News digest. 11 Dec
2021 has identified major themes and characters involved in the post-pandemic reality. What will their development look like in 2022? Here are the major takes.
Jingle all the way or does the coming year holds more mysteries and uncertainties than everyone expected? 2021 has not been easy and there have been several predominant themes occurring on the logistics and transportation arena: global congestion, enormous spot rates across all modes, capacity and equipment shortages, and increased influence of shipping lines. These are the characters of the modern play that we all will meet in 2022. Let’s dive in and highlight major forecasts. Spot rates are expected to jump in January which creates uncertainty for many shippers’ budgets. Their customers also want to know their freight costs. At the same time, on the transpacific, some indexes saw Asia-US components jump by 5% to the west coast, to $10,138 per 40ft, and by 4% for east coast ports, to $13,118. Supply chain disruptions will continue and the lead-time will remain long, however, the recent surveys indicate that the majority of the respondents anticipate improvements thanks to diversifying sourcing, holding more inventory to entering long-term contracts with carriers. In addition, сhanges will include leasing rules – one-way leasing will allow shippers to lease a container with extra flexibility by picking it up at one location and returning it at another. This approach is already taking place as the most sought-after alternative as compared with getting the equipment from the carriers. Will the new Ocean Shipping Reform Act alleviate current issues? It is now being criticized as strongly as it was anticipated. The Act mainly addresses unfair shipping practices and, according to critics, does not solve the issue of congestion, the most pressing problem nowadays. On the contrary, some believe it is only making things worse and US importers will end up being short on equipment and face prolonged high freight costs. The World Shipping Council has responded with the promise to continue working with Congress and come up with qualitative steps.
Everyone has their eyes on Maersk these days. The veil of rumors about Maersk possibly restricting some customers to spot bookings from 1 January has been lingering in the air for weeks now. No wonder that experts start toying with it and look at it from different angles. Not everything is expected to be negative. Some see it as an opportunity for smaller forwarders to win business from their multinational competitors. Maersk has been pushing everyone to online bookings and/or FAK rates that turn out to be more reliable named account contract rates and this is something big companies prefer not to announce to their customers. On the contrary, smaller forwarders are more transparent on this matter, thus they can compete for market shares and attract more customers.
While in the west the government decides to increase its influence, the east is choosing a different approach. The coming year will be the last one when Chinese industry players are the central place in subsidies on the New Silk Road. The decision is a consensus of the authorities and industry players that report that volumes are high and the rates competitive. If there is any form of financial support they need, it is for eastbound traffic, which is still less than westbound flows. The phase put will result in the train between Europe and China carrying less low-value goods. In general, there will be fewer shipments, and companies will be able to focus on quantity rather than quality. However, not all Chinese initiatives are expected to be fruitful. The country will no longer be accepting cargo in aircraft passengers which will keep air freight rates high. Only anti-epidemic-related items will be allowed to be loaded into the cabin. The consequences are already visible – some forwarders report that rates had risen 10%-15% this week. It is the highest ever rate level now.
Apart from all the challenges, the industry has recognized the potential of sustainable development for the future. Although the motives of the initiatives are widely different, many players have set ambitious goals. For instance, the UK is planning to make all new heavy goods vehicles zero-emission by 2040. Several other initiatives have been launched. This includes the World Bank’s Global Facility to Decarbonize Transport will mobilize $200 million over the next 10 years to support the decarbonization of road transport in emerging markets and developing economies. The drivers’ crisis has been the UK’s most painful issue this year when the road sector has lost almost all its attractiveness for the drivers. In 2022, the government will continue tackling this problem by funding training for HGV drivers with the aim of injecting 11,000 drivers across the country. The program will also focus on the development of their professional skills that will be necessary for the rapidly changing environment.
