News digest. 30 Sept
Let’s talk numbers: the post-crisis aftermath in ruined schedules and omitted ports. Deliveries are late everywhere, but what becomes the last drop is a soaring inflation.
With everything at six and seven, meaning a complete disaster on the market, it is no wonder that schedule reliability is gone waving with a handkerchief from the platform. Across more than thirty trade lanes and numerous carriers, it has dropped to the all-time low 33.6% in August, and although Maersk has proven to be the most reliable one, it still has not been able to escape reschedules and omissions of the most congested ports. This had led to many shippers delivering their goods later than ever – if we look at the days taken, the number is 83% higher than in September 2019. As a result, major inflation has spanned, particularly in the US. Growing rates have all chances to make the upcoming contracting season the toughest in ocean freight history for shippers that already can no longer absorb the costs. They have tried to shift to airfreight but the increase rate paired with the soaring demand and tight capacity repulsed them, and the marine sector is risking repeating the same dynamic. The interconnection with China is not contributing even to the slightest improvement. On the contrary, a marginal increase in container throughput has put the Chinese sector in a highly disadvantageous position that throws shade in the direction of North America as well. From January to August 2021, the number reached 186.7 million TEU, increasing 11.1% from the same period in 2020. The extra vessels that ports had to handle have also contributed to the worsening of the bottlenecks problem. In the US, The Georgia Port Authority has invested $34 mil into the Port of Savannah to help expedite an additional 1.6 million TEU in capacity. Malaysian ports are in the same boat. The lockdown pressure and inland disruptions had a big impact on the container sector, thus the authorities plan to invest in the construction of more resilient ports. Things are getting more intense as Hapag-Lloyd is investing in the JadeWeserPort in Wilhelmshaven, following the decision of its competitor Cosco to acquire a stake in a container port in Hamburg.
Companies are desperately trying to introduce new services that could somehow ease the problem of the tight capacity. The recent one is the result of the cooperation of several players that will connect Korea and Central/South China to Southeast Asia from the Port of Pusan. In turn, China sees a promising partnership of Taiwanese carrier TS Lines and New Zeeland that has resulted in the launch of a new liner. In fact, more and more experts call for a collaborative approach that seems to be one of the few strategies that work against the current challenges. It does not solely concern the expansion of assets or the deployment of new vessels altogether, this approach also regards the steps towards sustainable development. While trying to save economic capacity, charterers are coming under pressure to optimize their supply chain and contracts to minimize emissions. Many admit that green initiatives will be a financial burden, although they are necessary for the safety of the planet. Maersk shoots for the stars and picks one of the biggest players – China – to be its partner. The new agreements signed with the China Classification Society aim to proceed with its decarbonization strategy. The shipping giant wants to be first on all frontiers and takes the reigns of developing the right set of standards, rules, and technical solutions for everyone to play accordingly.
The rail locomotive is also on the way to the brighter and greener future under the new “Rail Freight, The Future is Ours” initiative with the active participation of the Port of Rotterdam. The goal is to gather all the ambassadors from across the sector to help in transporting 50% more freight on the Dutch railway network within the next ten years. However, not everything is so blue and sunny above European railways. The focus risks switching to Spain where the potential strike can disrupt the container moves. While there is still uncertainty whether it will take place or not Maersk has already taken precautions and announced that it was looking for alternative options and warned about delays.
For sustainable development, it is also crucial to consider the future of LNG because there have been doubts regarding it as several LNG-fuelled orders were canceled after a complaint against a backcloth of soaring gas prices. The plans to reduce carbon emissions are very ambitious but for the most part, they omit such an ossified and snail-paced sector as LNG-fuelled vessels. However, some companies state that the questionable ships are designed as dual-fuelled and could be run on low-sulphur fuel oil.
As for the drivers’ shortages in the UK where things have finally taken a more positive turn, companies are willing to tackle the problem of underqualified workers. Training programs are on the way out and it is something that companies are really planning to invest in, taking into account the benefits in the long run.
