Asia | US news digest. 18 June
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.
