Panama's unlucky season
Transpacific rates are increasing as carriers face restrictions at the Panama Canal. Due to maintenance work and reduced transit slots at the canal, they are encountering delays and congestion, which is leading to higher costs and tighter capacity. Ocean carriers will have to consider downsizing vessels deployed on the Asia-US east coast Panama Canal loops. One of the options could be to route more Asia-USEC strings via the Suez Canal but it is rather expensive.
Workers at the Pacific ports of Vancouver, Prince Rupert, and Stewart in Canada have voted in favor of striking, raising concerns for beneficial cargo owners. The strike vote comes after negotiations between the International Longshore and Warehouse Union and the British Columbia Maritime Employers Association reached an impasse. The main points of contention include worker wages, working conditions, and automation concerns. At the same time with the looming strike, transpacific container volumes have been increasing raising concerns about potential disruptions in the supply chain. In addition, the strikes on the US West Coast are influencing shipping operations by disrupting schedule reliability. The strikes have also impacted trucking services, further exacerbating logistical issues.
The changing market dynamics are making carriers divert their services from problematic routes to more profitable and stable ones. In particular, most of the top ten carriers have reduced their fleets trading between Asia and North America.
Latin American trade had overtaken Asia-Europe. Africa and the Middle East are also among the potential prospects. Overall, with all the challenges that have been going on, carriers' profits dropped by 81%, to $7 billion. The trend for declining revenues started in 2022 and fully unfolded in the Q1 of 2023.
Routes, rates & services
- CPKC, a Kansas City-based intermodal company, aims to attract Asian shippers by offering rail freight coverage under the USMCA (United States-Mexico-Canada Agreement). CPKC has access to seven gateways for ocean traffic: Vancouver, Montreal and St John in Canada; New Orleans in the US; and Lázaro Cárdenas, Veracruz and Altamira in Mexico.
- In North Europe, freight rates continue to decline ($1,195 per 40ft), while in the Transpacific, rates are experiencing a significant spike (by 11.5%, to $2,619 per 40ft). The high demand for goods from Asia, especially from China, has resulted in limited container availability and a shortage of vessels.
- Mexico tries to attract investors to the Tehuantepec trade project by offering incentives. The government plans to establish a special economic zone in the region, offering additional benefits such as tariff exemptions and preferential regulations for businesses operating within the zone.
- Union Pacific expands its intermodal service at Port Houston to meet the growing demand for intermodal transportation and improve the efficiency of cargo movement between Port Houston and major markets across the US.
- Canadian Pacific and Kansas City Southern expand their Mexico intermodal reefer rail service by adding new temperature-controlled reefer terminals.
- Carriers are refraining from implementing surcharges in the Indian market due to its soft conditions. In the current context, the levy of $800 per teu, $1,000 per feu and $1,200 for hi-cube loads (including reefers) will start on 1 July.
- Hapag Lloyd has added the port of Manzanillo in Panama to the port rotation of the West Coast South America Express (MSW) service.
- Iran has inaugurated a new railway line connecting Bostanabad to Khavaran. This railway line is part of a larger project aimed at developing Iran's rail network and improving connectivity both domestically and internationally.
- The first railway operation between Iran and Afghanistan has been successfully completed. The railway line is part of a larger project known as the Khaf-Herat railway.
- CMA CGM has launched a new rail service on the Mediterranean Corridor linking the port of Valencia with Murcia, in southeastern Spain.
- Experts acknowledge the ongoing competition between Russia and the EU to establish close cooperation with Kazakhstan, a key player in the New Silk Road initiative. Russia has been historically closely aligned with Kazakhstan. The EU, on the other hand, has been actively engaging with Kazakhstan, seeking to deepen its economic and political relations with the country.
- Mawani, the Saudi Ports Authority, has introduced a new shipping service to Jeddah Islamic Port operated by Omani International Logistics Group.
- Maersk, Renfe, and Cepsa have successfully conducted the first test of second-generation (2G) bio-fuel in Spanish rail transport as part of efforts to reduce carbon emissions and promote sustainable transportation.
- DP World has introduced a new rail incentive program to promote the use of rail transportation for containerized cargo. The Modal Shift program will charge a flat $12.41 fee on all import-laden containers. Customers whose container is moved to a railhead more than 140 miles from the terminal are reimbursed and a $86.90 incentive is paid to those whose container is moved to a railhead within 140 miles of the terminal.
- CMA CGM introduced a new rail solution in Spain connecting Valencia with Murcia in Spain.
Other
- Maersk has been fined $9.8 million by the Federal Maritime Commission for violating the Shipping Act. The fine was imposed due to allegations that Maersk engaged in unfair practices by providing misleading information to the FMC during an investigation into alleged excessive detention and demurrage charges.
These are only several changes that occurred in more than 250 bn freight rates across 25 million routes with more than 1 million market players. Want to share some news about your company, services, and routes? Just post them on MAXMODAL, a multimodal network that digitally connects routes and rates worldwide to automate sales and operations across container transportation & logistics industry. Join to innovate.
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Vietnam Railways is in the process of launching two new train services to China. These services will link the southern area of Ho Chi Minh City in Vietnam with Guangxi and Yunnan provinces in China, offering a delivery time of 5 days to Guangxi and 6 days to Yunnan.
The route heading to Guangxi province will start at Song Than station in Binh Duong province. After crossing Bac Giang Province and Lang Son Province, it will finally reach the Chinese border city of Pingxiang.
Another route shares the same starting point but heads to Yunnan province in China. After travelling across Lao Cai, the train will arrive at the Chinese border city of Hekou, unload the cargo, and finish the rest of the journey by truck.
These two new routes also contribute to the significance of Binh Duong province. According to the Saigon Times, Binh Duong is one of the provinces actively involved in exporting goods to China and Europe, including leather, shoes, textiles, garments, and others. In addition to the new services, investments are also planned for new infrastructure construction that will connect Vietnam, Laos, and China.
Back to the West
The downward trend in container shipping rates continues. Overall, rates have dropped by 42% compared to the previous year, with May marking the ninth consecutive month of declining rates. Long-term rates also fell by 27.5% in the last month alone. The drop in rates is attributed to the conclusion of 12-month contracts in the US and the introduction of new agreements reflecting the subdued market conditions. The impact of these lower rates is seen throughout the industry. Liners, including Maersk, have reported a significantly changed business environment with limited growth prospects. Demand for containerized exports from the Far East has decreased, and there is a lack of appetite for imports into the US, which are two key drivers of global trade growth. With the current market state, the US import demand in 2023 is expected to reach a new low.
Nevertheless, despite the persisting challenges, the rent for the warehouses is increasing. The ongoing disruptions in global supply chains have contributed to the tightness of the warehouse market making the rent go up.
Hot topic
Beneficial cargo owners are shifting their traffic back to ports on the US west coast from the east coast. Previously, there was a loss of volumes to ports on the East and Gulf coasts due to concerns about potential lockdowns or congestion. The return of cargo is driven by a growing confidence that significant disruptions will not occur and the pressure to reduce costs. Since the beginning of the year, the west coast ports have processed 40% of US container imports.
However, the disruptions are not at all mitigated. In reality, despite the cargo owners’ hopes, the US west coast is experiencing a wave of strike action due to stalled contract talks between employers and staff. Dockworkers, represented by the International Longshore and Warehouse Union have been engaging in disruptive work actions, severely impacting operations at major ports like Los Angeles, Long Beach, Seattle, and Oakland.
The possibility of another labor strike is looming over Germany as the negotiations with labor union EVG have hit a major setback. EVG has rejected the offer presented by Deutsche Bahn.
Routes, rates & services
- Geodis has acquired a Swiss freight forwarder, ITS - International Transport & Shipping Ltd to enhance its network and expertise in Switzerland.
- Maersk has joined the India-US General Rate Increase push. The GRI initiative aims to increase freight rates on the India-US trade route to address the rising costs and capacity constraints. From 25 June, there will be a GRI levy of $800 per 20-foot box, $1,000 per 40-foot box, and $1,250 per 45-foot box for all types of shipments from India to the US East Coast and Gulf coasts.
- DHL and Etihad Rail have formed a 20-year partnership in the UAE. DHL will utilize Etihad Rail's rail network to enhance its logistics services and promote sustainable freight transportation by shifting cargo from road to rail.
- Construction is underway for a fresh railway connection between Mongolia and China. This railway line will establish a link between the Mongolian border point, Shivee Khuren, and the Chinese border point, Ceke.
- Freight train operations in Italy following severe floods have been resumed since May 30. Previously the floods had disrupted rail traffic, causing significant damage to infrastructure and tracks.
- The Poland-Belarus border has been closed for trucks originating from Russia or Belarus due to ongoing tensions. However, rail freight trains are still allowed to operate and cross the border.
- Victoria International Container Terminal welcomed COSCO's new Asia-North Europe (ANE) service. The rotation will be Melbourne – Bell Bay – Sydney – Auckland – Melbourne.
Other
- Hellmann Worldwide Logistics has partnered with PKZ Group as its new sea freight partner. The collaboration aims to enhance Hellmann's sea freight capabilities and expand its network in the Asia-Pacific region.
- Maersk has lifted the booking suspension on its Kenya-Zanzibar service. The suspension was initially imposed due to operational challenges and disruptions caused by congestion at the port of Mombasa. By lifting the suspension, Maersk aims to restore regular shipping services and improve trade connectivity in the region.
These are only several changes that occurred in more than 250 bn freight rates across 25 million routes with more than 1 million market players. Want to share some news about your company, services, and routes? Just post them on MAXMODAL, a multimodal network that digitally connects routes and rates worldwide to automate sales and operations across container transportation & logistics industry. Join to innovate.
