

He noted that CMA CGM Air Cargo had outsourced its sales – with the exception of some 30% of the capacity originally set aside for Ceva – to a GSA, ECS Group.

“The GSAs and forwarders need to make a buck and think they can make money from the airline, but who will pay for that, if it’s all the same group?

“The GSAs will be looking for volumes, but a group company can’t pay more than the GSAs are selling it for – that would make a mockery of it. And if group customers get low rates, the airline won’t be able to support it. High rates via a GSA, and they’ll lose the business.”

Meanwhile, forwarders are already complaining about Maersk’s integrated logistics operations biting into their business, with two telling The Loadstar Maersk had contacted their customers, while at the same time preventing them from booking with the shipping line.

Another warned that he could feel Ceva breathing down his neck when booking with CMA CGM Air Cargo.

And with sources reporting that Maersk is expected to make a purchase of top-five forwarder, the transformation into ‘integrator’ will essentially be complete –potentially leaving ‘pure’ airlines out in the cold.

Interestingly, the most vertically integrated company, Amazon, predicted yesterday it would be bigger domestically than FedEx and UPS by the first quarter of 2022. Source

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Across the ocean line
X-Press Feeders signs for 16 methanol-powered newbuild ships

X-Press Feeders has placed an order for sixteen 1,170 TEU dual-fuel newbuild containerships that can operate on regular fuel or green methanol.

The vessels will be built by China’s New Dayang Shipbuilding and Ningbo Xinle Shipbuilding Group, with each of them supplying eight units.

The first boxships will enter X-Press Feeders’ Europe and Americas trade routes by Q4 2023, with all vessels joining the fleet by the end of 2024.

Maersk set the ball rolling for methanol-fuelled boxships earlier this year, with orders for a feeder and a series of larger 15,000 TEU vessels. In recent months, X-Press Feeders has voiced its backing for three forms of propulsion to power the next generation of vessels: methanol, ammonia and atomic.

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X-Press Feeders signs for 16 methanol-powered newbuild ships

All bomond of containers business of Russia at the conference "Transcont 2021" in Moscow tommorow. MAXMODAL will take part too. Dinar Gainutdinov will tell about trends container business and multimodal network.

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News digest. 25 Nov

Companies have already decided not to wait for the peak season to hit and dived into hyperdrived sales before supply chain snags cut off the flow of merchandise. A way to cover increased operating costs.

This Thanksgiving not only a turkey will be subject to share but also elevated costs that retailers are facing due to increased rent fees, labor expenses, and decreased stocks. Thus, industry giants are on the run to adjust their strategies and test the waters before the Christmas rush hits the stores by regulating FBA fulfillment fees to partially offset the higher permanent operating costs. On average, the increase will be by 5.2%. Sales in November and December are predicted to grow between 8.5% and 10.5% from last year. In addition, such companies as Amazon are raising monthly off-peak storage fees together with removal and disposal fees, and introducing a tiered rate structure for long-term storage and dim-wight pricing for large standard-size products. No one is Immune to the persisting pressure. However, the first signs on the US market indicate potential positive changes next year as inventory levels have re-bound to the pre-pandemic levels. If the consumer demand abates, this dynamic will continue, although the move to higher levels of stock held in by wholesalers brings its own set of problems. There is still no space in the warehouses that is slowing the movement of goods and containers through the supply chain. As the result, the industry gets stuck in congestion. Companies continue altering their services from North America, Latin America, and the Caribbean. Australia is under a huge risk of becoming a “no go” area as well since it is becoming more difficult to book cargo slots and container detention charges keep mounting. Cyber-attacks at container deport operators additionally disrupt the situation. In the meantime, some become creative when addressing equipment shortages. South Korea teams up with a factory in Vietnam to start its own container manufacturing process. The location allows cutting costs related to land and labor expenses. 

 The global character of the crisis makes the recovery more complicated. Despite the slight aforementioned improvements, the freight costs will remain exceptionally high and consequently drive an increase in prices. Experts predict that on a global scale import price levels could jump by 11%. Recent data proves that the main problem in disrupted schedule reliability is poor service rather than constantly blamed high spot rates. Another tumbling stone is whether shippers are at all willing to pay a premium for better schedule reliability. 

An additional overview of the current trends and their effects will be delivered by the FMC shortly to help the flow of cargo through the international supply chain. Transparent data sharing will be the next initiative to be implemented. Another initiative to address the logjam at the ports has sparked the talks in the State – the proposal to launch a new line between the US and China that will use 53-foot containers. While it is still in the talks, Amazon reportedly has backed it. The transpacific direction will play a key role in the future recovery. Currently, the freight transit time remains extremely high. For example, a 32-day transit time is still 68% higher than it was in May 2021 and double the usual transit time. It means that delays are happening at every step, even when containers are unloaded. Apart from transit, delays concern berthing and dwell time. To illustrate the chaos, there are currently around 78 container ships in the queue outside San Pedro Bay. The best way for the companies to avoid continuous delay so far has been the approach to have their own terminal facilities at congested ports. 

Alternatively, they can follow the UK’s example that illustrates how the country has shifted its focus at the development of the freeports eco-systems. The new steps aim to attract businesses, thus anyone willing to set up a new manufacturing, clean energy or logistics business at the Thames Freeport will benefit from the access to tangible economic benefits which are available across the main tax sites. This alone will allow companies to reduce ownership costs by 50% - a miracle in our times when the prices keep rising. 

When the marine sector fails, it is usually the rail that is put on the pedestal of the hopes and dreams of the future. It has seemed like all leaders have been calling for more investments in railway infrastructure, however, the new studyhas shown that the reality is far from what the media has painted. There is no sign of a modal shift to rail and it is the road sector that is a current priority, at least for the EU. Between 2007 and 2020 82.5 billion went to roads and motorways in comparison to 62 billion euros for rail. The numbers speak for themselves. At the same time, MSC sees inland transportation as a big opportunity and plans to provide a new overland service that will ensure a shorter journey for cargo bound for Saudi Arabia and other Gulf Cooperation Council countries. It will be of particular interest to those shippers that deal with refrigerated cargo. The company also does not slow down on expanding its fleet targeting the second-hand market. The advantage of this strategy is simple: instead of waiting for years for the vessels to be built, MSC will receive them in a much shorter time. Another four ships will join the marine giant’s forces.

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News digest. 25 Nov
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