News digest. 1 Dec
All shippers want for Christmas are contracts at a reasonable rate but when you are not the one running the show, matters become much more twisted.
The end of contract season is crippling behind shippers’ backs, but the prospects are not that bright because so far, it is only the shipping lines that are bathing in full glam and glory. They are forcing shippers into long-term contracts and on some tradelines such as the transatlantic one, are refusing to open negotiations on contract renewals. It is now obvious who is running this show. The situation is spiced up with the new spike in freight spot rates by 16.3% in the month of November, and the dynamic is not promising to slow down. The same is happening with airfreight where in some directions the rates are up to $20 per kg with the prospects to remain elevated in 2022. Many shippers are now hanging right above the abyss of uncertainty because they realize that those long contracts will be secured at those impossibly high rates. Will it be worth it to spend so much for the sake of having their cargo transported? Well, theoretically yes, if the demand stays high, but the new forecasts predict the possible ease in container demand. However, the US market is likely to remain strong because that port disruption will continue to be a contributing factor with congestion still being a significant concern. More companies start chattering their containerships to ensure that their cargo will be in time for Christmas. In order to speed up the improvements regarding cargo unloading in the Port of LA and Port of Long Beach, the government has recently stayed using the incentive of postponing the dwell fees, and it is doing it again. The results from the previous “threats” to imposing the fees have been so fruitful – the twin ports have seen a decline of 37% combined in aging cargo on the docks – that the authorities moved the date until December 6. To strengthen the positive dynamic, The CMA CGM Group will implement an Early Container Pickup Incentive Program for 90 days that will pay the importers for picking up their containers via merchant haulage from all the terminals in LA and Long Beach quickly. They will be able to use this money to offset costs incurred by tensions in their supply chains.
Nevertheless, not all ports can recall improvements in their operations this week. The storm in Canada was so strong that 50+ ships were waiting on Monday to unload at the Port of Vancouver. The emergency alert has been prolonged as well. To solve this problem, the federal government is providing more than C$4m to prepare an undeveloped industrial site to temporarily store empty containers. In the EU, congestion fever does not leave the Port of Felixstowe either where it was originally brought by a lack of truck drivers. The situation on the road remains challenging as road freight prices reach record highs. Maersk has omitted Felixstowe from its AE7 service due to the long waiting time. In China, COVID quarantine requirements are forcing major shipping lines to suspend their feeder operations. Not all of them but only the acceptance of the cargo bound for the ports in the South China area that require the usage of the domestic feeders to reach the final destination. However, China is still getting back on track with the increased throughput that has finally risen 8.4% for the first time since the beginning of 2021. The rising volumes will require more space, thus China Harbour Engineering is teaming up with Gulf Energy in Thailand to build two more container terminals. The initiative will be beneficial for both sides. China implements it as a part of its Belt and Road initiative and the Thai government’s plans to attract foreign investment to the industrial east. The results are yet to come, but the Port of Hamburg is already demonstrating outstanding performance in handling pre-and-post-voyage railborne container transport at as much as 2.1 million TEU. No wonder it has been on China’s interest list for months as a valuable asset. At the same time, the country is benefiting from the recent acquisition of the Tianjin Container Terminal done by Cosco and China Shipping Terminal Development Co. The move is purely strategic: Сosco aims to enhance its work with the OCEAN Alliance and continue to strengthen the Group’s leading position in the Greater China region.
China is also not going to stop its locomotive along the New Silk Road. The tiger has pounced in the direction of collaboration with France – the first eastbound train from Paris to Xi’an will carry high-end French furniture, linen products, cosmetics, and wine. The launch of regular trains has followed suit. Surprisingly such country as Poland where capacity issues regarding intermodal should have been gone for good is struggling with them. Intermodal transport is also severely affected by the lack of free tracks, congested border crossings and slow terminal processes. Experts point out the need to find a solution for a problem that affects rail freight generally, and not just a specific aspect of it. In the west, the rail industry sees a major merge of two of the largest rail operators in the US – Canadian Pacific Railway Limited (CP) and Kansas City Southern.
