News digest. 15 Sept
Shipping stocks are rising but is it worth trusting the trend when the sector is so unstable? Masks have fallen off and big players are coming into full force by trying to establish control over blank sailings and artificially influence the spot rates.
As logistics and transportation markets plunge deeper into the abyss of excruciatingly high shipping rates, clogged ports, and further breakdowns of supply chains, ocean shipping stocks are undergoing significant growth. Good news in the meantime of chaos? Indeed, some of the dry bulk shipping stocks have attained 52-week highs, surging 15%, while others are near annual tops. Overall, their shares have risen by around 200%-400% over the past year, in several cases outpacing container stocks that, in turn, are expected to hit September peaks.
Meanwhile, big players neglect their much smaller colleagues and chose their interest over the rules of a fair game. The recent announcement of blank sailings over China’s October holiday period by 2M alliance has left some shippers hanging in this frustrated, abandoned state as they keep struggling to find capacity on brim-full export ships from Asia. MSC is focused on improving its schedule reliability and takes the reigns in its hands – before it had already canceled four scheduled Asia-North Europe loops removing some 70,000 TEU of capacity from the route. Now as this strategy continues, many shippers feel staggered and lost with no real alternatives available. In its defense, the alliance has objected that shippers can keep placing the booking and alternative service will surely be provided. However, this is not the only factor that has been keeping the sector alert in the past several days. After CMA CGM had declared that it would stop all spot rate increases through to the beginning of February, such liners as Hapag-Lloyd also admitted that they had been capping the rates for a while. Other big players have not commented on the arrangements at all. The situation has brought the attention of the global regulators, and as big companies start navigating their conditions, it becomes more obvious that new regulatory regimes are needed. While, the future regarding the timing of these changes is uncertain and the capacity shortage is stronger than ever, the same Hapag-Lloyd is on the way to expand its fleet by adding 33 extra vessels in a new contract with Inmarsat. Will the situation remain the same? Asian direction remains an enigma as Typhoon Chanthu makes landfall, and some of the already congested terminals have to slow down their operations. East China has proven to be one of the most influential epicenters of blockages that tend to spill globally.
Not only regulation of competition is required, but also of such vital aspect as safety of dangerous goods storage and transport. Hence, ICHCA and IVODGA have signed a Memorandum of Understanding to assist guidance on the correct safety procedures that need to be employed in the future. This is especially important in the context of the green focus that the industry has taken as the basis for development. In fact, Maersk, being the top advocate for green-fueled ships, is calling for a ban of fossil-fuelled ships by 2035 and the implementation of a $450/tonne carbon tax. The UK shipping industry follows suit and agrees that the international shipping community must pursue a net-zero carbon emissions target, but it gives a different from Maersk deadline: by 2050.
Retailers are occupied with more mundane problems than green future because for them continuous lockdowns in Asia, particularly in Vietnam, have resulted in the lost sales and problems with suppliers. Companies are shifting their purchase orders, locations and financial outlooks. The main objective is not only to reduce Asia’s exposure but most importantly to improve flexibility in the supply chain, as the crisis has revealed that dependence on the limited number of suppliers serves no good. Why “now” is the only right time to act? The new data shows that year-over-year growth is slipping, and there is no sector that has not been affected: lack of warehousing; lack of truck and rail capacity, high shipping costs, etc. Perhaps, rail capacity has potential, especially since the China-Europe route keeps attracting attention – a new terminal will be opened in Mostyska, Ukraine. It is a part of the hub in the making on the Polish-Ukrainian border amid reloading traffic moving between the east and the west. In addition, Kazakhstan is building a new railway line to increase its transit potential on the Middle Corridor. What about Western Europe? Germany has been under the spotlight, and it seems like an agreement between DB and the train drivers’ union DGL is within a reach. The stumbling stone is the pay rise, so the solution will involve the two steps salary increase. The company simply cannot afford another disruption and further damage to its reputation.
The threat of possible problems that may arise from the steam of unresolved conflicts pushes not only DB to more flexible policies but the UK government too when it comes to drivers’ shortages. Among the recent improvements is the fact that the government is going to streamline the lorry driver testing process, which will speed up recruitment and make the sector more attractive to potential employees. The strategy is fairly justified especially if we
