News digest. 7 Sept
Hurricane Ida has stormed into the US as an uncontrollable whirl bringing all the facilities in the south to chaos. More rate increases are on the way, so it is time to not only get an umbrella, but also tighten the belts.
While it is still uncertain, whether hurricanes are indeed named after female names to awake more fear or not, it is certain the effects brought by hurricane Ida last week will be devastating for the US supply chains. The southern states are still under emergency alert trying to recover from floods and widespread infrastructural damage. Several ports, including New Orleans, have some of their operations shut down which will bring more delays.. Railway terminals have faced the same misfortunate destiny, and guess who will feel the financial aftermath the most? Customers. Experts have already warned that apart from getting their supplies late, consumers will experience increased costs. On the brighter side, the Port of New Orleans has awarded a $4 million contract to HDR Engineering for the new Louisiana International Terminal container facility that might be a live-or-die kind of move in the light of severe weather conditions
Will Groundhog Day ever end or is this contrapasso going to be eternal? Luckily, we are not in Dante’s Inferno, and the congestion is not here to stay – it is just the relief might come no sooner than 2022. Several factors contribute to a postponed date: good ol’ capacity shortages, spike in imports generated by the peak season, and the fact that Chinese factories remained opened during the holiday week, which has reduced the number of blank sailings this year, aiding the congestion.
Ocean carriers are already familiar with this crisis starter pack, hence they are growing more confident in their abilities to keep benefiting from the current situation by extending vessel charters with containership owners for longer periods at much higher daily hire rates. However, there is still a seed of doubt that they are not as powerful as they wish to be. Despite that they seem to have all the trump cards, carriers sense a “line in the sand” that some charterers were now not prepared to cross, in terms of charter lengths. Of course, when your ships are bottled at the blocked ports, how willing are you to pay for such conditions? Hardly. As a result, carriers are beginning to question the wisdom of adding extra loaders to trades where there are already heavily congested terminals. Anyway, for now, the charter market is still the hottest – 1,700 TEU ships are now able to command $51,000 a day for six -to 12-month contracts.
It all most seems like the increasing rates are equivalent to fever: going further up with no paracetamol in the first aid kit. It is a vicious circle of constraints driving them up and vise versa. Among the recent updates, CMA CGM has published a series of freight rate increases for shipments in Europe, the Mediterranean and Africa, which will be applicable from September and October. In the second part of this month, it will also implement another FAK rate increase from Pakistan to all North European, Mediterranean and North African base ports. The difference between old and new rates varies from $1000 to $1500.
Perhaps, the pressure might ease up on rail this week? It is controversial – on the one hand, labor unions in South Korea have reached an agreement with HMM about wage negotiations, since the company could not afford another possible disruption. Meanwhile, on the other hand, the strike in Germany is not over yet. Although Deutsche Bahn tried to object to a continuation of strikes through court, it has failed. Has Germany become a black ship all of a sudden? Despite the turbulence on the rail, its intermodal facilities are up and running. The new advancement concerns MSC’s new service connecting Turkey with the German town Ludwigshafen since the country is a great forepost for the rapid, high quality door-to-door services. No wonder, since the situation in ports is still gloomy, intermodal holds one of the biggest potentials and Asian direction is no exception – China speeds up and establishes a new trade route via Myanmarfollowing the successful arrival of goods at Chengdu International Railway Port.
Asia pushes through container transportation as well with Vietnam boosting its throughput in its container sector despite anti-COVID measures. Short-term relief is awaiting India as well thanks to the government’s upcoming measures. In Europe, container transportation is also going towards the light because of Bureau Veritas that has developed in-depth technical guidance to provide safe and practical pathways for operators carrying containerized cargo in bulk carriers.
Another horseman of the crisis, the post-Brexit framework of the EU – the UK relations is not contributing to the solution of the drivers’ shortages. There is now a risk of the food simply not being delivered due to the new regulations. One of the proposed ways out is a form of a digitally enabled Facilitated Movement Scheme that meets all of the EU standards. As for the new workforce, there have been suggestions to reduce working age and attract more women into the sector.
Although the EU has rather recovered from the July floods, there are still consequences of it – the logistics industry is very sensitive, so the new surcharges announced by Hapag-Lloyd can become a permanent fixture on Europe’s inland waterways. There has to be some communication, otherwise, rates wi