News digest. 5 Oct
The “Ivy league” of the biggest brands revolutionizing their delivery policies has welcomed its new member, Coca-Cola. We are in for a big shift.
Unprecedented situations require unprecedented solutions and the current market context serves as proof that it is time to think not just out of the box, but also out of the can. At least, this is the case with Coca-Cola. Crucial deliveries are no longer able to wait for the regular liner choices, so in order to keep up, the company has joined the club of those using bulk carriers to keep its production lines. Otherwise, what business meeting is a business meeting without a sugar-free diet coke or a table on the approaching Christmas without a familiar red and white bottle? These carriers will head to non-congested ports and the company is holding expectations for the smooth discharge. “If you want to do something well, do it yourself” the wise say, and so does Target that has joined its big companions in the decisions to charter its own vessels to keep the shelves stocked with goods. Whether this approach will be useful is a matter of time, but for now, it seems to be the only way out especially if we look at the current congestions in the big picture. The recent analysis has shown that today’s global capacity removal thanks to vessel delays is slightly greater than the entire fleet of either Cosco or CMA CGM. Let’s say we have five years to rewind the container dial – this is equivalent to three and a half times the fallout from the Hanjin bankruptcy.
In terms of how long the global congestion issues might take to resolve, realistic expectations stretch into 2022. It has been estimatedthat Chinese power disruptions will cost US$120 billion of trade flows delayed and the consequences will take months to get solved. The overall chaos paired with sky-high costs can go as far as 2023, and 2022 will be another peak season when shippers still will not have enough inventory and the demand will not slow down. It seems like a never-ending curse where bottom-line utilization per ship is driving freight costs and empty containers are contributing to it. The total exports of empty ones leaving the Port of Los Angeles are up over 10%, and the terminals are moving out these containers with each sailing to free up space, although 30% of all truck appointments are still not being filled each day. Despite the struggles, the US exports are hitting new highs with natural gas, coal, and NGL being the greatest assets. The ports keep struggling. In the search out of California’s blockages, everyone rushed to the east coast and…clogged it. Some of the ports’ authorities are accelerating the creation of additional container storage capacity. The catastrophic state of the American facilities serves as an example for much smaller players. In order to increase capacity and strengthen the shaky foundation of the national economy, The Sri Lanka Ports Authority and APSEZ have joint efforts to develop the Colombo West International Container Terminal of the Port of Colombo.
Since the beginning of the madness, carriers were the ones enjoying the biggest profits and the situation remains the same to this day. Millions of dollars in extra detention and demurrage charges at the busiest box hubs will go straight to their pockets as they are reducing the number of days containers can be stored before fees apply despite the haulage situation. Importers in North European already slammed with all the challenges are now devastated. Carriers explain that they are imposing the new rules to incentivize importers to take delivery of cargo promptly and thus improve the reliability of the supply chain by returning empty equipment back to Asia earlier, but since the drivers’ shortage is not improving, this policy is vague. The UK hubs are going to be carrying the most damage and perhaps give others room for growth? The US, for example, is going to push French thanks to its forwarder Bansard International that has been sold to Seko Logistics marking the largest acquisition to date. France gets exposure to a much bigger e-commerce market blooming after the pandemic. Meanwhile, DP World, sensing the difficulties on the way, opens an empty container storage park at the Port of Southampton, trying to anticipate the upcoming pressure on the UK facilities.
E-commerce is not the only sector experiencing developments. Railway congestions are pushing companies to expand their services, so the Netherlands and Belgium initiate the talks regarding the connection of their networks. The Netherlands has a clear advantage with its ports and at the same time, it has the most congested railways, thus the initiative will be a fundamental breakthrough. Apart from the ports and the infrastructure, there is also a lot of focus on digitalization. As for the latter, advanced technologies are already being tested. The Port of Antwerp is conducting trials of the fixed-wing drone that will be dealing with high-risk operations. Clearly, the advances can be used not only for achieving agility and improving the financial situation but also for much needed care for the employees.
