Asia | US news digest. 31 July
The peak season is here, so let the shipping hunger games begin
There is no time for rest for American dockworkers as the peak season arrives and ships form long queues at major getaways. With the aftermath of COVID restrictions and previous congestions, ports are going through particularly challenging times. The number of ships backing up outside San Pedro Bay is increasing towards record levels, while further north a cluster of vessels are bunched together east of San Francisco waiting for available dock space at Port of Oakland. The shortfalls in customer demand are not expected, so the situation will remain under pressure further into the season. Spot rates are also growing – from Shanghai to Los Angeles increased 6% to $10,503/FEU, while prices from Shanghai to New York were up 13%to come in at $13,434 for a 40ft box.
A tidal wave of freight demand puts vessel operators in a deadlock when they simply do not have extra ships or they cannot reposition quickly enough, so one of the ways to respond to the clients is to set an unbearably high shipping price. The recent case of an ocean carrier announcing a cost of 32,000 to ship a group of standard containers from Shanghai to Los Angeles is a perfect example. Everything has only escalated after a series of weather- and COVID-related events, as well as operational mishaps that caused a significant logjam. The grip of congestion is also tightening around Chittagong that is experiencing severe berthing delays. They have reached five days while some ships even waited up to ten days at the outer anchorage to reach jetties. On a big scale, across the major trades in Transpacific, Transatlantic, Asia-North Europe, and Mediterranean, there is a worrying 5% cancellation rate.
Meanwhile, FMC comes up with new recommendations that can potentially improve supply chain issues. The changes aim to minimize barriers to private party enforcement of the Shipping Act, clarifying commission and industry processes, encouraging shippers, truckers, and other stakeholders to assist commission enforcement efforts, however, the initiatives have not passed yet. The government is aware that ports require reactive measures here and now, so the Biden administration, together with a bipartisan group, has reached an agreement on a new infrastructure deal that will invest $17 billion into the industry. However, record volume at US cargo ports has already led to a much stronger financial performance than pandemic expectations, so whatever new initiatives the authorities will come up with next, they have to keep in mind that normal cargo throughput patterns are not set to return until 2022. The government plan has to be well-coordinated and keep the industry players updated on the changes; otherwise, it might be an unpleasant surprise for the latter and will only harm consumers, importers, and exporters instead of creating a fair environment.
As shippers plan to deliver for the holidays, they have to deal with the added hurdle of volume caps from major parcel carriers FedEx and UPS. They have also implemented additional surcharges amid to better handle the increase. While shippers are still trying to negotiate, more of them start to move volume toward a mix of regional carriers to reduce the effects of surcharges and caps from the logistics duopoly. Amazon is also sensing the direction of the wind of change and focuses on doubling the size of its fulfillment networkto meet consumer demand and continues to hire new employees.
To support local importers, Matson Inc. is launching a new express vessel service into northern California. It aims to move stranded shipments from China as the ocean container market experiences ongoing bottlenecks that are doubling normal delivery times and leading to stockouts for retailers.
The supplier dilemma that many companies are dealing with has been covered recently and it is worth mentioning that while some are considering strengthening their relationship with suppliers a winning strategy, others go for buying their supplies well in advance in order to outrun the competitors.
Following a hardware failure halted operations, two container terminals at Port Houston have reopened which is especially important in the current context when the smooth operation of every port counts.
From now on, the energy transition will be supported by the Maritime Port Authority of Singapore and Ocean Network Express, Eastern Pacific Shipping, and Sembcorp Marine that are planning to create a new research center to facilitate commercially viable solutions for sustainable shipping.
Meanwhile, long research of HMM PSA New-port Terminal and LeTech have resulted in the launch of Korea's first automatic container seal dispenser. It reduced the time spent by the trailer drivers receiving the seal after picking up the empty container before going to the shipper's factory.
A perfect storm of high demand is expected to hit air freight in August. However, the growth will be uneven and based on both passenger numbers and Covid strategies. Experts believe transatlantic capacity will be back to normal by summer 2022, while Asian growth may not return until 2024.
