While shipping sector is occupied separating the wheat from the chaff (all the different surcharges), intermodal pushes forward towards the new milestone. 

In the wind whirl of different surcharges, it is quite easy to lose one’s mind and keep track of the ocean freight prices played by shippers and surcharges to guarantee space and equipment. The difference between the two is growing, now reaching $10,000/FEU. It is getting more and more difficult to understand the market as, in addition to everything else, the spread between low to high and from short-term to long-term contract rates is bigger than ever before. The customers first, will have to carefully examine the reality and ask themselves such questions as to whether their cargo will go through congested port and how quickly they need it to be delivered. This is especially vital in America’s direction where the retail import rates are destined to remain at elevated levels through October. Without a doubt, ships will eventually get unloaded, but the peak season and additional pressure make it everyone’s headache. Spot rates are being driven up too, but there are a few loopholes – an opportunity for some forwarders to grab space at heavily discounted rates in last-minute deals during the holiday period, due to power outages causing production cuts in China. However, with no hopes for a recovery in the near future, this fortune seems more like an exception from the rule rather than a glimpse of possible improvement. Retailers, being hit the worst, are using it as an opportunity to speed up the deliveries, as there is no other choice if they want to satisfy the soaring demand. Home Depot becomes a pioneer of using GoLocal’s the same- and next-day local deliveries service. 

Airfreight rates are no better as they continue to experience the climb following the rise in airline cargo capacity utilization that went up to 68%, higher than any pre-COVID peak season level since 2018.

The Port of Hamburg, the recent star of the headlines thanks to its partnership with China, continues to make its way with strengthening relations – this time with the Port of Valencia. The collaboration will cover such areas as decarbonization, digitalization, connectivity, and equality policies. So far, the parties have agreed that a new electrical substation can become the major tool for achieving the reduction of emissions in ports’ operations. Meanwhile, Climate and health coalition Ship It Zero is calling on IKEA to transition to zero-emissions shipping by 2030. IKEA has been one of the most vigorous retailers advocating for the green future, but now there is a petition demanding a faster and more confident approach from the giant. 

The UK is still on the list of those struggling the most since the decisions of its leading ports to impose restrictions on the return of empty boxes due to congestion issues. For example, the Port of Felixstowe already suspended the return of Evergreen, Maersk, and CMA CGM empty containers. This all only compounds the severe shortage of HGV drivers that the industry is facing. One of the means to tackle this problem is the new campaign amid to bring back the drivers who already have a relevant license but chose to retire or switch to a more stable and profitable sector. The initiative is justified by the fact that the government is taking too long to implement the needed changes into the current visa policies but the labor force is needed ASAP. Data also shows that more than 13% of businesses are now facing big difficulties recruiting warehouse staff. 

The perspective of shippers switching to rail becomes more prominent as they start questioning how frequently their needs can be met, and how rail freight services could improve. Perhaps, intermodal can kill two birds with one stone and address these issues. In addition, it provides alternative routes through more waypoints that can help to avoid congested ports. For example, Cosco Shipping Lines is offering an expedited intermodal service to get shippers’ goods from China to Chicago in the US in 19 days, which is a good lead-time compared to the delays due to congestion. Asia remains a desired partner for many companies despite the challenges the region is currently facing – Ukraine has launched its first export train to China in an ambitious attempt to establish itself as a New Silk Road transit and final destination, while the first east-bound train. However, there is its competitor in Kaliningrad, the main transit hub on the New Silk Road, where a new terminal has been opened. New connections concern the North too with Hupac adding another departure to its Lübeck-Novara shuttle. The UK to secure the future of its critical cross-border transport link in Wales in England and for this matter, Network Rail is going to invest 28m euros. The decision is dictated by the line’s vulnerability to climate disruptions and particular sensitivity to severe weather conditions.  

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. 

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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.

What does it take to make a “perfect” storm? An ounce of congestion, a sprinkle (well, maybe a couple of dozens) of freshly increased spot rates, elevated shortages of everything one can possibly think of, and do not forget the inflationas the result, and serve it under a cocktail umbrella of darkness caused by Chinese power curbs. Voila, this has been the recipe of the events taking place in the recent week. The post-crisis reality consists of disrupted schedules and omitted ports, but companies embrace collaborations and acquisitions to maximize efficiency, expand their assets, and launch new services to ease the pressure off the overloaded ports. 

Although the UK is on the right track of resolving drivers’ shortage, the measures are being implemented at such a slow pace that it throws shade on the possibility of dealing with the conflict efficiently whatsoever. Many experts are wondering the same question. Perhaps, intermodal has more to offer and it will be one of the pillars that will be at the foundation of the new “stability” in the future along with the advanced sustainable policies, and breakthrough technological innovations? Join MAXMODAL to follow the analysis and news digests on all the crucial updates on logistics and transportation markets.  

When lights go off, what will ignite the hopes of shippers? More disruptions are on the way. 

As China dives deeper into the darkness in a quite literal sense, more disruptions are being caused by the electricity supply reduction amid the slash carbon emissions. The problem is, nobody knows how long it will take and some state that the power cuts will be extended all the way in October and it will add more uncertainty to long-haul container shipping since factories simply ill nit be able to produce goods. This is making the shipping lines go practically crazy – if before it was just difficult to book a vessel, now it is becoming impossible because the lines rip up agreements and leave the forwarders in the darkness of uncertainty. They are planning to “lie low” at least until after the Chinese New Year holiday in February, when the lines believe they might start to need to ask shippers for cargo. However, it does not cancel the desperation of shippers to move their cargo, thus they are left with nothing but the alternative of cycling through one forwarder to another in the attempt to find a more profitable option. These continuous searches paired with goods stuck at ports are about to cause the shortage of important items such as garments. This is especially true for the US market. Some companies try to anticipate obstacles and use their various connections extended to China and Southeast Asia, but since these regions are heavily suffering from delays and congestion, the attempts to get back on track have not been successful. The possible strategy could be the prolongation of their production lead times and beginning transporting goods well before purchase according to the delay updates. The latter is not the only thing worth keeping an eye on. Another one is the new prices set by MSC for shipments from Europe to America that will take effect on 25 October. The growth of the fresh Freight All Kind rates falls in the range from $500 to $1000 depending on the size of the container. May the force be with them. The new implementations are destined to rip through the plateau that some experts claim the container market has achieved. 

When shipping fails, will intermodal hold hope? It is not a secret that small and mid-sized exporters are having the toughest times in the whirlwind of the crisis, so the big player HMM will collaborate with South Korea’s Ministry of SMEs and Start-ups to give them multimodal logistical support by allocating 20 TEU of shipping slots which is truly a gulp of the fresh air in the context of the congested ports in California. As for the latter, among the recent steps taken to resolve the riddle is the one by The Port of Long Beach that is going to start a pilot program offering 24-hour cargo pickup to help move the piled up cargo. International support seems to be America’s sudden asset – Canadian CPP Investments has acquired a 100% stake in Ports America. Joint efforts mean more investments, greater expansion and more chances not to sink in the waves, so this week the industry has seen a series of major consolidations and the railway sector is no exception either. Scan Global Logistics has taken over Horizon International Cargo and Hapag-Lloyd has gotten a 30% stake in Eurogate’s Container Terminal Wilhelmshaven at Germany’s JadeWeserPort to further boost fortunes. 

England continues the development of the rail sector with the extensive ground works to strengthen heavy freight traffic on the West Coast Main Line. Network Rail has invested 1.5 mil euros as part of the Great North Rail Project to secure the cutting. Overall, European rail takes a positive spin after a rather gloomy previous weeks. The transformation is directly linked to the automatic coupler that will change the whole sector because so far, Europe is the last market that uses standard manual couplers.  The extensive rail growth concerns the UAE too since its National Railway Network is one step closer to completion thanks to the delivery of the new railway. The whole project will connect seven emirates and significantly push the country towards competitive advantage.

Although the UK has turned in the direction towards solving the drivers’ shortages crisis, it is unluckily that future measures will cause immediate relief as the damage caused by the lack of the workforce is already enormous. According to the analytics, customers are suspending their shipping operations and container haulage costs have more than doubled in most cases; more experts say the situation is worsening by the day. Even if the government is finally going to take the right measures regarding visa procedures, what is the guarantee that is not too late?

Let’s talk numbers: the post-crisis aftermath in ruined schedules and omitted ports. Deliveries are late everywhere, but what becomes the last drop is a soaring inflation. 

With everything at six and seven, meaning a complete disaster on the market, it is no wonder that schedule reliability is gone waving with a handkerchief from the platform.  Across more than thirty trade lanes and numerous carriers, it has dropped to the all-time low 33.6% in August, and although Maersk has proven to be the most reliable one, it still has not been able to escape reschedules and omissions of the most congested ports. This had led to many shippers delivering their goods later than ever – if we look at the days taken, the number is 83% higher than in September 2019. As a result, major inflation has spanned, particularly in the US. Growing rates have all chances to make the upcoming contracting season the toughest in ocean freight history for shippers that already can no longer absorb the costs. They have tried to shift to airfreight but the increase rate paired with the soaring demand and tight capacity repulsed them, and the marine sector is risking repeating the same dynamic. The interconnection with China is not contributing even to the slightest improvement. On the contrary, a marginal increase in container throughput has put the Chinese sector in a highly disadvantageous position that throws shade in the direction of North America as well. From January to August 2021, the number reached 186.7 million TEU, increasing 11.1% from the same period in 2020. The extra vessels that ports had to handle have also contributed to the worsening of the bottlenecks problem. In the US, The Georgia Port Authority has invested $34 mil into the Port of Savannah to help expedite an additional 1.6 million TEU in capacity. Malaysian ports are in the same boat. The lockdown pressure and inland disruptions had a big impact on the container sector, thus the authorities plan to invest in the construction of more resilient ports. Things are getting more intense as Hapag-Lloyd is investing in the JadeWeserPort in Wilhelmshaven, following the decision of its competitor Cosco to acquire a stake in a container port in Hamburg. 

Companies are desperately trying to introduce new services that could somehow ease the problem of the tight capacity. The recent one is the result of the cooperation of several players that will connect Korea and Central/South China to Southeast Asia from the Port of Pusan. In turn, China sees a promising partnership of Taiwanese carrier TS Lines and New Zeeland that has resulted in the launch of a new liner. In fact, more and more experts call for a collaborative approach that seems to be one of the few strategies that work against the current challenges. It does not solely concern the expansion of assets or the deployment of new vessels altogether, this approach also regards the steps towards sustainable development. While trying to save economic capacity, charterers are coming under pressure to optimize their supply chain and contracts to minimize emissions. Many admit that green initiatives will be a financial burden, although they are necessary for the safety of the planet. Maersk shoots for the stars and picks one of the biggest players – China – to be its partner. The new agreements signed with the China Classification Society aim to proceed with its decarbonization strategy. The shipping giant wants to be first on all frontiers and takes the reigns of developing the right set of standards, rules, and technical solutions for everyone to play accordingly. 

The rail locomotive is also on the way to the brighter and greener future under the new “Rail Freight, The Future is Ours” initiative with the active participation of the Port of Rotterdam. The goal is to gather all the ambassadors from across the sector to help in transporting 50% more freight on the Dutch railway network within the next ten years. However, not everything is so blue and sunny above European railways. The focus risks switching to Spain where the potential strike can disrupt the container moves. While there is still uncertainty whether it will take place or not Maersk has already taken precautions and announced that it was looking for alternative options and warned about delays. 

For sustainable development, it is also crucial to consider the future of LNG because there have been doubts regarding it as several LNG-fuelled orders were canceled after a complaint against a backcloth of soaring gas prices. The plans to reduce carbon emissions are very ambitious but for the most part, they omit such an ossified and snail-paced sector as LNG-fuelled vessels. However, some companies state that the questionable ships are designed as dual-fuelled and could be run on low-sulphur fuel oil.

As for the drivers’ shortages in the UK where things have finally taken a more positive turn, companies are willing to tackle the problem of underqualified workers. Training programs are on the way out and it is something that companies are really planning to invest in, taking into account the benefits in the long run.

Power curbs in China suddenly disrupt the already sensitive shipping sector. Although Christmas is upon us, this is not the right stimulus to light up candles. 

There already has been a lot on the plate in every sector but now, as winter approaches, gas prices are skyrocketing and the new wave of protests against high electricity bills washes over Europe, companies brace up for the consequences for shipping. Due to the recent power curbs in Chinese provinces, very soon the global markets will feel the pinch of a shortage of supply almost everywhere even more. As a result, many factories are planning to further delay deliveries of U.S. imports. Major clothing companies continuously report inventory increases and now the shutdowns of the factories created a gap to the flow of inventory. A lot of goods are at risk of not being delivered on time, therefore, Costco, has become the latest American brand to take shipping matters into its own hands and chattered three vessels. As there is no relief in sight and everyone promises things to get more tight, the Port of LA authorities are asking the federal government to reconsider the priorities in terms of port investment areas to help alleviate supply chain crunches hitting the nation’s retailers. In fact, the recent day shave been eventful in terms of different requests targeting the official from the US shippers. Another one concerns the pleas to reject the proposed Ocean Shipping Reform Act of 2021because of the unfair demurrage and detention charges applied in case the containers are not picked up within the agreed-upon timeframe. The agreement is almost impossible to follow with all the schedule disruptions. 

Sensing where the wind is blowing, big players try to be ahead of the curve and announce the redaction in the number of port calls in an attempt to speed up schedules. They also advise to book slots in advance as Christmas approaches and warn that inventory levels are still at the lowest while demand keeps growing. In particular, Maersk has projectedthat global container demand growth from 6% to 8% in 2021.

The current year has granted not only the record increase in congestion and the crashing aftermaths of it but It has also broken through all S&P records despite the fact that 2021 is not over yet. Containership and bulker S&P prices are up by around 120% and 70% respectively since the start of the year. Analytics report that the industry is on track for 7.3% of the start year fleet to change hands this year, the highest since 2007.

While omitting ports can be one of the ways to deal with the increasing pressure, there is another one involving barges turned into floating storage platforms at the Port of Rotterdam. Initially, they were called in to fill their vessels with some number of TEUs of empties and find a way of connecting these to ocean carriers for evacuation from more congested Rotterdam to less crowded Antwerp, but long delays at terminals have pushed barge owners to find other ways of solving the problem. Everyone survives as best he can? Others hope for the government measures, thus in India the authorities decide to tackle the problem of container shortage by extending the deadline for the re-export of imported vessels lying at different domestic ports. To put it simply, less export of empty containers from the country will increase the availability of containers for trade. This comes at the same time with the shipping lines having repositioned 1.7 million empty TEU into India, at a huge cost. In addition, the CSLA member lines have placed orders for 500 new vessels. The fleet expansion seems to be one of the few strategies that might work against capacity shortage as not only Indian companies use it to their advantage. The Canadian vessel owner and operator, Seaspan Corporation has followed suit and entered into an agreement for ten 7,000 TEU scrubber-fitted new container ships. Meanwhile, another big acquisition has taken place with China International Marine Containers Ltd. taking over Maersk owned Container Industry reefer manufacturer. At the same time, the rail industry has experienced a similar move by Hapag-Lloyd.

It seems like the ice has cracked in the issue of drivers’ shortages in the UK. The government will suspend the competition law for the fuel industry to allow fuel companies to more easily share information and priorities areas of the country most in need of deliveries to petrol stations. In addition, a major breakthrough has been achieved – a new package of measures will grant visas to drivers, which has been the stumbling stone in recent weeks. 

Experts continue to debate about the best approach in transition to an emission-free world. The areas of discussion include the sources of financing, the role of digitalization, etc. There is a high chance that terminals in countries with poor electrical grid networks may need to self-generate energy in the future. Each point is an ecosystem on its own, thus it will need individual efficiency that can be improved through investments and collaboration.

From the New Silk Road to the serpentine ribbons thrown over Europe with the outpost in Hamburg, China is on the way to strengthening its presence in the EU as the situation in other directions is not getting any better. Numerous ships are still gathering at California’s ports and the Shanghai Airports is experiences difficulties, which all add to the worsening of the capacity shortage. Space on the vessels has become the new gold and shippers are going to do whatever it takes to get their cargo delivered. The hunt for the better alternative forces more companies to charter their own vessels, but is the smoke worth the fire? Carrier rates’ dynamic is too unpredictable to make any predictions: so far, it looks like it has reached the plateau but there is no guarantee that the existing challenges will not drive the rates further up.  

The green debates continue with rail being on the front page. Countries have come to the conclusion to set the year 2050 as the deadline for the achievement of the emissions-free sector. The UK builds ambitious plans of almost becoming the forwarder of the new industrial revolution while still being unable to solve its troublesome issue with drivers shortage. Apart from the US where shippers at least try to run their truck fleets, the UK can barely offer any alternative. As usual, MAXMODAL stays on the lookout for the updates and delivers the in-depth analysis. Sign up now.