News digest. 8 Oct
Does every new day bring industry players further from that long-awaited period of “normality”?
“We are open for business” is about to become the US heavily congested ports’ motto in the coming days as the government starts pushing them to round-the-clock operating hours. Shippers and carriers cannot sleep with all the nightmares about post-pandemic recovery anyway, so now they are encouraged to have longer gate hours in order to solve the capacity crisis. Railroads and truckers eventually will be affected too but a truly intermodal plan takes the entire goods movement chain from the source that might still require more time to develop from the organizational point of view. While everyone braces up for almost non-stop work, the situation still looks like desperate attempts to crawl out of the rabbit hole when your hands and feet keep slipping. Unsuccessful. The new forecasts predict that the sector is probably in for a turbulent second half of the financial year, leaving shippers with crashed hopes for recovery. Major players expected more progress at this stage, but the current situation proves that the problems are so deeply routed that the end of 2022 seems like a more likely timeframe for things to get better. For carriers, especially big ones, it means another period of growth. All factors combined, they are now on course to EBIT of $150bn, a groundbreaking record. Although for the next year spot rates will most luckily decline, there will be a significant increase in contract pricing, leading to an increase in average global pricing of about 6% and as a result to booming earnings. The slowdown of the spot rates growth can already be spotted. Major East-West trades inched down by 2.2% this week reaching $10,129.72 per 40ft container. Freight rates on Shanghai to Los Angeles dropped 8% or $999 to reach $11,173 and Shanghai to New York fell 5% or $739 to $15,110 per 40ft box. However, worsening port congestion and delays in California are still keeping Asia-US prices extremely high.
The sector has seen big acquisitions and new collaborative efforts in the EU and the US this week, and the Middle East has followed suit. Abu Dhabi Ports have decided to address the problem of growing trade demands within the Gulf region by establishing the UAE-based container feeder services company, Safeen Feeders which is a joint venture with Bengal Tiger Line. The move is not solely dictated by the growing demand. The company’s rival DP World in Dubai has a very extensive feeder footprint having bought Unifeeder and other liner operators in recent years, so it is an attempt to become more competitive.
Despite the “glory” washing over the shipping lines, they are still going to carry major expenses in South Korea where not so long ago Korea Fair Trade Commission imposed fines on those who fell foul of anti-trust laws in order to protect the sector from monopoly. Although the decision was amended after several protests and reports proving the damaging effect of the measure, it was done too late. Most probably, 23 liner operators will not be able to avert the fines of nearly $672m.
While ports can only hope for the bottlenecks to resolve, airfreight is experiencing the quadruple influx of the number of freightersheading to the US, and it is not something to be excited about. It is putting immense pressure on the warehouses and forwarders who need to collect cargo quickly, but their facilities are full, too. In addition, there is a lack of drivers to handle the load, so all this bouquet of challenges is creating a logjam. DHL takes a massive turn on the investments on the expansion and the upgrades of its American facilities, planning to spend more than $360m. The cost of any kind of construction will be extraordinary this year, as the prices for materials are soaring. What does it mean for the customers? The clients of the DHL Express will pay at least 5.9% more for their traffic with the integrator, which has also indicated that some surcharges will also increase. While some airline companies are testing the waters and reducing the number of aircraft they operate in preighter configuration, the future is still uncertain. Experts are wonderingwhat is going to happen when that capacity is back 100% or even more, taking into account that many carriers are trying to enter the transatlantic market.
Trying to reduce its carbon print, Maersk, in collaboration with Wärtsilä, is going to test an Air Lubrication System manufactured by Silverstream Technologies. The system creates a carpet of microbubbles that coat the entire flat bottom of the vessel. This carpet then reduces frictional resistance between the hull and the water. Maersk is clearly trying to strengthen its network in every field from its own services to the green agenda as recently it has also signed cooperation framework agreements with the China Classification Society.
