Asia | US news digest. 29 July
Meeting surging demand seems to be the same as chasing a tail – impossible to achieve. Why is the shipping sector stuck in the Groundhog Day?
The severe typhoons are not only Europe’s headache – the one that hit China does not seem to calm anytime soon, at least according to the new forecasts. Shanghai’s ports and some in neighboring regions will remain shut until the situation improves, which means that more delays are coming. The Yangshan port has already evacuated hundreds of vessel and this action alone add more pressure since it is a part of the world’s biggest cluster of container terminals.
Containers are a good indicator of how supply is doing and so far, they have not told any positive stories. In fact, the numerous congestions have been here for so long that shippers will need a miracle for the situation to resolve at least slightly on a positive note. Experts insist that now is the right moment to start booking, otherwise, Christmas can be considered canceled. Walmart is one of the brightest examples that can illustrate the impact of congestion issues – even with its flexible and agile supply chain, it was not able to escape delays that severely affected the shipment of its apparel and garments.
The skyrocketing demand still is not allowing container crunch to ease. Prices are at unprecedented levels, the production of million TEUs of dry containers has been reported at record levels (it is estimated that 2021 production could reach just over 4.5 million TEUs, more than double the annual totals in the prior two years), however, on the global scales the pace is not enough to address the growing needs of the market. Despite the increased production, there is still no splurge in inventory. Port congestion also plays a vital role, by tying up equipment. The only instruments in a carrier’s toolbox to overcome the schedule delays are either to blank a sailing or, more common now, to allow a vessel to slide on its schedule by one week. Companies like Hapag-Lloyd do not lose hope to meet the demandand chose the strategy of vigorous expansion of their ships to boost the box capacity. It has announced the discussions for the acquisition of 10 container ships with 13,000TEU capacity each. Singapore’s Pacific International Lines has also expanded its fleet size– besides, there is a unit of Singapore’s sovereign wealth fund coming in with $600m to save the SS Teo-led carrier.
However, the key to building agile supply chains can be in the hands of skillful employees – the concept MSC is trying to tap into by wishing to hire South Korean seafarers with experience of operating very large container ships. HMM is the only South Korean liner operator with VLCSs in its fleet, and in order to stand out MSC decides to offer more attractive salaries. HMM has already been recognized as the company with a staff salary growth of 2.8%, but it seems like there is still a chance to aim higher?
To facilitate better export especially in the light of the soaring freight rates, the government has told the Port Authority of Thailand to establish a national liner operator. Not now, but by 2022. So far, a committee to study the feasibility of re-establishing a national shipping line has been formed to help Thailand reduce its dependence on foreign ships, as well as to lower transportation costs. At the same time, Thai freight forwarder JWD has agreed to a $15m deal for a significant 20% stake in ESCO.
Meanwhile, the first Budapest-Xi’an return train left Hungary, crossed the border with Ukraine through Zahony, and finally arrived in Xi’an. Lately, the transit cargo in Hungary has seen a tenfold increase, so Zahony, comes in handy as an emerging transhipment point for China-Europe trains, where transit goods are transferred from broad gauge to standard gauge tracks.
There is a new trend of transport-related mergers and acquisitions among major carriers that are eating up smaller ones. The Knight-Swift with its $1.35 billion purchase of AAA Cooper, Werner closing its deal with ECM Transport Group for $142 million, and Uber Freight acquiring Transplace for $2.25 billion, are the perfect examples. As for what the future of transport, experts suppose that TL firms will buy LTL carriers, and vice versa.
The main driver of innovation in vehicle production remains Tesla, this time aiming to mitigate the semiconductor shortage's effects by substituting alternative chips and writing new firmware. The company has already achieved record production of impressive more than 200,000 vehicles in Q2.
Extreme weather conditions and congestions will not be the only challenges for the shipping sector in the coming days. Canadian border services officers have voted in favor of strike action, although the impact of their decision is still unknown, but of course, it could cause significant disruption to the flow of goods.
The Port of Savannah is now seen as a critical getaway for US goods. According to the recent data, it has already moved 5.3 million TEU for first time in its history as cargo volumes grew by 20% year-on-year (YoY) in financial year (FY) FY2021. For the most part, it has become possible thanks to its strengthened positions in Georgia.
