News digest. 7 Nov

News digest. 7 Nov

Surcharges are now coming in chunks. Shippers worldwide are fed up with never-ending fees, and even the slightly decreased spot rates are no longer a game-changer. 

There might have been a glimpse of a decrease in spot rates on a global scale, but shippers are being fed with more and more surcharges, which saturate even the slightest improvement on the market. They buckle up for the new FAK rates to come in chunks. The desperation to have their cargo delivered forces shippers to comply just to have a guarantee that the contract agreements will be fulfilled. With the new so-called “excess container dwell” fees imposed in California’s ports, the burden becomes almost unbearable. At least, more experts agree that the plateauing of the container shipping markets has passed and now we are on the way to the decline. Indeed, in the past several weeks, the spot rates did not show new highs. The Shanghai-Los Angeles rate dropped $1,119 per feu to a level of $9,857 for the first time since July. A similar trend is seen from Shanghai to New York with rates dropping $887 per feu to $12,667. However, a logical question arises in this case – how long will it last, can we be confident that the numbers will not bounce back to the elevated levels? It all started with the increased demand that pushed the rates up, and the new forecasts predict that it will not decline. The demand is driven mostly by American consumers and since this is where there is the most congestion right now, the situation will take months to resolve, most probably all way into 2022. Such measures as the implementation of the 24/7 operating schedule have not been successful either. The scarcity of chassis is affecting all types of moves, from local deliveries to terminal moves to/from off-dock rail ramps despite the fact that local trucking delays have been reduced. Thus, such companies as Maersk chose to focus on the growth on the landside of their business and acquisition in the logistics space. Noting on acquisitions, CMA CGM Group has bought a 90% stake in the FMS terminal in Los Angeles. Indeed, the storm is temporary – when congestion is resolved, the company will be left with a very powerful facility. It is wise especially when the airfreight rates are flying up again. Overall air cargo rates are up +155% and +37% in October 2021 versus October 2019 and October 2020. 

 In addition to growing surcharges, another kind of expense will rise – the canal costs. The move is justified by the initiative of The Panama Canal Authority to start green transitioning. It will require more or less a $70bn long-term development programme to take the canal to zero-carbon emissions by 2050. It will also introduce a new “differentiated tariff scheme”, which will see less-polluting vessels, charged lower prices for the reduction in greenhouse gases emitted. At the same time, the Suez Canal has announced an increase of 6% in charges from February on all vessels except cruise ships and LNG tankers that suffered in the pandemic the most. The authorities are trying to attempt to fix the financial losses with the expenses of those who are able to pay and to take off the pressure from the kinds of vessels that are struggling. Meanwhile, Maersk also joins another sustainable initiative as a part of the First Movers Coalition together with such global brands as Apple and Amazon. It is a platform where companies make purchasing commitments to create early markets for important technologies needed to achieve net-zero by 2050. Maersk has set a goal to achieve at least 5% of its deep-sea shipping operations powered by zero-emission fuels by 2030. The Port of Valencia tunes into the partnership with the Port of Hamburg with emphasis on the promotion of hydrogen aiming for the same 2030 deadline as the majority of the players that want to go carbon-free.

We are on the highway to h…historic highs on the road. While in the marine sector, there is a slight decrease in spot rates, road freight rates have hit the fifth consecutive quarter of European road freight rate increases. Topped with widespread cost inflation up to the end, driver shortage and rising fuel prices this dynamic is set for the downfall. The issue of the lack of labor has been especially painful. The reason why it still has not been resolved is the fact that the sector remains unattractive, some experts believe, so governmental regulation regarding better the treatment of drivers is needed ASAP. The volumes are expected to keep increasing – in the UK alone the highest price-per-mile average across all vehicle types was in September 2021 — a 21.8%. The country has been trying to address this problem for months, although the focus is still on rail. Perhaps, it is because the railway sector has been the only one that is returning to pre-2019 levels. With passenger numbers coming back to network, it has the potential to play a key role in the government’s agenda, supporting economic growth, investment and jobs. However, in the international arena not everything is so positive for rail. The North-South International Transport Corridor connecting Russia with India via Iran has been put on hold and the issue is much deeper than Iran’s rail underdevelopment. The game involves Armenia and Azerbaijan having contradicting agendas spiced up with political tension. The latter dimension will determine the outcome of the project. 

#rail
News digest. 7 Nov

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