News digest. 2 Nov
Ocean rates have been hovering in the clouds for a long time, opening up airspace for new players. This time for Maersk.
Maersk is not just buying everything on its way when it comes to the expansion of its marine fleet, but it is also doing the same in the airfreight sector. It is already a shipping giant, so now the company is planning to expand its presence in the air. This is not something new – back in the day its competitor CMA CGM pushed more into airfreight. Maersk’s ambition is to have approximately 1/3 of its annual air tonnage carried within its own controlled freight network. The initiative is possible thanks to the company’s outstanding performance – with revenues up 68% year-on-year to $16.6bn. Switching to a more promising transportation sector does seem like a wise strategy as congestion continues to saturate the future. The local pain points have proven to have caused damage worldwide so it is no wonder that the US is calling for international support. During the G20 summit, the participants agreed that the key is in cooperation between government and the private sector that can better anticipate and respond to shortages that may be coming down the pike. The concerns are justified because of the alarming delays and moreover, the environmental threat the misfortunate blockages in southern California possess (despite the Port of LA meeting its emission goals earlier than 2023). The conditions are complicated and the government is working closely with the ports to improve cargo velocity. So far, it is the infrastructure improvements that have been the focus of the authorities. California’s agreement with the US Department of Transportation will work on a series of projects amid to improve financial context, facilitate environmental development, etc.
While the big plans are still in the making, the shipping lines continue riding the wave of success. If before the profits seemed only sky-high, now they are cosmic. The recent updates have shown, that the big players are on the way to unimaginable (in the past 20 years) $200bn. Some of them are even expanding – China Merchants Energy Shipping has taken control of Sinotrans Container Lines in a deal worth around $344m. The trend of the lines’ domination is expected to keep up as forecasts assume a relatively more resilient freight rate and current shipping conditions to persist in 2022. Speaking of the former, the forwarders are still trying to negotiate for long-term freight contracts aiming for the predictability. However, the clogged supply chains are making it impossible. At the same time, surcharges keep risingdue to the remaining elevated demand and tight capacity. The new Peak Season Surcharges will be US$1,000 per unit of all types for Europe and America. Paired with disrupted schedule reliability, more and more carriers will show low performance. Evergreen has already set an unimpressive bar – it has managed to get just 13.2% of its ships into port on time in Q3. With hundreds of ships still waiting at berth, the situation will remain troublesome, if not worse, it risks accelerating.
Despite the uncertain future, India is doing much better in the present. Although never-ending congestion has caused severe headaches to the supply chains all over the world, the country seems to have gotten its external trade in control slowly and gradually. The focus on technological advances is its main priority now in attempts to reduce dependency on ships. As for the innovation, is the hyperloop still a dystopian technology? At least, in the Netherlands, it is becoming more realistic for cargo. If it is implemented, it will result in a one-million-tonne reduction in CO2 emissions and could lead to a significant improvement in air quality. In addition, it requires fewer investments than the ones in road. The discussion has been brought to the table by Hardt Hyperloop in light of its collaboration with other companies.
Winter is coming and so is more energy consumption. Rail, being traditionally the go-to alternative method of transporting cargo, has been put under close investigation in the UK as to whether it is that worthy of investment. The concerns have been awakened by the fact that increasing energy costs may discourage freight operators from sending freight by rail instead of reverting to road transport. However, with all the investments being made and overall support of the intermodal shift to rail, the concerns were soon bashed. At the same time, the DB Cargo and DHL back railway focus by planning to transport more parcels by rail. The joint effort will open new possibilities for cargo flows between the companies. In addition, the sector has welcomed a new connection between Italy and Russiawhere all types of cargo can be transported from heavy goods to alcohol. With all the developments, there is should be something to celebrate with, shouldn’t it?
Perhaps, Amazon will not be able to share the festive mood for quite a while. Halloween might be over, but the nightmares are not. The company is bracing itself for several billion dollars of additional operating costs by the end of the year due to staff shortages, decreased transport capacity, etc. Even its recent initiative to invest in the expansion of its own in-house delivery capabilities is worth it. Meanwhile, DP World is setting its own distribution hub with OASIS Group to facilitate trading infrastructure.
