Moving containers on the fleet of bulk carriers may not be a panacea but at least it is a good band-aid straight from the first aid kit.
It seems like there is light at the end of the tunnel when it comes to alternatives providing a much needed support for supply chains for the shippers with urgent requirements. Bulk containers are the answer. The dry bulk owners have started to move containers on the dedicated fleet of bulk carriers, and, although it is not as efficient as companies would like it to be, it provides a considered relief to supply chains. Moreover, bulk carrier owners are eager to accept some high-paying containers. The dearth of cellular container tonnage in the charter market has also forced many companies to tap into the multipurpose (MPP) and open hatch bulk carrier markets to cover their needs this year.
Airfreight capacity remains tight as more restrictions are reinforced in China and congestion does not leave Bangladesh (alongside with continuous strike spree). As a result, the major retailers find themselves the hovering-up capacity to get their autumn/winter ranges to market, leaving smaller firms floundering. More shipping delays are expected in the future, so air forwarders should not rely on the marine sector and expect the situation to improve any time soon. On top of that, thanks to the ground operations in Shanghai, there has been a 10% drop in volumes on China to Europe direction in the last two weeks of August, while westbound capacity was reduced by 18%. Consequently, spot rates for air increased by nearly 20% in the last week of August compared to the last week of July.
There used to be high hopes for intermodal to become the most efficient alternative for transportation but as the situation unfolds, the future of it does not seem so bright due to the maxed-out trucking market. CSX will restrict the number of domestic containers it accepts from Chicago. Although intermodal is more competitive from a cost perspective, the deterioration in service levels is undermining its appeal. For everyone, all of this spells more misery ahead as the peak season shifts into high gear.
Anyway, it is too early to bury rail despite another upcoming strike in Germany. In the UK, British railways have drawn the audience’s attention by proving a possible solution for the drivers’ shortage. The concept of trunk operations by rail between efficient and conveniently sited hubs can be possible thanks to capacity released by pandemic-reduced passenger travel, and rolling stock now available for conversion. It is something the railway industry has not embraced for a long time, but experts say it is something that is about to change.
The crisis has demonstrated that expansion and joint efforts, perhaps, could be one of the possible ways to tackle the challenges. Thus, HMM, SM Line Corporation, Pan Ocean, Sinokor Merchant Marine, and Heung-A Line have started joint intra-Asia services under the K-Alliance engineered by the Ministry of Oceans and Fisheries. Although the latter was recently concerned about unfair competition of the lines, the voluntary membership in the alliance makes it better.
IKEA joins Walmart and Home Depot in the attempt to take matters into its own hands, revealing the decision to buy boxes and charter ships amid to address the growing port congestion around the world. Some experts believe that these giant shippers will have a good look at terminal handling charges that potentially could be a game-changer in their relationship with carriers, terminals, and forwarders.
MSC will one more nail in the coffin for the exporters by introducing its new increased peak season surcharge between Europe and the US by $1,000 per 40ft. Spot rates on the tradelane have leaped by about 180% in the past six months, indicating a rate of $5,888 per 40ft. As for the overall state, another month of high demand, overloaded infrastructure and intense negotiations for shippers, long-term contracted ocean freight rates now stand 85.5% higher than at this point last year.
Meanwhile, OOCL has entered into shipbuilding contracts for the construction of ten 16,000 TEU containerships following the trend of big players investing in their assets expansion. In turn, Fenix Marine Services had decided to focus on the infrastructure development and ordered four additional STS quay cranes its commitment to the partners at the ILWU, the terminal, and the future growth of the critical Port of Los Angeles gateway. The latter has recently noted that apart from investments in infrastructure, significant development of digitalization is needed as the splurge in e-commerce has added to the existing challenges that the port is facing.
Fasten your seat belts, we are taking off into the peak season and it promises to be turbulent
Ocean freight turmoil, production delays, and air capacity shortages caused by numerous restrictions have long been the omen of the approaching peak season. For the air sector, it has come a month earlier than expected taking many companies off-guard. Instability and unreliability are forcing many carriers to withdraw their capacity agreements and start quoting daily or weekly rates based on a spot basis only. Airlines are increasing rates by the day and westbound cargo rates have risen significantly in a week. Rates from China to the US west coast surged to more than $10/kg with rates to the US also disrupting capacity to Europe. Overall, they have increased by 112% from pre-Covid levels in August. Consequently, the capacity crunch is becoming more severe, so experts expect the chaos to be back shortly.
However, for Russian airfreight, it may be a moment for recovery or at least, a breakthrough that will lead to stable improvements. Local observers predict an 8% to 13% increase in the share of cargo traffic with the revenues possibly reaching $152bn. Meanwhile, there is a strong flow of newcomers such as smaller operators that decided to focus on charter services to make the most of the situation and as the result strengthened their presence in the industry.
Not only Russian air companies are on the rise. Geodis has taken a lease on a new freighter to operate between Amsterdam, London, Chicago, and Hong Kong. It will also serve the China – Europe route during the peak season. The decision to charter their own freighter aims to provide service at a more reliable schedule especially in such chaotic times.
Previously booming China-Europe rail volumes clocking a massive 52% increase in first-half volumes are now under the threat of a drastic 30% reduction in capacity in September. The cause of it is the delays at Kazakhstan border crossings and congested European gateways. The latter is also going to worsen due to another upcoming strike by German train drivers. In addition, following the increase in ocean freight rates, rail operators have announced general rate increases between $600 and $1,500 per 40ft container from 1 September. DB Cargo Eurasia will be the one sorting it all out mostly, as it is currently leading the game of China-Europe links. On the bright side, it has already launched five new connections in this direction.
Although there has been a massive trend of such big conglomerates as Walmart and Home Depot planning to ship their own containers, experts are skeptical about the long-term effects of this strategy. The economic situation is too dodgy and does not play in their favor – chattering vessels by themselves will only bring immediate relief. The current situation is driven by too many factors for the chosen approach to be the solution.
Ocean freight rates have been on the rise for 19 consecutive weeks. The recent updates show an increase in major East-West trades by 2.1% reaching $9,817 per 40ft container, although various freight sources report that the real price paid by shippers is way higher. Rates on Eastbound Transpacific lanes surged 4% or $393 to $11,362 from Shanghai to Los Angeles. However, from New York to Rotterdam they dropped 1% amounting to $1,142/FEU.
Port congestion is not the only cause of the drastic rise. It is now mostly up to the antiquated rail and road infrastructure on the West Coast that is preventing the efficient removal of containers out of the port. The Port of LA is currently facing a daily 30% no-show rate for truck appointments.
Strikes have not only washed over Europe. After HMM’s management pushed to resume discussions regarding the seafarers’ union strike, they voted to fire again. They have also claimed that HMM did not comply with the Maritime Labour Convention, and KMTC Line, Korea Line Corporation, SK Shipping and H-Line Shipping joined the protest.
Another player on the blacklist is Amazon. Climate activists have called the e-commerce giant on ship pollution. They underline that when the industry is determined to achieve a more sustainable future, big retailers and their shipping companies simply have no excuse to not invest in cleaner ways of doing business. Other companies that have become targets are Target, IKEA, and Walmart that previously expressed the initiative to transition to 100% zero-emissions cargo shipping vessels by 2030.
Мы предоставляем услуги транспортно-экспедиторское обслуживания, связанное с экспортными, импортными и транзитными перевозками грузов, при использовании различных видов транспорта, как в прямом, так и в смешанном сообщении, по территориям Китайской Народной Республики, Республики Казахстан, Стран СНГ и других государств (Европа, Центральная Азия и тд.).
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Мы предоставляем услуги транспортно-экспедиторское обслуживания, связанное с экспортными, импортными и транзитными перевозками грузов, при использовании различных видов транспорта, как в прямом, так и в смешанном сообщении, по территориям Китайской Народной Республики, Республики Казахстан, Стран СНГ и других государств (Европа, Центральная Азия и тд.).
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It is all “fun and talks” until it escalates — the tension between China and Lithuania is growing. Intermodal still remains the industry’s last hope as ports are drowning in surging volumes.
The threat of possible cease of railway connections between China and Lithuania has been looming over for a while now, and things are getting only more unclear. Although no official statements have been made, some companies are already taking a pause in ongoing projects until political stability is back. In this context, the Kaunas Intermodal Terminal will play a crucial role in Baltic and European rail freight.
Overall, European intermodal terminals remain a valuable asset for development. It is difficult to choose only one when it comes to evaluating their potential as new candidates keep appearing in the intermodal race. In particular, Luxemburg is currently in the spotlight as an aspiring powerful hub — CFL Multimodal is planning to expand its operations in Europe and the New Silk Road. Poland is another alternative with great possibilities, however, there are several issues such as the imbalance between east and westbound flows that make intermodal development challenging. It is prime time to get onto an intermodal train, especially in the Chinese direction. The updates have shown that there is a 35.5% increase for train trips and a 44.6% surge in TEU handled, year on year on China-Europe route.
American ports continue struggling with no ease in sight. Import values are surging at an unprecedented pace. Experts project import volumes of 190,937 TEUs for the week of Sept. 12-18. Paired with low inventories and ships still queening, it is almost bringing the situation on the verge of collapse. The government, in turn, has appointed the port envoy to tackle the congestion problem. The blockages and gloomy forecasts have already forced the 2M Alliance to reschedule its Asia to US and Canada services.
No wonder that MSC is going to push up rates in Europefor upcoming September. In addition, it will push up its prices by $200 per dry and HC unit, for all export shipments from the Southern Africa Region.
COVID crise followed by the devastating consequences have been extremely harmful for every industry. Airlines all together have lost $6.9 bil. in spring 2021, and although traveling is recovering, not everyone shares optimistic mood. Recently, the EU recommended to re-impose travel restrictions to omit the new COVID waves, so the companies should not take off their armor too early.
Chinese ports have seen it all: pandemic outbreaks, severe weather conditions, disrupted supply chains — the list goes on. Meanwhile, the container throughput has increased year-on-year by 12.4% from January to July 2021. The average freight rate of a 40 ft container from Ningbo Port, where congestion has slightly eased its grip, to Los Angeles port in August was $6559, an increase of 15.3% compared to July 2021 levels.
The crisis has clearly demonstrated how truly different the companies are when it comes to addressing the challenges. The industry has already witnessed a trend of the big players vigorously expanding their fleet to tackle the problem of capacity shortage. Hapag-Lloyd pushes through and makes a new order of 75,000 TEU dry boxes in order to ease the scarcity of empty containers through the new order.
DP World is on the roll of advancing its initiative with the government of Bangladesh regarding the construction of Bangladesh’s largest rail container depot in Gazipur district. Shippers are currently dependent on trucks, so when the facility is complete, it will majorly boost efficiency of the operations. DP World had already expressed interest to invest US$1 billion in Bangladesh’s logistics sector including the Bay Terminal in Chittagong.
Shipowners have splurged on tonnage like never before boosting containership to unbelievable volumes. Will expanded assets guarantee staying afloat?
Since shipping reliability continues to worsen (down a massive 39.7% from last year), spot rates are on their rise hitting the 19th consecutive week. The composite index across eight major East-West trades increased 2.1% or $204 this week, to reach $9,817 per 40ft container. Freight rates on Eastbound Transpacific lanes surged 4% or $393 to $11,362 from Shanghai to Los Angeles and 5% or $631 to $14,136 from Shanghai to New York per 40ft container. Rates from New York to Rotterdam dropped 1% to reach $1,142 per FEU.
Meanwhile, the chaos reigning over supply chains has led suppliers and manufacturers to hike up prices for their customers. As a result, companies are considering switching to new ones, but this may lead to more difficulties, as now supplier reliability is one of the most important factors helping to stay afloat. Players are paying close attention to customers’ reactions to higher prices while trying to negotiate with suppliers for more convenient conditions.
Liner operators have proven to benefit the most from the current situation in the past several months and they still do. Recently they have added 23 transpacific services boosting nominal capacity by 33%. The 2M alliance of Maersk Line and MSC account for the largest growth in transpacific capacity. However, let’s keep in mind that this is nominal vessel capacity, and with the congestion in ports, actual working capacity is reduced. For example, Long Beach has set a congestion record – there are now more than 40 ships waiting outside.
In the meantime, shipowners have splurged on new tonnage like never before. A total of 619 containerships are now on order for future delivery. Players either go big or do not go at all; it is now the game of survival where the tonnage is one of the tools for remarkable competition.
The industry needs an alternative routing that would be as reliable and stable as shipment, so OOCL Logistics and OOCL have offered a multimodal container service from China to the US East Coast. It is operated by an ocean carrier, using the Asia-Europe land bridge and the Atlantic Ocean to avoid the current high levels of traffic seen on routes to the US West Coast and through the Panama Canal.
If only the driver crisis in the UK could be solved solely by the relaxation of immigration rules, the situation could have already been improved. However, UK government ministers appear to be resisting calls to reconsider the current policies. They have stated that a package of measures to tackle the HGV driver shortage that was put in place will bring fruitful results soon. The drivers believe it is just a temporary solution. Data estimates driver shortage at around 100,000, with some suggesting the number is much higher. Meanwhile, more and more hauliers apply driver retention surcharges which have caught some of them off-guard as haulage firms increase rates by roughly £50 a load. The British Ports Association has also voiced its concerns about post-Brexit immigration rules for European-based HGV drivers and warned that the lack of action will be devastating for the British economy.
German railways are still dealing with the consequence of the strike. Paired with the recent floods, the situation is extremely complicated to resolve. Maersk and Hapag-Lloyd stated that some of the services on the Germany-Czech corridor that had been supposed to start operating earlier are still taking time to resume. In particular, Maersk has decided to omit Hamburg on the next six voyages and divert the discharge moves on these voyages into Bremerhaven.
Not only Chinese ports contribute to congestion, but also airports that are causing cancellations and a lot of uncertainty for ex-China air cargo, pushing up air cargo rates. The update has shown spot prices ex-Shanghai rising 15-25% to US destinations this week and 12-15% to airports in Europe.
The US rail is expecting major difficulties with operations serving facilities at Chicago, Cleveland, Atlanta and Memphis, Tennessee, because of chassis shortages.
Labor shortages in the seafarer workforce keep worsening with more than half of HMM’s employees signing letters of resignationfollowing management refusal to meet payment demands. Meanwhile, terminal operators in Busan are preparing contingency plans for moving cargo if the strike hits the port.
CMA CGM is going to apply new Peak Season Surcharges in the number of ports globally. It will also push up its rates from Europe to several destinations in America: $470 per dry and reefer container from North Europe, Scandinavia and the Baltic Seaports.
Shippers from Ukraine are vigorously criticizing the decision of Ukrainian Railways to increase the tariffs for rail freight operations to support infrastructure upgrades. Despite the initially positive intention, it will raise the prices of coal transportation. It is said that logistics providers will not tolerate the higher tariffs and move their enterprises to the road.
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