News digest. 24 Sept
The lesser of two evils: how companies still choose chartering their ships despite high rates when any other alternative is much worse. The charter rates are about to hit the plateau, is it the beginning of a new chapter?
Clinging with all their might onto whatever space they can find is the only possible strategy for the shippers despite the all-time high charter rates, even if it means leasing an entire ship. Retailers are trying to ship their goods on time, and they are ready to do whatever it takes to get an ounce of control over their pressured supply chains. This approach has already brought some fruitful results – Walmart has secured more freight capacity, and Home Depot manages to keep imports flowing into the U.S. Carrier rates have hit the historical record a while ago and now it seems like they are about to reach the plateau. Experts warn that although some change in the overall dynamic might be around the corner, there will not be any significant drop soon.
The situation is similar for airfreight. The competition among the players escalates and the prices for one-way charter flights are forcing the companies to tighten their belts. Recently it has soared to as much as $1.5 million. What also differs the situation from what the world witnessed before is the fact that rates from China to the US and China to Europe are moving to the same level. Fortunately, the end of the US travel ban on the UK and European passengers will increase capacity, which will allow tackling the increase in demand. Any other big changes are still unluckily.
No light at the end of the tunnel is expected as numerous ships, around 70 vessels to be more precise, continue to queue off California’s coast like sardines in a can. Thirty-six ships with a total capacity of 230,803 TEUs arrived in port waters in the seven days through Monday. That is 54% of the total TEU capacity waiting offshore. To understand how devastating the fact the Port’s pf LA congestion is, it is worth looking at its throughput that, according to the new updates, has overtaken Hong Kong to become the world’s ninth largest container port. When the volumes are surging and the wait time keeps increasing as well, companies are trying to hold up for dear life. Experts have observed that the median time spent in port in the first half of 2021 was higher by 11% compared to the pre-pandemic average time spent in port in 2018 and 2019.
It seems like a notorious example of the struggling US ports has inspired others to take precautions amid to boost ports’ capabilities. Hence, Russia’s major Baltic oil port will undergo a construction start that will transform it into a multi-purpose facility for up to 3m TEU annually. Among all the projected benefits, the port and the terminal would also have a well-developed overland transport infrastructure linking Primorsk with the Scandinavia International Highway.
Scandinavia is a promising direction for development indeed, as it will also see a new span of significant advances, especially in rail. Thanks to its lease agreement with European Loc Pool, a Norwegian rail freight operator CargoNet, will start using two EuroDual hybrid locomotives. They will give the sector what it needs the most at this particular moment of crisis – faster transit times and the transport of heavier loads. It is a breakthrough in the latest technological and environmental standards in rail logistics. The UK seems to welcome positive changes in its rail industry this week too, mostly thanks to DP World that is planning to build a fourth berth at the port with an increased role of rail. The project is an enormous expansion and a major investment in the UK that will give London Gateway more capacity to handle the world’s largest vessels than any other port in the country. This is right on time with the constrained economic fortunes. In addition, the UK is going to tackle the problem of the underdeveloped in terms of rail northern region. Putting it on the high-speed rails may become a trigger for the faster recovery of the sector across the whole country. Will all these ambitious plans spark a new industrial revolution down the tracks? Glasgow has the potential of becoming a center since it is going to host maestros of the rail sector at the upcoming United Nations Climate Change Conference. There already have been discussions about lower-carbon alternative fuels and private-sector innovations.
In the meantime, such regions as Afghanistan and Pakistan brace up not only against perplexing political situation but also against the consequences this tension causes to shippers. They have to deal with seemingly intransigent shipping lines insistent on collecting soaring detention and demurrage charges. Companies worry that if it does not change, they will go bankrupt. With COVID restrictions and congestion all over the region, the situation is concerning but at least, one of the recent challenges – the truckers strike in Bangladesh – is over. They have withdrawn after the government has agreed to meet certain requirements. Without it, the sector would have carried unbearable losses.
