News digest. 11 Nov
Apparently, shippers suffering from congested ports are the problem themselves. How does the desire to increase financial assets postpone the awaited recovery?
By now, long-lasting global congestion (with Australia becoming an honorable member) has proven that there are always players that are benefiting from the constraints. Traditionally it has been the shipping lines, but now the new ones are coming into the spotlight. It has been revealed that some carriers that have investment stakes in different terminals chose to wait for days offshore until a particular terminal becomes available instead of using a terminal that has a much shorter berthing backlog. In the meantime, they are making money from the huge amount of demurrage. The FMC is expected to address this issue, but in reality, it has no executive power to navigate it. Such maneuvers are postponing the awaited recovery, so if the crisis continues into 2022, the suffering carriers themselves are part of the problem. If they think that other factors influencing the current context will loosen their grip, the hopes are intended to fail. Thus, such companies as Wan Hai Lines chose to anticipate financial losses and resign their ships from the congested west coast. The demand alone keeps growing. The latest updates show a 25% jump in total personal consumption in the year to September on the US market. However, the government is not planning to surrender. On the contrary, it going to launch (since the 30s) its largest infrastructure programme with the landmark equal to a $1.2 trillion package. The major part will be sent on transport funding with an emphasis on roads and bridges. In addition, the action plan will increase federal flexibilities for port grants to release congestion and strengthen long-term supply chain resiliency. Rail is not left alone either – 66 billion dollars will go to the national rail network.
Meanwhile, Germany is also preoccupied with railway issues. In particular, it is planning to tackle the issue of the forming monopoly, so the Monopoly Committee is pushing onto a division of the DB Group. However, the officials’ concerns do not change the growing influence of the big companies – neither in the rail sector nor at sea. According to the data, the top eight liner companies now control 81% of global capacity. Ocean carrier consolidation also keeps expanding, as they have been vigorously placing orders and making new acquisitions. Maersk’s orderbook totals 6% of its on-the-water capacity, CMA CGM’s orders-to-fleet ratio is at 17%, HMM and Cosco 20%. The reign of the marine giants is happening with the free-falling spot rates in the background. The latest drop occurred at 4.9% in the first week of November. Experts warn that shippers hoping to bag bargain ocean freight prices anytime soon are likely to face disappointment. This is why long-term contracts are becoming the new gold as companies are striving for any guarantees in this uncertain time. Maersk has gotten into partnership with the energy solutions provider Vestas for all containerized transport. Apart from building a resilient supply chain, they will also focus on sustainable objectives. In addition to the new green initiatives, the ports of Long Beach and LA will encourage the trucking industry to invest in cleaner vehicles and reach zero emissions by collecting its Clean Truck Fund Rate starting from April 2022.
In contrast to ocean spot rates, airfreight rates are climbing further. Already elevated Hong Kong to North America and Shanghai Pudong to North America average prices increased 76% and 89%. In Europe, average prices for airfreight traffic from Hong Kong and Shanghai climbed 78% and 63% year-over-year. In the long run, companies are preparing for an increase in the appetite for passenger to freighter conversions and the impact of that capacity on the market. Amazon and Maersk are planning to deploy more long-haul widebody aircraft.
Although it is the US ports’ turn to disrupt schedule reliability, the UK’s Felixstowe is adding logs into the fire. The alternative routes from the ports are a complicated issue because they require facilitation of better intermodal freight services and land purchases. There are now calls for urgent remodelling of lines in and around the Cambridgeshire town of Ely. However, the Mediterranean corridor comes in handy – a new direct railway line has been opened between the Spanish port of Alicante and London. The move is especially important for the fruit and vegetable sector, so oranges will be on the Christmas table for sure.
