News digest. 21 Dec
A reset of the China-Europe’s main rail artery? The new task on the coming year’s “To do” list.
Although rail is not directly affected, while Omicron is marching over China, it still does not mean that this sector is going to be immune to the consequences of potential ports closure. The New Silk Road has surely sparked a lot of hope that it is going to play a key role in the sector’s recovery, however, a close examination has revealed that it is still suffering issues that have been present for years. Some of them include problems with restricted goods regulations, capacity shortages, price instability or flow imbalances. Are we in for a major strategic reset? It mostly depends on the powerplay between Europe and China. Experts say that Europe should take the lead, otherwise it will not be able to stand the competition and China will advocate for the policies that will be beneficial only for it. Finally, another focal point that would make a difference in improving the New Silk Road and its services is the scheduling of trains and the balancing of eastbound and westbound flows. The destiny of the latter is closely tied to China’s future policies regarding subsidies. The government will phase them out by the end of 2023 which is expected to make forwarders focus on quality over quantity, especially in light of congestion experienced this year. Smaller rail terminals will shut down and give room to bigger ones that no longer need government support. Hungary, on the contrary, relies on the aid of the authorities, as it fears the rise of rail freight costs in 2022 due to elevated energy prices. At the same time, Spanish railways have been disrupted by the flood – the line between Madrid and Iran, a gateway of high importance for rail freight to and from the north-west of Europe, still remains closed. On the other side, Port Klang becomes the brother in misfortune where operations have been stopped because of the weather conditions.
In the battle against shipping lines for contracts at reasonable prices, shippers were destined to lose, taking into account the influence of the giants’ on the market. The winners are expected to seal agreements with clients at record figures. They are on track to earn $115 bn to $120 bn in profit with the average of the bids coming in $11,900 per feu on China to North Europe trade. Left-out forwarders are firing complaints about unfair competition claiming that they will no longer find space for their cargo in the new structure created by big lines unless they venture into the less favorable spot market. The current state of the EU law of competition does not live up to the new challenges, thus many advocate for reconsideration of the provisions to make them up to date. Sounds familiar, does not it? The US has been trying to influence the unstoppable shipping lines with the help of FMC, so now it is the turn of the European Commission to step in; otherwise, prices and reliability are going to be at risk of the unprecedented increase of cost of shipping goods, as well as enormous delays in the delivery. The US is already calling big carriers for collaboration and implementation of wiser strategies (e.g. regarding utilization of available terminal capacity on the West Coast). Besides, the kings of this chessboard are not going to slow down on their expansion with MSC placing a $6.4bn bid to buy out Bolloré Group’s African logistics business. For the company, this is a region of strong growth this decade and major developments in the future to strengthen its competitiveness. Apart from conquering new land, companies have significantly increased their spending on ships – both newbuilds and secondhand – thanks to the capacity crisis. The updates report the record amount since 2008 estimated at $147bn.
“Go green or go home” has been the leitmotif of 2021 and as an encouragement for everyone choosing sustainable development, Port Bronka is introducing a 10% discount. It will be applicable for mooring and quay operations. It is especially relevant for shipping companies operating in the Baltic and North Seas and other water areas that are part of the special Emission Control Areas. Lithium-ion battery systems also allow for zero-emissions port visits as well as modern two-stroke engines that cut emissions further.
It must be the tough times that are pushing the statistics of cargo theft higher in the Middle East. 76% of stolen cargo is from warehouse and storage facilities, with high-value goods such as electronics. This poses a big threat to higher volumes of cargo since the economies of the Gulf countries are returning to the pre-pandemic levels. Hence, many organizations are going to strengthen global transport supply chains through the implementation of international standards such as TIR for compliance management and security. The tough reality is also true for Hungary where electricity prices are going up.
