The “Ivy league” of the biggest brands revolutionizing their delivery policies has welcomed its new member, Coca-Cola. We are in for a big shift.
Unprecedented situations require unprecedented solutions and the current market context serves as proof that it is time to think not just out of the box, but also out of the can. At least, this is the case with Coca-Cola. Crucial deliveries are no longer able to wait for the regular liner choices, so in order to keep up, the company has joined the club of those using bulk carriers to keep its production lines. Otherwise, what business meeting is a business meeting without a sugar-free diet coke or a table on the approaching Christmas without a familiar red and white bottle? These carriers will head to non-congested ports and the company is holding expectations for the smooth discharge. “If you want to do something well, do it yourself” the wise say, and so does Target that has joined its big companions in the decisions to charter its own vessels to keep the shelves stocked with goods. Whether this approach will be useful is a matter of time, but for now, it seems to be the only way out especially if we look at the current congestions in the big picture. The recent analysis has shown that today’s global capacity removal thanks to vessel delays is slightly greater than the entire fleet of either Cosco or CMA CGM. Let’s say we have five years to rewind the container dial – this is equivalent to three and a half times the fallout from the Hanjin bankruptcy.
In terms of how long the global congestion issues might take to resolve, realistic expectations stretch into 2022. It has been estimatedthat Chinese power disruptions will cost US$120 billion of trade flows delayed and the consequences will take months to get solved. The overall chaos paired with sky-high costs can go as far as 2023, and 2022 will be another peak season when shippers still will not have enough inventory and the demand will not slow down. It seems like a never-ending curse where bottom-line utilization per ship is driving freight costs and empty containers are contributing to it. The total exports of empty ones leaving the Port of Los Angeles are up over 10%, and the terminals are moving out these containers with each sailing to free up space, although 30% of all truck appointments are still not being filled each day. Despite the struggles, the US exports are hitting new highs with natural gas, coal, and NGL being the greatest assets. The ports keep struggling. In the search out of California’s blockages, everyone rushed to the east coast and…clogged it. Some of the ports’ authorities are accelerating the creation of additional container storage capacity. The catastrophic state of the American facilities serves as an example for much smaller players. In order to increase capacity and strengthen the shaky foundation of the national economy, The Sri Lanka Ports Authority and APSEZ have joint efforts to develop the Colombo West International Container Terminal of the Port of Colombo.
Since the beginning of the madness, carriers were the ones enjoying the biggest profits and the situation remains the same to this day. Millions of dollars in extra detention and demurrage charges at the busiest box hubs will go straight to their pockets as they are reducing the number of days containers can be stored before fees apply despite the haulage situation. Importers in North European already slammed with all the challenges are now devastated. Carriers explain that they are imposing the new rules to incentivize importers to take delivery of cargo promptly and thus improve the reliability of the supply chain by returning empty equipment back to Asia earlier, but since the drivers’ shortage is not improving, this policy is vague. The UK hubs are going to be carrying the most damage and perhaps give others room for growth? The US, for example, is going to push French thanks to its forwarder Bansard International that has been sold to Seko Logistics marking the largest acquisition to date. France gets exposure to a much bigger e-commerce market blooming after the pandemic. Meanwhile, DP World, sensing the difficulties on the way, opens an empty container storage park at the Port of Southampton, trying to anticipate the upcoming pressure on the UK facilities.
E-commerce is not the only sector experiencing developments. Railway congestions are pushing companies to expand their services, so the Netherlands and Belgium initiate the talks regarding the connection of their networks. The Netherlands has a clear advantage with its ports and at the same time, it has the most congested railways, thus the initiative will be a fundamental breakthrough. Apart from the ports and the infrastructure, there is also a lot of focus on digitalization. As for the latter, advanced technologies are already being tested. The Port of Antwerp is conducting trials of the fixed-wing drone that will be dealing with high-risk operations. Clearly, the advances can be used not only for achieving agility and improving the financial situation but also for much needed care for the employees.
What does it take to make a “perfect” storm? An ounce of congestion, a sprinkle (well, maybe a couple of dozens) of freshly increased spot rates, elevated shortages of everything one can possibly think of, and do not forget the inflationas the result, and serve it under a cocktail umbrella of darkness caused by Chinese power curbs. Voila, this has been the recipe of the events taking place in the recent week. The post-crisis reality consists of disrupted schedules and omitted ports, but companies embrace collaborations and acquisitions to maximize efficiency, expand their assets, and launch new services to ease the pressure off the overloaded ports.
Although the UK is on the right track of resolving drivers’ shortage, the measures are being implemented at such a slow pace that it throws shade on the possibility of dealing with the conflict efficiently whatsoever. Many experts are wondering the same question. Perhaps, intermodal has more to offer and it will be one of the pillars that will be at the foundation of the new “stability” in the future along with the advanced sustainable policies, and breakthrough technological innovations? Join MAXMODAL to follow the analysis and news digests on all the crucial updates on logistics and transportation markets.
When lights go off, what will ignite the hopes of shippers? More disruptions are on the way.
As China dives deeper into the darkness in a quite literal sense, more disruptions are being caused by the electricity supply reduction amid the slash carbon emissions. The problem is, nobody knows how long it will take and some state that the power cuts will be extended all the way in October and it will add more uncertainty to long-haul container shipping since factories simply ill nit be able to produce goods. This is making the shipping lines go practically crazy – if before it was just difficult to book a vessel, now it is becoming impossible because the lines rip up agreements and leave the forwarders in the darkness of uncertainty. They are planning to “lie low” at least until after the Chinese New Year holiday in February, when the lines believe they might start to need to ask shippers for cargo. However, it does not cancel the desperation of shippers to move their cargo, thus they are left with nothing but the alternative of cycling through one forwarder to another in the attempt to find a more profitable option. These continuous searches paired with goods stuck at ports are about to cause the shortage of important items such as garments. This is especially true for the US market. Some companies try to anticipate obstacles and use their various connections extended to China and Southeast Asia, but since these regions are heavily suffering from delays and congestion, the attempts to get back on track have not been successful. The possible strategy could be the prolongation of their production lead times and beginning transporting goods well before purchase according to the delay updates. The latter is not the only thing worth keeping an eye on. Another one is the new prices set by MSC for shipments from Europe to America that will take effect on 25 October. The growth of the fresh Freight All Kind rates falls in the range from $500 to $1000 depending on the size of the container. May the force be with them. The new implementations are destined to rip through the plateau that some experts claim the container market has achieved.
When shipping fails, will intermodal hold hope? It is not a secret that small and mid-sized exporters are having the toughest times in the whirlwind of the crisis, so the big player HMM will collaborate with South Korea’s Ministry of SMEs and Start-ups to give them multimodal logistical support by allocating 20 TEU of shipping slots which is truly a gulp of the fresh air in the context of the congested ports in California. As for the latter, among the recent steps taken to resolve the riddle is the one by The Port of Long Beach that is going to start a pilot program offering 24-hour cargo pickup to help move the piled up cargo. International support seems to be America’s sudden asset – Canadian CPP Investments has acquired a 100% stake in Ports America. Joint efforts mean more investments, greater expansion and more chances not to sink in the waves, so this week the industry has seen a series of major consolidations and the railway sector is no exception either. Scan Global Logistics has taken over Horizon International Cargo and Hapag-Lloyd has gotten a 30% stake in Eurogate’s Container Terminal Wilhelmshaven at Germany’s JadeWeserPort to further boost fortunes.
England continues the development of the rail sector with the extensive ground works to strengthen heavy freight traffic on the West Coast Main Line. Network Rail has invested 1.5 mil euros as part of the Great North Rail Project to secure the cutting. Overall, European rail takes a positive spin after a rather gloomy previous weeks. The transformation is directly linked to the automatic coupler that will change the whole sector because so far, Europe is the last market that uses standard manual couplers. The extensive rail growth concerns the UAE too since its National Railway Network is one step closer to completion thanks to the delivery of the new railway. The whole project will connect seven emirates and significantly push the country towards competitive advantage.
Although the UK has turned in the direction towards solving the drivers’ shortages crisis, it is unluckily that future measures will cause immediate relief as the damage caused by the lack of the workforce is already enormous. According to the analytics, customers are suspending their shipping operations and container haulage costs have more than doubled in most cases; more experts say the situation is worsening by the day. Even if the government is finally going to take the right measures regarding visa procedures, what is the guarantee that is not too late?
Let’s talk numbers: the post-crisis aftermath in ruined schedules and omitted ports. Deliveries are late everywhere, but what becomes the last drop is a soaring inflation.
With everything at six and seven, meaning a complete disaster on the market, it is no wonder that schedule reliability is gone waving with a handkerchief from the platform. Across more than thirty trade lanes and numerous carriers, it has dropped to the all-time low 33.6% in August, and although Maersk has proven to be the most reliable one, it still has not been able to escape reschedules and omissions of the most congested ports. This had led to many shippers delivering their goods later than ever – if we look at the days taken, the number is 83% higher than in September 2019. As a result, major inflation has spanned, particularly in the US. Growing rates have all chances to make the upcoming contracting season the toughest in ocean freight history for shippers that already can no longer absorb the costs. They have tried to shift to airfreight but the increase rate paired with the soaring demand and tight capacity repulsed them, and the marine sector is risking repeating the same dynamic. The interconnection with China is not contributing even to the slightest improvement. On the contrary, a marginal increase in container throughput has put the Chinese sector in a highly disadvantageous position that throws shade in the direction of North America as well. From January to August 2021, the number reached 186.7 million TEU, increasing 11.1% from the same period in 2020. The extra vessels that ports had to handle have also contributed to the worsening of the bottlenecks problem. In the US, The Georgia Port Authority has invested $34 mil into the Port of Savannah to help expedite an additional 1.6 million TEU in capacity. Malaysian ports are in the same boat. The lockdown pressure and inland disruptions had a big impact on the container sector, thus the authorities plan to invest in the construction of more resilient ports. Things are getting more intense as Hapag-Lloyd is investing in the JadeWeserPort in Wilhelmshaven, following the decision of its competitor Cosco to acquire a stake in a container port in Hamburg.
Companies are desperately trying to introduce new services that could somehow ease the problem of the tight capacity. The recent one is the result of the cooperation of several players that will connect Korea and Central/South China to Southeast Asia from the Port of Pusan. In turn, China sees a promising partnership of Taiwanese carrier TS Lines and New Zeeland that has resulted in the launch of a new liner. In fact, more and more experts call for a collaborative approach that seems to be one of the few strategies that work against the current challenges. It does not solely concern the expansion of assets or the deployment of new vessels altogether, this approach also regards the steps towards sustainable development. While trying to save economic capacity, charterers are coming under pressure to optimize their supply chain and contracts to minimize emissions. Many admit that green initiatives will be a financial burden, although they are necessary for the safety of the planet. Maersk shoots for the stars and picks one of the biggest players – China – to be its partner. The new agreements signed with the China Classification Society aim to proceed with its decarbonization strategy. The shipping giant wants to be first on all frontiers and takes the reigns of developing the right set of standards, rules, and technical solutions for everyone to play accordingly.
The rail locomotive is also on the way to the brighter and greener future under the new “Rail Freight, The Future is Ours” initiative with the active participation of the Port of Rotterdam. The goal is to gather all the ambassadors from across the sector to help in transporting 50% more freight on the Dutch railway network within the next ten years. However, not everything is so blue and sunny above European railways. The focus risks switching to Spain where the potential strike can disrupt the container moves. While there is still uncertainty whether it will take place or not Maersk has already taken precautions and announced that it was looking for alternative options and warned about delays.
For sustainable development, it is also crucial to consider the future of LNG because there have been doubts regarding it as several LNG-fuelled orders were canceled after a complaint against a backcloth of soaring gas prices. The plans to reduce carbon emissions are very ambitious but for the most part, they omit such an ossified and snail-paced sector as LNG-fuelled vessels. However, some companies state that the questionable ships are designed as dual-fuelled and could be run on low-sulphur fuel oil.
As for the drivers’ shortages in the UK where things have finally taken a more positive turn, companies are willing to tackle the problem of underqualified workers. Training programs are on the way out and it is something that companies are really planning to invest in, taking into account the benefits in the long run.
Power curbs in China suddenly disrupt the already sensitive shipping sector. Although Christmas is upon us, this is not the right stimulus to light up candles.
There already has been a lot on the plate in every sector but now, as winter approaches, gas prices are skyrocketing and the new wave of protests against high electricity bills washes over Europe, companies brace up for the consequences for shipping. Due to the recent power curbs in Chinese provinces, very soon the global markets will feel the pinch of a shortage of supply almost everywhere even more. As a result, many factories are planning to further delay deliveries of U.S. imports. Major clothing companies continuously report inventory increases and now the shutdowns of the factories created a gap to the flow of inventory. A lot of goods are at risk of not being delivered on time, therefore, Costco, has become the latest American brand to take shipping matters into its own hands and chattered three vessels. As there is no relief in sight and everyone promises things to get more tight, the Port of LA authorities are asking the federal government to reconsider the priorities in terms of port investment areas to help alleviate supply chain crunches hitting the nation’s retailers. In fact, the recent day shave been eventful in terms of different requests targeting the official from the US shippers. Another one concerns the pleas to reject the proposed Ocean Shipping Reform Act of 2021because of the unfair demurrage and detention charges applied in case the containers are not picked up within the agreed-upon timeframe. The agreement is almost impossible to follow with all the schedule disruptions.
Sensing where the wind is blowing, big players try to be ahead of the curve and announce the redaction in the number of port calls in an attempt to speed up schedules. They also advise to book slots in advance as Christmas approaches and warn that inventory levels are still at the lowest while demand keeps growing. In particular, Maersk has projectedthat global container demand growth from 6% to 8% in 2021.
The current year has granted not only the record increase in congestion and the crashing aftermaths of it but It has also broken through all S&P records despite the fact that 2021 is not over yet. Containership and bulker S&P prices are up by around 120% and 70% respectively since the start of the year. Analytics report that the industry is on track for 7.3% of the start year fleet to change hands this year, the highest since 2007.
While omitting ports can be one of the ways to deal with the increasing pressure, there is another one involving barges turned into floating storage platforms at the Port of Rotterdam. Initially, they were called in to fill their vessels with some number of TEUs of empties and find a way of connecting these to ocean carriers for evacuation from more congested Rotterdam to less crowded Antwerp, but long delays at terminals have pushed barge owners to find other ways of solving the problem. Everyone survives as best he can? Others hope for the government measures, thus in India the authorities decide to tackle the problem of container shortage by extending the deadline for the re-export of imported vessels lying at different domestic ports. To put it simply, less export of empty containers from the country will increase the availability of containers for trade. This comes at the same time with the shipping lines having repositioned 1.7 million empty TEU into India, at a huge cost. In addition, the CSLA member lines have placed orders for 500 new vessels. The fleet expansion seems to be one of the few strategies that might work against capacity shortage as not only Indian companies use it to their advantage. The Canadian vessel owner and operator, Seaspan Corporation has followed suit and entered into an agreement for ten 7,000 TEU scrubber-fitted new container ships. Meanwhile, another big acquisition has taken place with China International Marine Containers Ltd. taking over Maersk owned Container Industry reefer manufacturer. At the same time, the rail industry has experienced a similar move by Hapag-Lloyd.
It seems like the ice has cracked in the issue of drivers’ shortages in the UK. The government will suspend the competition law for the fuel industry to allow fuel companies to more easily share information and priorities areas of the country most in need of deliveries to petrol stations. In addition, a major breakthrough has been achieved – a new package of measures will grant visas to drivers, which has been the stumbling stone in recent weeks.
Experts continue to debate about the best approach in transition to an emission-free world. The areas of discussion include the sources of financing, the role of digitalization, etc. There is a high chance that terminals in countries with poor electrical grid networks may need to self-generate energy in the future. Each point is an ecosystem on its own, thus it will need individual efficiency that can be improved through investments and collaboration.
From the New Silk Road to the serpentine ribbons thrown over Europe with the outpost in Hamburg, China is on the way to strengthening its presence in the EU as the situation in other directions is not getting any better. Numerous ships are still gathering at California’s ports and the Shanghai Airports is experiences difficulties, which all add to the worsening of the capacity shortage. Space on the vessels has become the new gold and shippers are going to do whatever it takes to get their cargo delivered. The hunt for the better alternative forces more companies to charter their own vessels, but is the smoke worth the fire? Carrier rates’ dynamic is too unpredictable to make any predictions: so far, it looks like it has reached the plateau but there is no guarantee that the existing challenges will not drive the rates further up.
The green debates continue with rail being on the front page. Countries have come to the conclusion to set the year 2050 as the deadline for the achievement of the emissions-free sector. The UK builds ambitious plans of almost becoming the forwarder of the new industrial revolution while still being unable to solve its troublesome issue with drivers shortage. Apart from the US where shippers at least try to run their truck fleets, the UK can barely offer any alternative. As usual, MAXMODAL stays on the lookout for the updates and delivers the in-depth analysis. Sign up now.
From highs to lows, back and forth – the rates dynamic has been a nightmare for shippers. Asia is losing its appeal, but what is left on the plate?
A silver lining in spot rates? Is it just wishful thinking or reality? So far, the situation is still wrapped in the fog of uncertainty as the dynamic is very inconsistent. What has been registered so far is an ease in the growth ahead of the Chinese holidays due to the slight loosening of capacity thanks to the fact that some overtime ships were put into the market before the Chinese National Day. However, the rates bounced back to the high of $20,586 per 40ft on the China-US west coast route last week. While American ports remain highly congested, Asia is not doing better – Vietnam is adding another log in the fire by warning that if the COVID restrictions do not end, it will suffer enormous financial losses that will be unbearable for the local economy and put everyone at risk of a collapse. International partners are preoccupied too and more companies announce their plans to move sourcing from Vietnam or at least some of them have already done so. The production costs are destined to rise to cover up all the post-pandemic aftermaths so Vietnamese suppliers are losing all their appeal for customers abroad. In the meantime, Thailand is trying to keep its shipping sector afloat, so the government is pressing ahead with the creation of a national flagship carrier. The plan is to shift gradually from domestic routes to regional trades with the help of the mixed fleet of boxships, tankers, and bulk carriers. As challenges persist, the trend for major reboots seems to be taking Asia over and South Korea follows suit by planning to launch a new dedicated feeder terminal by 2025.
So far, without a doubt, the capacity shortage has been the biggest driver for companies to start big reconstructions, create new facilities from scratch or expand their assets through acquisitions and consolidating partnerships (not only in Europe and Asia but also in Africa). Samskip chooses the latter and broadens its Baltic operations by acquiring shortsea specialist Sea Connect. The move not only strengthens its presence in Russia but also spreads across the Netherlands and a range of key Baltic ports in between. In fact, it goes in line with the tightening connection between Moscow and Rotterdam where a new shuttle train will become the Dutch getaway to Russia.
Whether the mentioned developments will provide immediate relief for the constraint supply chains is still unclear because the storm of the ongoing blockages is going in its full force and causing consequences far beyond the shipping industry. It spills over the homebuilding sector as delays and shortages are creating traffic jams restricting the companies from receiving the constructing materials on time. The cherry on top of that is the escalating unemployment and the lack of professional skilled workers. Tell the UK more about it. The country has been torn among the post-Brexit hysteria, a series of unsuccessful and chaotic measures, a couple of bright initiatives, and the uncontrollable expansion of the drivers’ crisis that is now affecting deliveries to petrol stations, with hundreds no longer selling some grades of fuel or being forced to close entirely. Companies raise their hands in disbelief that the government is not willing to add international HGV drivers to the skilled worker list, so they could get their visas and fill the gaps at the workplaces. According to them, it is the only solution. Quick and simple. Perhaps, they have not considered another alternative that could tackle the lack of employees. Well, Co-op, the major UK supermarket, has. The increased demand has pushed them to use robots for home delivery. Anyway, the situation is already in the spiral mode, and in contrast to the US, it is not so flexible. At least in the States, the context allows shippers to try to run their own truck fleets, although they are not so sure yet if this promising strategy is worth it since the costs are constantly escalating.
Airfreight is crumbling too, although, in August, there was some improvement and capacity managed to recover from its pandemic lows, up 18%. However, the increased demand and the closure of the Shanghai Pudong International Airport Cargo Terminal ruined the party. Despite the shippers’ hopes to see more cargo capacity from the return on airline passenger operations, the situation is unluckily to change so fast due to the recent EU recommendation to pause on all non-essential travel from the US to Europe.
Jokes aside, robots do have a positive impact apart from providing a quick delivery – they provide emissions-free transportation and it is something that has been on the list of priorities for the majority of industry players. There were different deadlines defining by when the word would have to achieve decarbonization. Recently leaders across the international shipping industry have aligned with the principles of the Paris Agreement’s temperature goal of becoming climate neutral by 2050. They have also called for the governments worldwide to take active participation and introduce measures that would encourage everyone to follow the chosen agenda.
The lesser of two evils: how companies still choose chartering their ships despite high rates when any other alternative is much worse. The charter rates are about to hit the plateau, is it the beginning of a new chapter?
Clinging with all their might onto whatever space they can find is the only possible strategy for the shippers despite the all-time high charter rates, even if it means leasing an entire ship. Retailers are trying to ship their goods on time, and they are ready to do whatever it takes to get an ounce of control over their pressured supply chains. This approach has already brought some fruitful results – Walmart has secured more freight capacity, and Home Depot manages to keep imports flowing into the U.S. Carrier rates have hit the historical record a while ago and now it seems like they are about to reach the plateau. Experts warn that although some change in the overall dynamic might be around the corner, there will not be any significant drop soon.
The situation is similar for airfreight. The competition among the players escalates and the prices for one-way charter flights are forcing the companies to tighten their belts. Recently it has soared to as much as $1.5 million. What also differs the situation from what the world witnessed before is the fact that rates from China to the US and China to Europe are moving to the same level. Fortunately, the end of the US travel ban on the UK and European passengers will increase capacity, which will allow tackling the increase in demand. Any other big changes are still unluckily.
No light at the end of the tunnel is expected as numerous ships, around 70 vessels to be more precise, continue to queue off California’s coast like sardines in a can. Thirty-six ships with a total capacity of 230,803 TEUs arrived in port waters in the seven days through Monday. That is 54% of the total TEU capacity waiting offshore. To understand how devastating the fact the Port’s pf LA congestion is, it is worth looking at its throughput that, according to the new updates, has overtaken Hong Kong to become the world’s ninth largest container port. When the volumes are surging and the wait time keeps increasing as well, companies are trying to hold up for dear life. Experts have observed that the median time spent in port in the first half of 2021 was higher by 11% compared to the pre-pandemic average time spent in port in 2018 and 2019.
It seems like a notorious example of the struggling US ports has inspired others to take precautions amid to boost ports’ capabilities. Hence, Russia’s major Baltic oil port will undergo a construction start that will transform it into a multi-purpose facility for up to 3m TEU annually. Among all the projected benefits, the port and the terminal would also have a well-developed overland transport infrastructure linking Primorsk with the Scandinavia International Highway.
Scandinavia is a promising direction for development indeed, as it will also see a new span of significant advances, especially in rail. Thanks to its lease agreement with European Loc Pool, a Norwegian rail freight operator CargoNet, will start using two EuroDual hybrid locomotives. They will give the sector what it needs the most at this particular moment of crisis – faster transit times and the transport of heavier loads. It is a breakthrough in the latest technological and environmental standards in rail logistics. The UK seems to welcome positive changes in its rail industry this week too, mostly thanks to DP World that is planning to build a fourth berth at the port with an increased role of rail. The project is an enormous expansion and a major investment in the UK that will give London Gateway more capacity to handle the world’s largest vessels than any other port in the country. This is right on time with the constrained economic fortunes. In addition, the UK is going to tackle the problem of the underdeveloped in terms of rail northern region. Putting it on the high-speed rails may become a trigger for the faster recovery of the sector across the whole country. Will all these ambitious plans spark a new industrial revolution down the tracks? Glasgow has the potential of becoming a center since it is going to host maestros of the rail sector at the upcoming United Nations Climate Change Conference. There already have been discussions about lower-carbon alternative fuels and private-sector innovations.
In the meantime, such regions as Afghanistan and Pakistan brace up not only against perplexing political situation but also against the consequences this tension causes to shippers. They have to deal with seemingly intransigent shipping lines insistent on collecting soaring detention and demurrage charges. Companies worry that if it does not change, they will go bankrupt. With COVID restrictions and congestion all over the region, the situation is concerning but at least, one of the recent challenges – the truckers strike in Bangladesh – is over. They have withdrawn after the government has agreed to meet certain requirements. Without it, the sector would have carried unbearable losses.
Perhaps the golden years of China have only just started. From the serpentine of the New Silk Road to the marine influence all the way to Hamburg.
Chinese influence on the shipping sector is so enormous that any change leads to a global consequence, so there is no wonder that stocks practically hammered in the wake of the recent events. The sudden default of Chinese property developer has evoked a wave of fear of the possible financial contagion, which, in turn, has resulted in container shipping stocks decreasing. After hitting the new “highs”, the shares of the leading lines fell in the range of 4% to 9%.
Indeed, China leads the ball not only on the Asian stage but also spreads its roots in Europe thanks to a deal that will see COSCO acquire a 35% stake in HHLA Container Terminal Tollerort in Hamburg. It is a win-win move for both sides as China gets more exposure to the European market and Hamburg strengthens its positions as a logistical hub in the European North Range and for the Baltic region. As for COSCO, the company has started the week on a controversial note because apart from a successful acquisition, the settlement of the dispute with MCS is not that much of a win. Although the parties have agreed to reinforce the business relationship, there has not been any resolution regarding MCS’s complaint seeking $600,000 in damages. Overall, the growing shipping rates driven by the congested ports continue to be the hottest topic to follow. Speaking of the latter, in California all those stuck vessels have been forced to drift off. The recent data indicates that the average time it takes for ocean freight to go door-to-door has increased to 43%. This leads to not-so-surprising consequences of the record demand in real estate near ports. The updates indicate more than 11% rent increases year-over-year. To defeat high rental rates, retailers have turned to on-demand warehousing and other short-term contracts, which is definitely not a long-run solution.
With skyrocketing demand that is impossible to keep up with, the recent initiative to cap carrier rates seems to be a joke.All the major lines have again raised rates in the last 10 days. The situation is alarming especially for the exporters using the spot markets’ guidance because for instance, it is reported that there are currently hardly any bookings ex-India to Africa, Oceania and North and South America. Even bookings on premium rates are getting rejected. With vessels running late on all major trade lanes, the situation will barely be able to resolve before the beginning of the holiday season. In addition, CMA CGM, the leader of the carrier rates’ cap failure has faced another misfortune its second cyber-attack in less than a year. The company has confirmed that there is a data leakage of limited customer information.
Since charter rates will not go down any time soon, some players decide to use the moment to their advantage despite the crumbling competitors. Apparently, British NVOCC with its unit based in Hong Kong has been successfully chartering multi-purpose ships to carry containers from China to the UK. Moreover, it has been securing space by chartering entire vessels.
Meanwhile, not everything is in the bright colors for the UK as its government is beating around the bush of implementation of the Brexit customs procedures by further postponing the deadlines, although forwarders, shippers, and other players claim to be ready for the new rules. The more they get postponed, the more frustration and annoyance grow because the implementation of export health certificates, safety and security declarations for goods imported from the EU, etc. have been “cooking” for ages. The biggest concern is that companies spend significant resources on adjusting their systems and training their employees to do the work in accordance with the new regulations and nobody wants things to be left in vain. Perhaps, the best way to divert the public’s attention from the “slow” policies is to focus on what has already been achieved and this is where rail comes in handy. Once again, it has proven to be a major force behind growth according to the new studies. This is right on time with the CEF for Transport program that makes available 7 billion euros for projects targeting new, upgraded and improved European transport infrastructure. The main purpose of it is to increase the sustainability of the overall transport network of the EU. With the new “green” technologies on the way, the transportation sector gets all the trump cards for vigorous development.
It is not a secret that the crisis massively boosted e-commerce, and although at some point it may have seemed that the trend has slowed down, it is not necessarily true. It is still booming and more and more companies believe that digital will not go back but on the contrary, it will continue evolving. DHL already plans to invest $300 mil in e-commerce over the next five years. In turn, Wincanton has strengthened its e-commerce offer with the acquisition of Cygnia Logistics, a leading specialist e-fullfilment business. The chosen approach aims to give room for agility and more advanced practices.
