News digest. 5 Feb
Shopping for basic necessities may be a serious problem in 2022 with shortages storming over the most important sectors. Which has been affected the most?
The setup for the product shortages appeared in 2021 and with ongoing constraints, it is not going to ease its grip. However, companies are becoming better at forecasting and trying to make the impact of the skyrocketing demand, the pandemic, and congestion less pronounced. Most of all, tight supplies are expected to affect semiconductors - such big companies as Toyota already report missed production targets - anything that requires aluminum and plastic for production, the food sector, and building materials. With defined pain points, companies will be able to achieve some sort of predictability, however, experts say that 2022 will not be the year when they combat shortages. One thing is to produce necessary products but the other is to have them delivered to the required destination which is an additional riddle to solve. The liner schedule remains under a serious drop since last year when it decreased to 35.8%. Only a few big players managed to keep the rate above 40% with the rest performing rather poorly. Besides, there are incidents that cannot be predicted such as situations when a vessel can run aground like it happened recently with Maersk’s boxship. New legislation contributes to the increased waiting time as well - South Korean ports will be inspecting dangerous cargo with more precision for the sake of safety. Alternatives means of transportation are not the ones to rely on for delivery either as when it comes to roads, surging fuel prices, driver shortages, and increased demand are driving the rates through the roof.
The global community is gravitating to the opinion that the current chaos will last at least throughout 2022, with some predictions going for 2023. Meanwhile, container vessels changing hands are increasing with supersonic speed. Updates report the number of container ships sold last year was 26% higher than the prior record in 2017. This time the number amounts to an insane 1.94 million TEUs. Hence, substantial fleet growth will be the defining trend of 2023 and 2024, and it is the “red-hot” second-hand vessels that will form the majority of it because none of the players wants to waste time waiting for the newly-built vessels. What about congestion? If it does not ease up, there will be 15% more capacity waiting in the queue in the troublesome ports, but the shipping sector acts like it is not its problem with some of the players arguing that overcapacity is not a threat. However, the data proves different - in the Port of LA, the land capacity is 90%, which means that there are too many trucks and people to move around efficiently. Overall, the U.S. ports are responsible for approximately 80% of the global disruption, and many fear the situation getting worse as well as the rates increasing. The shipping sector is at a very vulnerable phase and no wonder that even the big ports are becoming victims of cyber attacks on top of facing all the challenges. The rising costs are resulting in more forwarders setting their carriers and beginning to run their liner services to guarantee space to their customers. In an attempt to increase capacity at the local ports, the Indian government, in turn, is going to develop new cargo terminals in the span of the next three years and aim for the facilitation of multimodal logistics parks. At the same time, DPWorld London Gateway’s expansion has been completed. The overall site capacity increased from 4,000 TEU to 7,400 TEU. Germany is investing in infrastructure as well by planning to contribute 13.6 bn euros to the railway networks.
Apart from contributing to delays, the busy ports are the ones causing the most emissions, and the recent initiative benween the Port of LA and the Port of Shanghai is dedicated to the creating of a green corridor on one of the busiest routes. In addition to decreasing GHG emissions from vessels in the corridor, the partners will reduce supply chain emissions from port operations to improve air quality in the facilities. Another ally may be on the way - Cargotec and Konecranes. The two companies want to merge but it can potentially present problems to the competition, hence, the authorities have not given the green light to the initiative yet. Meanwhile, CMA CGM continues strengthening its presence in the logistics sector by acquiring a 51% stake in the Colis Privé Group.
Lithuania - Belarus ping-pong game is becoming more intense as the latter has responded to Lithuania’s decision to ban transporting Belarusian potash fertilizers through its territory. Stopping trains coming from Lithuania is the first step of the Belarusian response. The country is planning to rely on the internal rail network that it has been investing in during the last several years. Poland has already announced that it will transport its goods to Ukrain through Lithuania, omitting Belarus.
