News digest. 26 Sept
From highs to lows, back and forth – the rates dynamic has been a nightmare for shippers. Asia is losing its appeal, but what is left on the plate?
A silver lining in spot rates? Is it just wishful thinking or reality? So far, the situation is still wrapped in the fog of uncertainty as the dynamic is very inconsistent. What has been registered so far is an ease in the growth ahead of the Chinese holidays due to the slight loosening of capacity thanks to the fact that some overtime ships were put into the market before the Chinese National Day. However, the rates bounced back to the high of $20,586 per 40ft on the China-US west coast route last week. While American ports remain highly congested, Asia is not doing better – Vietnam is adding another log in the fire by warning that if the COVID restrictions do not end, it will suffer enormous financial losses that will be unbearable for the local economy and put everyone at risk of a collapse. International partners are preoccupied too and more companies announce their plans to move sourcing from Vietnam or at least some of them have already done so. The production costs are destined to rise to cover up all the post-pandemic aftermaths so Vietnamese suppliers are losing all their appeal for customers abroad. In the meantime, Thailand is trying to keep its shipping sector afloat, so the government is pressing ahead with the creation of a national flagship carrier. The plan is to shift gradually from domestic routes to regional trades with the help of the mixed fleet of boxships, tankers, and bulk carriers. As challenges persist, the trend for major reboots seems to be taking Asia over and South Korea follows suit by planning to launch a new dedicated feeder terminal by 2025.
So far, without a doubt, the capacity shortage has been the biggest driver for companies to start big reconstructions, create new facilities from scratch or expand their assets through acquisitions and consolidating partnerships (not only in Europe and Asia but also in Africa). Samskip chooses the latter and broadens its Baltic operations by acquiring shortsea specialist Sea Connect. The move not only strengthens its presence in Russia but also spreads across the Netherlands and a range of key Baltic ports in between. In fact, it goes in line with the tightening connection between Moscow and Rotterdam where a new shuttle train will become the Dutch getaway to Russia.
Whether the mentioned developments will provide immediate relief for the constraint supply chains is still unclear because the storm of the ongoing blockages is going in its full force and causing consequences far beyond the shipping industry. It spills over the homebuilding sector as delays and shortages are creating traffic jams restricting the companies from receiving the constructing materials on time. The cherry on top of that is the escalating unemployment and the lack of professional skilled workers. Tell the UK more about it. The country has been torn among the post-Brexit hysteria, a series of unsuccessful and chaotic measures, a couple of bright initiatives, and the uncontrollable expansion of the drivers’ crisis that is now affecting deliveries to petrol stations, with hundreds no longer selling some grades of fuel or being forced to close entirely. Companies raise their hands in disbelief that the government is not willing to add international HGV drivers to the skilled worker list, so they could get their visas and fill the gaps at the workplaces. According to them, it is the only solution. Quick and simple. Perhaps, they have not considered another alternative that could tackle the lack of employees. Well, Co-op, the major UK supermarket, has. The increased demand has pushed them to use robots for home delivery. Anyway, the situation is already in the spiral mode, and in contrast to the US, it is not so flexible. At least in the States, the context allows shippers to try to run their own truck fleets, although they are not so sure yet if this promising strategy is worth it since the costs are constantly escalating.
Airfreight is crumbling too, although, in August, there was some improvement and capacity managed to recover from its pandemic lows, up 18%. However, the increased demand and the closure of the Shanghai Pudong International Airport Cargo Terminal ruined the party. Despite the shippers’ hopes to see more cargo capacity from the return on airline passenger operations, the situation is unluckily to change so fast due to the recent EU recommendation to pause on all non-essential travel from the US to Europe.
Jokes aside, robots do have a positive impact apart from providing a quick delivery – they provide emissions-free transportation and it is something that has been on the list of priorities for the majority of industry players. There were different deadlines defining by when the word would have to achieve decarbonization. Recently leaders across the international shipping industry have aligned with the principles of the Paris Agreement’s temperature goal of becoming climate neutral by 2050. They have also called for the governments worldwide to take active participation and introduce measures that would encourage everyone to follow the chosen agenda.
