Asia | US news digest. 2 June
With the suffering supplier performance and instability of the freight sector, American logistics companies are doing whatever it takes to keep running and search for alternative channels to deliver their goods to consumers.
The beginning of Joe Biden’s presidency has started with a drastic change in policies and primary objectives from those set by his predecessor, Donald Trump. Several executive orders that were announced just hours after Biden’s inauguration have highlighted the new direction. There are several regulatory reviews affecting freight markets that need closer examination. The 5.9GHz safety band by Federal Communications Commission has been confirmed, enhancing vehicle-to-vehicle communications safety for more consumer-based Wi-Fi services. Companies like Volvo Trucks North America had noted that dedicated bandwidth within the 5.9 GHz spectrum was critical for deploying vehicle-to-vehicle applications such as truck platooning. Biden has also signed an executive order, “Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis,” that included reviewing the Trump administration’s regulation allowing bulk shipments of liquefied natural gas by rail. Additionally, the National Industrial Transportation League is calling on Congress to modify the Shipping Act of 1984 in a way that would expand FMC’s authority to act on anti-competitive complaints against carriers and expand the FMC’s oversight of commercial contracts between the carrier and their customers.
As for the manufacturing activity, according to the data, there is a significant increase in one of the key metrics – PMI (at 61.2 (a reading of 50 or higher growth), plus a 0.5% increase from April to May that marks its 12 consecutive months of growth. Supplier performance overall is suffering; the lead time of raw materials is extremely low, so the current environment highlights just how much companies’ internal operations and inventory planning rely on a smoothly run freight environment. The freight sector has been unstable, and, as the result, more retailers are starting to build extra days into their shipping schedules to improve their inventory planning. They also have to keep in mind the rising logistics cost that follows the rise of the B2B sector. The challenge regards the search for alternative channels to deliver their goods to consumers is not an easy one. Truckload rates are also up drastically. The indicators of the logistics spend set a record in April – its fourth record in five months – and spot prices are reportedly on track to rise 70%, year on year, in the second quarter. With the continued relentless rise of container freight spot rates (they are set over $10,000 per FEU for both northern Europe and the Mediterranean, and the 4.2% and 5.2% increases, respectively, which will put yet more pressure on shippers. The Shanghai Containerized Freight Index rose another 1.8% last week as a decline in transpacific rates to the US West Coast mitigated rises elsewhere. The data on the Asia-North America direction reports high demand and short capacity, with no slowdown in sight, pointing that the situation will be escalating even if the blank sailings remove capacity across all TPEB (Transpacific Eastbound) lanes. South America’s destination will also experience certain changes: COSCO Shipping Lines is planning an implementation of a new General Rate Restoration for all shipments from the Far East to Latin America & Africa ports with the new charges taking effect in June, according to the company's announcement.
Although it has started to seem like the COVID-19 pandemic has eased its grasp, the latest outbreak hit Yantian and as a consequence, all the ships that are scheduled to call there in the coming 14 days are forced to come up with alternative plans. It may have a devastating effect since Yantian handles nearly 90% of Shenzhen’s U.S. and Europe’s exports, with approximately 100 routes impacted. It will also delay European exports to North America.
An alliance of the ports of Long Beach, Los Angeles, Oakland, and another 34 organizations, has sent a request to the state of California seeking a state investment of US$2.25 billion on emissions-free freight hauling. Supply chain and environmental groups sent their request to Sacramento this month, seeking surplus state revenue to finance zero-emission trucks and cargo handling equipment and infrastructure such as electric charging stations, and training to operate and maintain the equipment. State support of the ports has recently become one of the most important issues in general. The deepening and widening of Norfolk Harbor at the Port of Virginia were for the first time included in a federal budget with $83.7 million that will help ensure that the project remains on course for completion in 2024. The Port of Seattle has approved a long-term ground lease for a portion of Terminal 106 to Trammell Crow. The new facility will be able to support e-commerce, manufacturers, and logistics providers that support maritime industries. On a positive note, the Port of New York and New Jersey, and New Jersey’s seaport cargo volumes demonstrated an increase for the ninth month in a row to reach 18% above pre-COVID-19 pandemic levels in April 2021.
A further investigation on the issue of the X-Press Pearl burning off the coast of Colombo, Sri Lanka has been carried out. The captain has been detained in the country along with the chief engineer and deputy chief engineer by order of Colombo Magistrates Court.
Regarding the Asian direction, Taiwanese container line Wan Hai has placed an order at South Korea’s Samsung Heavy Industries for four containerships worth between $474m and $500m. The four 13,100 TEU ships are scheduled to start delivering from the second quarter of 2023. The deal includes potential equipment upgrades on the vessels. Bangladesh’s spike in mango exports caused a splurge in air cargo shipments.
