News digest. 18 Nov
While some are working to the bone to resolve notorious bottlenecks, others are enjoying the occurred opportunity to use ports as a free space for storage. The classic game of winners and losers.
The most vulnerable business affected by global congestion turn out to be the importers and distributors fighting to meet delivery deadlines. Shippers are complaining about queuing vessels, an inexplicable shortage of containers, and poor service from the shipping lines. However, the latter believe that consumer demand will slacken and capacity and resilience will get back on track. Of course, the shipping lines are peacefully advocating for the positive predictions as they are going to break the record in profits thanks to the current context. Cosco alone reports nine month profits skyrocketed up 1 650% in the light of soaring demand and volumes. Zim follows suit generating its highest ever quarterly net income of $1.46 billion. Others make their presence by strengthening regional presence in the main areas. Shipping lines are the true royal now especially when their customers are hunting after long-term contracts. They are taking on millions of dollars in forward charter commitments on vessels well beyond the delivery dates of large swathes of newbuild tonnage that will hit the seas in the coming years. The new survey has revealed that expiring charters will now peak in 2024. Thus, the shipper’s point of view is more realistic – the marine congestion will take time to resolve and the pace, with which spot rates are dropping, is going to determine future competitiveness of the market Meanwhile, forwarders are not hurrying to pick up their containers, especially since the dwell fees have been postponed until the middle of November as container flow significantly improves. Seems like a great strategy to use ports for the free storage. That is why FMC is going to take matters regarding the return of containers to the marine terminals in its hands by creating several responsible teams. The teams will focus their efforts on improving conditions at the Ports of Los Angeles and Long Beach, New York and New Jersey.
Infrastructure that is failing to satisfy the current consumer demand needs to be developed as well, otherwise, huge losses are inevitable. Experts warn that the prices that people are paying for ocean freight right now add between 5% and 10% to the cost of all the purchases. Taking into account that 90% of the consumed goods are moved on container ships, the influence of the marine sector is predominant when it comes to recovery. With Christmas just around the corner, everyone’s wish for the festive season is quite easy to predict: to have spot rates at a decreasing pace, although the marker is no miracle. The new dynamic is definitely the sign of the coming changes, but it might take another 18 to 30 months for the rates to reset.
Economic relations among the players on the grand chessboard will not be the only determining factor of the awaited stability. Although it may seem that in today’s globalized world market influence is the strongest, there is still room for geopolitics. The rail ties strengthened by the New Silk Road are already playing a crucial role in transportation, and their future depends on the evolution of the contradictions between the US and China especially since China is now more west-oriented. The volumes of goods that are transported by rail across the continents continue to increase. From 2016 until 2020, these volumes grew 7.9 times. Meanwhile, the EU infrastructure is going through a metamorphosis. The upcoming revisions of the TEN-T and Rail Freight Corridor Regulations of the European Commission are now in the talks and digitalization will be the forwarder. Experts collectively agree that the future is behind European Traffic Management System, Automated Train Operation, and digital traffic management systems, etc. Green agenda also does not leave the round tables in the context of rail influence.
In the meantime, the growing demand for clean energy has encouraged the launch of the world's largest LNG tank container ship.Yangzijiang Shipbuilding will use Tiger Maanshan and its sister ships to carry LNG from Malaysia to China, having signed a shipping contract with its partners. With all this potential, the green sector has to have the same regulations as any other one, and they are already here. The US Environmental Protection Agency has assessed penalties of $81,474 against two MSC’s ships reporting violations in California and Louisiana regarding improper management of ballast water. Carbon-free initiatives and clean energy technologies are a great thing, but the rest of the environmental measures must not be neglected.
However, financial constraints can easily disrupt hopeful plans. The latest example is the Port of Rotterdam where the lack of money for train maintenance causes major consequences for its accessibility. With the implementation of the sustainable requirements and cyber security that the government was aiming for, the costs are going to increase and it will significantly postpone the development. Issues with accessibility have been the headache for Canada as well due to severe weather conditions disrupting cargo flows between the port of Vancouver and the interior.
