Asia | US news digest. 26 June

The long-awaited ease of Yantian’s congestion has not brought the needed relief. The new jaw-dropping increase in rates has shaken up the industry

Despite Yantian resuming its full operations after weeks of severe congestion, normality is still far out of reach. Experts have estimated that it will take around 82 days to clear the backlog. The reality is yet to prove or disagree with the forecast. So far, the trend of increasing rates continues with a major hike including rises nearly 40% in the US. Even with the eased situation at the US west coast gateway complex, logistics companies are in for one hell of a ride. According to the predictions, there will be a surge in traffic that will renew strain on the ports of Los Angeles and Long Beach, as well as the rail and truck networks beyond them before the context will stabilize. As a result, the high prices and the lack of capacity have led to difficult decisions for shippers such as negotiations on a premium price. It hardly was a topic of discussion before but now companies, desperate for inventory space, are willing to spend any money just to receive the needed service. However, money cannot solve the problem as carriers’ capacity has peaked and there is no guarantee that they will not charge more.  Rates are experiencing the steepest rise.  From Shanghai to Los Angeles they increased to $8,548 this week. Some report $32,000 per FEU regarding the same direction. Rates from Asia to the US east coast also soared 39% to $11,180.

As a result, it may bring the shortages of essential goods, hence, the US government is broadening its focus from the food supply chain to the essential products supply chain, which incorporates personal care items that were lacking during uncontrollable buying in the beginning of the pandemic.

The problem of preventing the monopoly had the Korea Fair Trade Commission imposing a fine on 23 liner operators, but now industry stakeholders claim that the measure was a double blow amid tight shipping capacities. Following the complaints, KFTC’s investigations found that 23 liner operators and the Committee Of Shipowners For Asian Liner Service had come up with 122 freight-related agreements pertaining to the South Korea-Southeast Asia route.

While shippers are struggling to find space for their cargo and try to mitigate the threat of higher contract priceslooming over next years, Chinese COSCO has announced it will work with the Dalian Commodity Exchange to launch new shipping derivatives including a container capacity futures. In addition, COSCO is expanding its fleet by signing fixed agreements with Seaspan Corporation for 17 container ships. 

Ripples from port blockage are going to affect booming rail freight that has been viewed as an alternative direction for development. The Pearl River Delta Port congestion has triggered another spike in volumes and rates (around $17,00 per FEU to Hamburg, for example) causing delays and equipment shortages. 

Following the growth of spot rates, charter rates go through the roof and continue to be signed at jaw-dropping rates above $100,000 per day, in particular for short-duration charters. There are talks of uncertainty further out, in 2023.

Airlines are in need of more facilities since numerous airports are plagued by antiquated, cramped warehouses that haven’t kept up with growth in shipment volumes. Hence, the first new cargo facility built in 20 years will bring efficiencies at John F. Kennedy International Airport. Canadian airline WestJet will launch a freighter division to diversify its business. 

The green debates over the stimulation to shift from fossil to low-carbon fuels have erupted again. NGO Transport & Environment claims the latest EU proposals will make matters worse, with an increased use of fossil fuels and the use of biofuels of dubious origins.

Automotive and industrial logistics specialist Gefco has been put up for sale in a deal expected to be worth more than $2.39 billion. It is also facing a very different competitive landscape and been badly hit by the Covid-19 crisis, with revenue falling back by almost €1bn. 

FedEx is working to substantially increase its capacity by building out its infrastructure that will include 16 new automated facilities expected to be ready in time for peak season. The company is also adding a hub in Chino, California, in addition to the regional sortation facilities.