Left out and ignored – carriers strike the last nerve of European shippers
It is tough times for both – customers and consumers – as carriers are being accused of welching on newly signed contracts to go after more lucrative premium business. As more pressure adds up, carriers no longer want to respect the MQCs of new contracts with shippers making the latter feel frustrated and abandoned. Overall, customer relations continue to deteriorate. The shippers are forced to send a percentage of their contracted volumes at highly elevated rates, plus premium fees and surcharges. The UK forwarders complain that they are getting a few boxes released under rates only due to long negotiations and “pleading”. Is there more to come? So far, there is no light at the end of the tunnel since the chronic congestion in Asia increases rates on some directions for the 10th consecutive week. Spot freight rates to move a 40ft on the headhaul transatlantic lane from Rotterdam to New York increased by around 16% to $4,607 per FEU, with spot rates on New York to Rotterdam growing 11% to $1,121 per 40ft box. Meanwhile, continuing strong Asia-Europe demand saw rates from Shanghai to Rotterdam a further 6% to reach $11,196 FEU. Major delays at Yantian have seen other carriers, including Hapag-Lloyd, Ocean Network Express, and MSC, shift service calls to Nansha. According to the recent data, there are 304 ships in front of ports around the world waiting for berth space to open up. In total 101 ports have reported congestions.
The impact of the COVID and post-Brexit trade has hit the UK in a particularly severe way. Statistics show that the country’s food and drink exports to the European Union (EU) fell by 47% in the first quarter of the year compared to the corresponding period in 2020. The industry experts set out a plan to mitigate the effect of the disruptors by boosting support for exporters. The initiative has been backed by the Trade and Agriculture Commission. Additionally, they advocate for the government to take a more active role, otherwise, the situation will get even worse. The extreme shortage of HGV drivers in the UK has already reached a crisis of national importance. Suppliers state that if things do not improve, Supermarket shelves and restaurant plates are going to be empty. However, it is not all a one-way decline: the EU exports to the UK were also down across the board, with wine shipments down 20%, for instance.
Maersk pushes forward by organizing another eastbound block train, connecting South-Eastern Europe and China. It is a win-win move since besides strengthening the giant’s presence, it satisfies the needs of the chemical industry. Departing from Madrid in Spain, the train’s final destination in China is Nansha. Rail Cargo Group has made some other advances and launched a new TransFER connection between Verona in northern Italy and Regensburg in southern Germany. It is open for those goods that are currently banned from the road, such as wood, scrap and grain, thus contributing to the modal shift across the Alps.
The green agenda is still up and thriving. Deutsche Bahn will reduce its climate impact faster than initially planned, moving the previous target of being climate neutral forward from 2050 to 2040. The company has announced that will use 100% green electricity for factories, office buildings, and train stations. To reach the target, Deutsche Bahn aims to emit less CO2 in the coming years with significantly younger train fleets in long-distance, regional, and freight traffic and investments in operations.
German speed logistics company Time: Matters has introduced its measures regarding intra-European air cargo capacity by offering additional dedicated air freight capacity between Germany and the UK and Ireland. Its primary objective is to offer the customers flexible solutions for maintaining supply chains. In a separate, recent development, Time: Matters has “significantly” expanded its Sameday Air service between Europe and the US via Paris.
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Worldwide congestions push railway underwater
Liner congestion fever is spreading across the planet – there are now 304 ships idle in front of ports around the world waiting for berth space to open up. This global character represents a clear change from the past weeks when the congestion was mostly concentrated in south China. Intra-Asia hubs are now reporting tailbacks and in the US, east coast ports are suffering all manner of disruptions. Experts report that more than 600,000 TEU has now been affected from the fallout of an outbreak of Covid-19 around Yantian Port. Although current overall operational capacity has returned to 70% of normal levels, and container yard utilization has dropped from 100% to 70%, such big players as Maersk are perplexed with such rapid spread of Yantian’s effect and the impact it makes on the rates. Asia-US West Coast prices now stand at $6,614 per FEU, up 206% year-on-year. Asia-US East Coast prices are now at $9,889 per FEU, 244% higher than rates for this week last year. It has been reported that more than 130 omitted calls and over 60 added calls have been noted for the period 23 May - 26 June.
The situation pushed the U.S. authorities to bring the discussion of reshoring back to the table; however, it actually may not be as profitable and strategically wise as the government believes. Asia is still a viable option for many supply chains. It proved its resilience during the pandemic with its exports recovering more quickly than other regions, and its consumer market is growing. North America's share of global exports is expected to remain unchanged, at 14% by 2025, while Asia's share is expected to grow two percentage points to reach 38%. In this case, collaborative initiatives could be a solution. One of them is an enormous project of a 13,000km-long railway line from China to the USA, running partially underwater to cover the Bering Strait. This ambitious initiative would be the finishing touch of the Belt and Road initiative, as it would connect the world by rail, but it will hardly happen due to the high cost and numerous actors with different expectations involved. Hence, Maersk looks for alternatives. It has organized another eastbound block train, connecting South-Eastern Europe and China.
In the U.S. supply chain battlefield, the parties continue accusing each other of the failures. ILWU has laid the blame for supply chain woes across the country on foreign companies, including shipping lines and terminal operators that have failed to invest in staff. Another issue regarded the D&D charges against which shippers have been advocating. Hapag-Lloyd has stated that the new draft legislation from the US Congress will not solve the crisis faced by US exporters after lawmakers put forward plans to force carriers to accept bookings from domestic businesses. There is a call for action from the U.S. government to protect the interests of local exporters and provide more financial support for the supply chain. It is crucial especially in the light of the protracted crisis – the ports are struggling to keep up amid more record imports. The ports of San Pedro Bay and Los Angeles have recorded a total throughput of 8.6m TEU – a 45.3% increase from the 5.9m TEU handled in the first five months of 2020. Port of Oakland has handled a record of 1.08 mil. containers from January through May, while it said annual volume could surpass 2.6 million boxes for the first time in 2021.
The current context is challenging for all industry players, but the small ones are particularly vulnerable. Small and mid-sized Korean liner operators voiced their frustration claiming the imbalance in state funding (regarding HMM) for the country’s vessel operators that imposes a threat to them. The government has reacted with the assurance that smaller operators would be supported. Feeder operators also indulged Korean exports and said more funding would be made available to them. In total $856.39m are planned this year for shipping companies – with nearly 91% reserved for mid-sized companies.
The dynamic of the air freight sector is similar to other segments of the industry – Asian air freight’s export capacity is expected to remain tight over the next two months before the start of the peak season. This capacity reduction along with robust consumption, especially in the US, should keep rates elevated during July and August. Among significant achievements, the U.S. and the EU have agreed to end a 17-year dispute over aircraft subsidies. Additionally, they decided to suspend the application of harmful tariffs worth US$11.5 billion for a period of five years that hurt companies and people on both sides of the Atlantic.
It seems like the authorities of the Panama Canal have done their due diligence regarding the Suez incident. It has increased the maximum allowable length for vessels transiting the Neopanamax Locks. The increase means that now 96.8% of the world’s fleet of container ships can transit the Panama Canal, shortening routes and benefiting economies around the world.
The challenges that have hit the retailers did not omit such e-giants as Amazon. While the logistics and e-commerce platforms Amazon has built over the last 20 years are rightly admired, its HR systems have simply not kept pace with the aggressive expansion of its network, leading it to lose market share to rivals such as Walmart during the height of the pandemic, as it struggled to overcome severe warehouse worker shortages.
Port’s of Hamburg congestion forces companies to look for the alternatives, but are there any of them left? Container export freight rates have marked the 10th week of consecutive growth
Freight rates for container exports from the Port of Shanghai in Week 23 increased from the previous week on several trade routes, commemorating the 10th consecutive week of growth. Spot rates for moving containers to Europe picked up 7.9% to US$6,355 per TEU, while those to the Mediterranean were carried at US$6,272 per TEU, swelling 5.4%. Carriers lose patience with congested box terminals and dump their cargo at other ports. In addition, they are being asked to pick up the tab for inland on-carriage or relay to destination ports. While Hamburg is being omitted, the struggle for booking slots and surge in demand cause Liverpool’s container port to implode. As the result, real costs are being incurred and more charges are added. They demurrage for vehicles waiting more than 90 minutes at the port, as well as a £100 surcharge for end-of-the-week collections is imposed. For the time being, in the EU, export demand is expected to remain strong across all trade lanes.
The high hopes for rail freight to become one of the means for post-crisis recovery have been in the air for a while now. According to the experts, the China-Europe rail connections could come to the rescue indeed, since Eurasian trains have acquired a more prestigious position and are now a credible alternative to maritime transport in terms of reliability and prices. The new services that enter the market with an intermodal profile are equally important in this sense. The facilitation of rail development has become a primary objective for many companies. The Netherlands is participating in a new study on feasibility of a new train connection from Antwerp to the Ruhr area in Germany. The initiative addresses the issue of the rising industrial demand. Lineas follows suit. The company will connect the North Sea Port and Ghent directly to the Intermodale Milano Segrate terminal in Northern Italy. The new train service will have an intermodal profile and will run with five weekly roundtrips. Industry players believe that another strategically important direction for development in terms of recovery – the Rhine-Alpine corridor – could be improved with the help of additional investments. Instead, the Dutch port of Moerdijk bets on infrastructure and strives to increase the number of weekly trains. Meanwhile, the UK sees itself as the main driver of the rail freight locomotive based on the data that demonstrates the increased efficiency of the local rail network as a sign of market recovery. In turn, Britain’s biggest inland intermodal terminal – DIRFT – is swiftly moving to the largest stage of its development that will boost its capacity up to 32 trains per day.
However, the situation on the roads leaves much to be desired. The continuous, acute shortage of HGV drivers has reached a phase of critical importance on the national level in the UK. Experts claim that there is no quick solution to the problem in the current context and the government needs to take active steps especially after it intervened to change the tax rules and added drivers to the migrant skilled labor. In general, whatever measures authorities implement, they have to design them with respect to efficiency. This common knowledge might not be a common practice – Danish restrictions on road haulage are already affecting transport companies. FREJA Logistics experiences increasing capacity shortages that are very difficult to meet due to the imposed measures that are too bureaucratic and time-consuming to comply with. As the result, Danish hauliers cannot provide satisfactory solutions to the transport demand.
The air sector is still struggling, and yet the first steps towards an upward trajectory are being undertaken. Despite the ease of the lockdowns, rates from India to the UK are high, amounting to $3.2-$3.5/kg, which is an uptick, compared with the EU prices of $3-$3.2/kg, due to the limits on factory production and tight air and sea freight capacity. The latter continues to jeopardize the situation. In unison with other sectors, airfreight calls for government support. Logistics UK, together with the Aberdeen Investment Fund, has issued a call to arms to the UK government that could significantly improve the current state and maintain already achieved accomplishments. Among the objectives proposed by the companies, it has been suggested to expedite negotiations between the EU and UK on traffic rights to open up core markets and ensure the free flow of cargo. It seems like there is no better moment for it since the European market is so eager to move forward. The Italian market, which has long wished for its very own freighter operator following the demise of Cargoitalia, is set to see an all-cargo operator launch shortly. Aliscargo, to be based at Milan Malpensa, is in the final stages of getting its AOC after its first aircraft delivers at the weekend.
The U.S. shippers are getting more frustrated as rates grow further. Is the government able to help? Yantian offers a glimpse of hope that the congestion might resolve in the near future.
The current situation simply does not allow any room for further debates over strategies for improvement, since another week has brought a new increase in freight rates. This is particularly true for the Port of Shanghai on several trade routes. On the route to North America, spot rates climbed 0.9% to US $8,554 per FEU to east coast ports but fell 3.5% to US $4,658 per FEU to those on the west coast. In addition, thanks to the recent data, experts have identified the following pattern – the difference between the low range and high range of rates paid by shippers on the Asia-Europe trade had increased significantly on the spot market, from around $300 per FEU to more than $1,200 per TEU. By now, all caries have applied congestion surcharge on the refrigerated containers. The small shippers have suffered the most in comparison to the large ones. However, there is a glimpse of hope that things will improve – YICT has informed customers that the bottleneck at the port had eased. Current overall operational capacity has returned to 70% of normal levels, and container yard utilization has dropped from 100% to 70%.
The frustration of the U.S. exporters has hit its new milestone. They have accused carriers of billing for detention & demurrage charges even when empty containers have been returned. As a result, this increases costs and time spent battling with shipping line administrators – daily for some – to rectify errors. There are numerous complaints about the lack of export options and the overall state of the American supply chain. In turn, the National Retail Federation (NRF) has called Joe Biden to address port congestion crises. Having announced the creation of a Supply Chain Disruptions Task Force, the government is discussing taking drastic action to force global liners to take all US export container bookings, addressing the aforementioned issue with shippers. The U.S. ports are undergoing incredible pressure. The Port of Los Angeles stated that it had earned the distinction as the first port in the Western Hemisphere to handle more than 1 million TEUs in a single month. It has been reported that it is one of many U.S. ports that is having severe congestion issues because of the veritable tidal wave of imports.
Apart from dealing with multiple delays and skyrocketing rates, some of the companies become targets of cyber-attacks. It has been confirmed that the recent HMM’s incident was an attack indeed. However, most of the claimed damage has been restored and no information or data leakage was found.
In order to ease the tension at least in one of the sectors, the U.S. and the EU agreed to suspend tariffs on $11.5 billion worth of goods for five years. The list of goods includes food, wine and spirits, and machinery, which were embroiled in a dispute over subsidies to Airbus and Boeing. Although the trade blocs have resolved the aircraft dispute, the tariff suspension does not allow spirit importers and exporters to emerge, so the question of the efficiency of this measure is up for debate according to experts.
MSC continues its tremendous growth. The 60 ships bought have a combined capacity of 257,000 TEU and have taken MSC’s fleet recently past the 4m slot mark. Another industry giant, Maersk, has collaborated with ERS/BoxXpress.de to facilitate hydropower renewable energy, placing bets on sustainability. Seaspan Corporation is close to finalizing orders in China for 20 boxships of around 7,000 TEU, with deliveries set to begin in 2023. The Northwest Seaport Alliance has made a milestone by using four ZPMC Super-Post Panamax cranes to the Seattle Harbor. The new Terminal 5 cranes will begin moving cargo at the beginning of 2022.
Evergreen’s epos has been going on for 2.5 months already and yet, there is no light at the end of the tunnel in terms of an agreement between the sides. The SCA has reduced its claim from $916m to $550m, but firmly rejected an offer from the Japanese owner of the ship of $150m to free the vessel. It is going to be a long way for both parties to resolve the issue. However, the losses do not wait. The longer this saga continues, the greater will be the damage arising out of the incident. Experts urge the parties to consider all the options available including the release of the vessel from arrest especially now when containership capacity in such short supply and demand is remaining high.
Is too soon to place bets on rail as an industry savior? Perhaps, it is time to makes a leap of faith
The crisis has brought to light several pain points that no longer can be ignored – for years, shippers strived to make their supply chains as ‘efficient’ as possible – where efficiency was all about lower cost, lower inventory, just-in-time, faster lead times, etc., but in the process removing resiliency. Logistics coordinators also note that JIT in the supply chain suits the balance sheet only until there is a problem – then production stops and companies wonder why they made themselves such easy targets and there is no buffer transit time. The solution is viewed in approving smaller shipment lots, reducing factory stuffing FCLs, and improving LCL consolidation. The industry has to be reactive because although Yantian’s congestion is slightly getting better (the port's productivity has moved towards 45% of normal levels); the ripple effects of it are long-lasting. North Europe port of Hamburg has been under intense pressure in the past few weeks and recently, Hapag-Lloyd advised customers of a tightening of restrictions for export cargo deliveries at Antwerp. An advisory from the carrier said terminal operator PSA Antwerp had been forced to implement a seven-day cargo opening rule for export containers to its terminals.
The twin impacts of Brexit and the pandemic have harmed UK ports throughput in the first quarter of 2021. Recent data shows that total freight tonnage fell 9% year on year between January and March to 103.9m tonnes. Total imports were down 8% to 67.2m tonnes and exports down 11% to 36.6m tonnes. It is challenging to estimate which factor contributed the most to the damage, but what is certain is that traffic remains low and the driver shortages have reached their peak. The latter is in such a critical condition, that it was proposed to use army trucks to ensure enough vehicles and drivers to distribute food. However, an RHA spokesperson questioned the validity of using the military since it would need additional training and the crisis expects quick solutions. The current contexts pushed Logistics UK to call for an end to a post-Brexit rule banning lorries from parking in laybys for more than 45 minutes across several areas of the key southeast England county of Kent. The company considers this measure redundant.
There is significant international optimism that rail freight will play a huge part in the worldwide economic recovery over the next five years. What are the signs? The sector’s economic contribution has been valued at almost $ 250 billion and is predicted to grow annually by 20% in the next five years. Apart from playing a role in globalization, rail freight can increase economic integration in some regions of Eastern Europe characterized by groupings of many small countries by providing access to international and regional markets. The recent findings on the current state of rail freight are based on the data received from French national operator SNCF and DB Cargo and Genesee and Wyoming, the parent company of Freightliner in the UK. Great Britain in particular can become a forwarder on the way to decarburization. At least it was the message to G7 leaders from the Railway Industry Association. It believes that by acting strongly and decisively in 2021, rail will not only help the UK to achieve its green transport ambitions, but it will also give more weight to the Government’s call for other countries to follow suit when it comes to decarbonizing their transport networks around the world.
Unusual changes require unusual solutions, and the current situation is certainly out of the ordinary; therefore, the Russian military’s fifth railroad brigade reconstructed a 340-kilometer long rail track that is a part of the railway line connecting Siberia with the Far East part of the country. Experts are also watching over the proposed initiative (it has not been confirmed) to use prison convicts as workers to resolve the issue of labor shortages.
Ironically, the rail freight industry has been advocating for a shift to rail for many years, but now due to the high demand, its capacity on the westbound train is limited. However, there might be some tips that would allow booking on the train between China and Europe. According to industry experts, firstly, if you have considerable eastbound volumes, you are more likely to get space on the train going west. Secondly, e-commerce is prioritized over general cargo. Thirdly, companies like T.H.I. appreciate those customers that book space on the train all year round and advise doing it in advance.
Trying to come up with alternative solutions, Lamborghini and Rail Cargo Group have set up a new logistics concept. The luxury car giant will transport the Lamborghini Urus models by rail between their production site in Zwickau, Germany, and its parent plant in Sant’Agata Bolognese, Italy. The service will primarily use rail, with trucks involved only in the last 21 kilometers of the route between the Modena terminal and Sant’Agata.
Meanwhile, other initiatives push rail freight forward. Serbia and Montenegro have agreed to transport large amounts of copper through the port of Bar, with rail playing a leading role. The copper originates from the Serbian city of Bor and will be loaded on the train to the Montenegrin port. Intermodal operator Loconi has launched a new container train service connecting the Port of Koper and the Baltic Container Terminal (BCT) in Gdynia, Poland.