Nothing encourages more to take action than success of the competitors. Following the ambitious plans of China, Russia unfreezes its intentions to become the leader of the Eurasian corridor.
You know it is not a drill when big giants like Maesrk warn that the situation is alarming. This applies to China’s power curbs that continue to hold the industry in fear of the financial losses that they are causing. Power prices may rise to 20% higher than current levels or to pre-approved benchmark prices set by the government. Paired with rising raw material costs, port delays and shortage of shipping containers, this news is suffocating shippers with the already tight belts. With the crippling winter, the country will face the general need for electricity, which will surely have an effect on the supply chains. However, Maersk is not doing that bad on its own despite the disrupted schedules. The new updatesshow that overall, the reliability improved marginally in September 2021 by 0.6% to 34%, maintaining the range of 34% - 40%. This plunge is also followed by the drop in spot rates as soon as everyone has accepted the fact that goods will not be delivered on time for Christmas. Asia-US rates fell by more than 6% on both coasts and Asia-US West Coast prices are now 22% below the mid-September peak. Delays are the new reality that is impossible to escape because although rail and road play a vital role, they are at full capacity and cannot help the marine sector. If it seems like the shippers are already paying a lot thanks to all these constraints, the authorities of the Port of LA and Long Beach do not think so. From now on, they will charge $100 per container for boxes dwelling nine or more days that move by truck and those dwelling six days or more that move by rail. What is the point? The plan is to forcibly unclog the terminals and get containers moving faster, however, experts predict catastrophic consequences. Not only will the ports suffer. In addition to the shippers’ misfortunes, there are now worrying updates on imports. Although the import boom of cargo into the US is now sufficient to keep pace with sales, it is still not high enough to rebuild retailer inventories. It is believed that part of the physical problems in the supply chain in the US is capacity problems in the warehouses while some sectors see rapidly escalating inventories, meaning they need to get more warehousing space leading to shortages.
The motto “if there is not enough space, expand” seems to have been imprinted in the strategies of the players worldwide and Russia is no exception. Following China’s ambitious railway projects, the country has picked up on its abandoned plans regarding the intention to connect the ports of the Pacific and Indian Oceans with the Northern Sea Route.“Siberian Meridian”, includes construction sites such as the Northern Latitudinal Passage, and new thousand-kilometer lines in Siberia and the Arctic. The project has already attracted significant investments and the attention of Gazprom and other hydrocarbons’ majors. It is aligned with Russia’s strategy to strengthen the railway sector. Moreover, it has recently launched the rail freight service connecting Rotterdam with Moscow. Is the new Eurasian corridor on the way? As China moves forward – in all frontiers as it announces the opening of the new shipping route the Yangluo Port and Busan Port – Russia is looking for a New Silk Road alternative route with a potential ally with Kazakhstan.
The alternative routes are as necessary as alternative means of transportation. Especially when the airfreight is still turbulent. Spot prices this week from Hong Kong to Europe rising to $7.24 a kilo, with rates from Shanghai to Europe trailing a little at US$6.59/kg. The calmest direction is still the EU where the demand is steady. However, the debates in the UK over CHIEF to CDS may cause trouble at the customs. Meanwhile, Britain introduces the initiative amid reduce CO2 emissions and bypass highly strained truck networks by carrying packages on commuter trains. Another breakthrough is made by Nokia joining DB Schenker and Lufthansa Cargo’s effort to extend their weekly CO2-free freighter flights. The company will use the world’s only freighter flight running on 100% Sustainable Aviation Fuel produced from renewable waste. The shipping sector has been fruitful for the green results as well. The hard work has paid off in the Port of Long Beach that has reported record reductions in diesel particulates and nitrogen oxides in 2020, meeting its 2023 air goals. The port has never been close to its goal to go emission-free as it is now.
The elevated demand for overland cargo routes and the fact that more ocean freight forwarders are experiencing intermodal shift have pushed Geodis to expand its Southeast Asia road freight network to Vietnam. The decision is justified by the significant upward trend moving via FTL in this direction.
Another link between the EU and China has been strengthened. The Port of Hamburg and the Piraeus Port in Greece have topped the list of the recent Chinese partners.
Lately, China has been confidently expanding in the European direction and now we can see the results – the first container block train has arrived at the Port of Hamburg from Shanghai commemorating the beginning of the significant partnership that goes far beyond collaboration in the transportation sector into education, culture, and science. In addition, the country has marked its milestone in cooperation with Greece thanks to COSCO Shipping that has increased its stake by 16% for the Piraeus Port Authority. The focus on the marine industry is justified by the government’s concern that the railways might not be able to handle sky-high rates. There are now talks that this year will probably be the last year for the Chinese government to subsidize the train services on New Silk Road, but the decision will introduce more opportunities for the launch of the new reefer container and re-shape of goods structure. However, it will also provoke the imbalance of eastbound and westbound traffic, which has already taken place. China Railways has released an official mandate to stop the loading of outgoing trains via the border with Kazakhstan due to the big backlog. Numerous trains are waiting to cross it, and there are no alternatives so far.
France, on the other hand, is pushing towards rail development by drawing the national plan in order to reverse rail’s lost market share during the coming years. The most attention will be focused on three market segments: single-wagon transport, combined transport, and intermodal transport that align with the general European agenda. The coming partnership with Belgium may come in handy. The port of Zeebrugge is planning to expand its inland connections by launching a new direct rail freight connection to Marseille. Strengthening the ports positions by enhancing railway connection is a great move especially when the ports all over the world have been significantly weakened. The latest victim of congestion is the Port of Seattle. The 2M carriers, Maersk and MSC, with VSA partner Zim, will drop it from the schedule for the time being. Meanwhile, container volumes keep rising with China reporting a 10% increase in throughput.The largest increase comes from Beibu Gulf Port with a year-on-year increase of 19.1%, processing 4.19 million TEU. As containers pile up, some companies come up with creative ideas on how to get their materials and goods delivered. One of them is UCC, a Qatari construction company, that has opted to use bulk carriers from China to complete an express mega construction project. The move is another example of the trend of repurposing and strengthening bulk carriers to carry containers that started earlier this year. Among other strategies that companies are trying to use are the attempt to diversify sourcing and add capacity. Retail, construction business and now, pharma have become the victims of supply chain disruptions. The latter claims that the global semiconductor chip shortage is causing delays, order cancellations and other supply shortages for medical device companies.
Can the freeports take the fire on themselves? The areas where tariffs on imports are either substantially cut or waved in a bid to stimulate economic growth can significantly improve efficiency. Thames Freeport will open for business in November and will connect all freeport sites to the consumer markets of London and the South East, creating the infrastructure for an innovative and green trading corridor.
The recent fire on the Zim Kingston has sparked many concerns regarding the possible environmental damage, however, it has been confirmed that the smoke is dispersing. The fire onboard is now said to be limited to a number of hotspots. Additional losses have been taken place – although initial reports indicated that boxship lost 40 containers overboard during the storm, that number has been revised upward to more than 100 boxes. As for the green agenda, it seems like the use of drones could offer an unprecedented opportunity for the logistics industry to cut CO2 emissions for local delivery by half. The problem comes with regulations allowing UAVs to fly beyond visual line of sight and integrate with other air traffic, as well as the need for well-structured regulation that defines the roles and responsibilities of all stakeholders that utilize airspace.
Regulations are often a stumbling stone in the way of development. For instance, Northern Ireland is still under the jurisdiction of certain EU rules, and checks remain in place for goods entering from Great Britain. The issue is taking a lot of time to resolve in the post-Brexit framework. The future of the protocol guiding the UK-EU trading relationship is now under everyone’s gaze.
As stakes rise higher and competition increases, Maersk was reported to cut off some forwarders, focusing on bigger clients to achieve more profit. However, the company has rejected the accusations by diplomatically stating that its rejections to some customers are based on the strategy to enhance the unpredictable reliability of the market. Meanwhile, there are rumors that Maersk is going to acquire Hamburg-based SME freight forwarder, Senator International.
Many experts are testing the waters by voicing out positive prospects about the future as trading and leasing prices in China show a more confident dynamic of decreasing. The recovery still seems distant especially when ports start building “pyramids” of the piled-up containers.
Now when the dynamic of container prices in China for trading and leasing seems to be gradually plunging, it seems like we can start making very cautious statements that the situation is improving. Although it is still a matter of time to see how the market will respond with all the US port congestion and continuous challenges with the rail sector wherethe boom in China-EU rail freight is bringing blockages at key border crossings, there are good signs of the market correction. Average trading prices in China fall by 22% and leasing rates in China went down by 35%. If the prices do not decline further, perhaps, this trend can be considered a response to the upcoming Golden Week in the region. The container throughput has been enormous anyway, having reached 211 million TEU, representing a significant growth of 9.5% in comparison to the last year. The port congestion on the west coast of the northern United States has led to poor liner transportation turnover from the main Chinese ports to the ones in the States. To tackle the problem, the City of Long Beach issued an emergency order allowing businesses to temporarily increase how high they can stack ocean containers. This will apply only to apply to properties that are currently zoned. However, the root of the problem is in the fact that containers have few places to go because warehouses are overwhelmed, so the introduced measure is going to be nothing but a mere Band-Aid.
Meanwhile, on the other side of the world, instead of building “pyramids” of containers, Singapore is using its non-operational Tuas port to ramp part of its capacity while the Port of Singapore is going round the clock. In the big picture, it is obvious that ports are ticking to a more or less similar strategy. What other patterns can we expect in the future? Many experts predict that the government will take a more active role in 2022 because the crisis has reached so far that the private companies will not be able to resolve it on their own. Although the new regulation might involve tightening some areas of liability between parties, they will not govern capacity, equipment, or inventory. It is a pity that it has taken a massive, international disruption for the industry to reset, however, the future is bright according to the majority of the experts as everyone is bracing up to solve such fundamental problems as how we spend consume, and transport goods.
The road freight is in tune with the positive forecasts. At least in Europe. Despite the struggles with labor shortages, Brexit, and supply chain dysfunctions, it is showing signs of recovery. The data shows that it will be back on track by the end of 2021, with an exception of being slightly smaller than it was in 2019, by 1.5%. The latest report also highlights that one of the biggest contributors for improvements should be digitalization including digital forwarders, marketplaces, and TMS providers.
Apart from the big role of digital space, infrastructure improvements will have the back of the railway freight. A recent example is Norway where thanks to continuous development, it has become possible to expand fish industry capabilities by acquiring rail transport options. The new train service launched by OnRail will run along the Nordland railway line, the country’s longest route, starting from Bodø and reaching Trondheim. In addition, the company has ordered a couple of EuroDual locomotives to improve its services.
Are the prospects as promising when it comes to sustainability? The recent fire outbreak on the ZIM Kingston spread over 10 containers and aused serious environmental concerns. Although no damage has been reported, there is fear that the potassium amylxanthate carried in a couple of the overboard containers can form a flammable gas from contact with water. On a positive note, ÖBB Rail Cargo Group has taken another step towards green mobility – it is going to use eco tracking in the Czech Republic. Moreover, the sustainable transport scheme will be implemented on the Brno-Budapest and Melnik-Hamburg intermodal services, which is very vital if we take into account what role rail transportation takes in the nowadays world.
It is not a secret that shipping lines were using the mess in surcharges as a tool to trick their customers to follow the desired contracts and agreements, however, as soon as the tables turned, they flipped off and were quick to penalize the forwarders that have been taking contract rates, of some $4,000/feu from Asia to Europe, and reselling to customers for a price that is more than double. It does not feel good to be on a losing side, especially when some ports are going back to the pre-pandemic levels of throughput with no changes in capacity and elevated levels of worldwide congestion. The pressure from the environmentalists also does not add up to the table, as they demand to speed up the transition to an emission-free future. Will synchro-modality save the game? The transportation industry is becoming more and more like a web, so some experts believe that the key to faster recovery and following agility will be in transparency and cooperation among international terminals.
Embracing the interconnection has a strong potential, especially since one sector is doing better than the others and can become a much-needed catalyst for the change of the weaker ones. The railway industry has welcomed a new freight service launched from China to Russia, new electric locomotives that will be especially useful during heavy train operations, and much more that can be found on MAXMODAL. Sign up for the updates.
So far, the interconnected character of international terminals have been perceived as nothing but the reason of the domino effect and negative consequences, but what if the industry embraces it?
The roaring twenties of the 21st century surely have brought many surprises, and as the congestion crisis unfolds, the masterminds all over the world are preoccupied with finding the way out. It may seem that everything has been tried: around-the clock schedules, expansion of facilities, etc., and yet a new solution has emerged. Barge owners are calling for port operators to adopt “synchro-modality” based on complete reimagining” of how supply chains operate. The crisis has proven the interconnected character of all industry players, thus the focus must be on all stakeholders sharing vital information with each other, so that goods can move faster, more efficiently and as if there is a big wide web connecting international terminals. If we look at the current congestion state, it follows a 50/20/30 rule, in which 50% of capacity moves by barge, 20% by rail, and 30% by road. This would require prioritizing quay capacity, ensuring frequent rail services and ample gate space for trucking. Some companies are already building a system to fit this premise. Meanwhile, developing the routes promising sufficient volumes is another go for the win. The new Hamburg-Shanghai route can be one of such routes. The first eastbound train launched by DB Cargo Eurasia has the potential to keep exported volumes at a high level. However, it will still take time for synchro-modality to take off and the new facilities to have a desired impact on the congested supply chains; for example, the US ports are still struggling in California with $26B worth of cargo. In the meantime, such clogged ports as the Port of Felixstowe are still being omitted. Maersk reports increased consumer demand due to the approaching Christmas and the negative effect the UK bottlenecks are going to cause. At least the rates have plunged by 22% just in time for the new peak season. Moreover, in an attempt to attract large shippers, Maersk is going to handle only cargo from direct shippers, cutting out freight forwarders starting on November 1. Not all it seems – Maersk is seeking revenge because of the forwarders that have been taking contract rates, of some $4,000/feu from Asia to Europe, and reselling to customers for $20,000/feu. The “punishment” has not waited for too long to arrive.
However, if we look at the companies that really use Christmas as the main driver of changes, here comes China United Lines that has launched an express service to the Port of Tilbury to meet shipping demand. It is a big breakthrough because until now most liftings to the UK were delivered to Felixstowe (a new pain point of the EU), Southampton or Liverpool. The step aims to increase capacities, which comes on time with the new dynamic of the European ports – some are going back to the pre-pandemic level of container volumes. The same trend is at ports along the Gulf Coast because of the crisis on the west coast. Unfortunately, it seems like congestion in the UK will not be the only trouble – full customs declaration will come in full force at the beginning of the new year with no mercy for the pleading shippers.
Having identified the shipping sector as one of the main influencers on climate change, the environmental organizations have also granted it certain responsibilities such as a sped-up transition to carbon-free operations. The new deadline is 2030 despite that the big retailers chose 2040. The latter is decided as the most realistic one, according to the players. Nobody is refusing the commitments, however, it seems like the question of the deadlines will be the new stumbling stone between the industry and NGOs.
This week is topped with another railway freight service launched from Jinan, China, to Vorsino in Russia by Ruscon. Covering the all key transport hubs in Russia is the company’s primary strategy on the way to development and expansion. Jinan is an important point where the highways from Beijing and Qingdao intersect.
The differential between the surcharges increases, now reaching $20,000, and so does the number of smaller shippers falling into bankruptcy.
Just like in any other game, it is always the smaller players that usually take the most misfortunate position. In the foolish game of the surcharges, they are carrying immense losses, while some of them fall off the cliff into bankruptcy as the price differential between smaller shippers using spot cargo and larger shippers on contract continues to escalate. Now it is almost reaching $20,000. Although there was a subtle sign of spot rates topping out in recent weeks, many analysts are warning it will take many months for prices to truly cool down. What other Jack in the box is expected? The rise of the insurance costs has taken a strong grip around the throats of the shipping lines that used to be among those profiting from the current madness the most. The predictions regarding how much the price will increase vary from 15% to 25%, therefore life will not be honey-sweet even for the winning players. Sounds like an upsetting scenario, does not it? Especially when Christmas is approaching, and all the fears of empty shelves wash over the minds of not only customers but also of shippers. However, not everyone shares a pessimistic mood. Some sources admit that yes, there are shortages; yes, congestion is everywhere, etc., but if consumers do not engage in panic buying, there will not be any widespread empty shelf winter. They believe that the hysteria is being spread by the companies that lost their competitive advantage. Even if it is true, the current state of things does not provide much confidence in the future. China has not resolved the power crises yet, on the contrary, further disruptions are expected, and as a result, it will lead to longer lead times and a preference for high-value goods. Nobody knows when it ends. While it has become obvious that everyone is struggling with high rates and skyrocketing costs, even robbers have taken mercy on the ships. The recent data has shown that the number of armed robberies has declined by 27% in Asia during the January-September period this year compared to the same period of 2020.
In addition to problems undermining positive prognosis regarding upcoming holidays, the EU does not bring any relief as companies continue to omit UK port calls, which causes a massive challenge for feeder operators tasked with relaying thousands of “overcarried” containers. The good news is that reports are stating that the worst is over and the landside congestion had eased. Meanwhile, the US continues to tackle the problem of bottlenecks by implementing the 24/7 operating hour schedule. More ports such as the Ports of Seattle and Tacoma have taken this approach. This is not going to be the only strategy. Recently, the Supply Chain Act was introduced to the officials, an initiative that proposes to monitor the supply chains of critical goods and design a response to disruptions, using a $500 million annual budget from 2022-2027. It follows up the already accepted Biden’s plan and takes a more detailed look at the hidden costs of faraway manufacturing and supports the idea of companies having more control of their suppliers.
The US ports are not the only ones experiencing the increased throughput. The Russian Container Market has processed 1.3 million TEU in Q3 of 2021, increasing 9% compared to the same period in 2020. However, the decrease is also common in the Northern Ports – a decline of 4.8%.
While Amazon was not the star of the positive news in recent days, it does not mean that e-commerce giants are not on the roll. Perhaps, for China that is still in the darkness in a literal sense, Alibaba will be that much-needed torch. It has gotten a stake in new liner operator Transfar Shipping, which launched operations with China-US west coast sailings in August. This is not just a follow-up of the trend of big e-commerce chattering their vessels. A unit of Alibaba logistics offshoot Cainiao, purchased a 10.33% stake in September last year, so now it is expanding which demonstrates a vertical integration that is different from what the competitors are doing.
It is impossible to decide which sector has been hit the worst, but without a doubt, it is clear that airfreight would share the pedestal. The crisis has shown that it was a big omission not to consider air cargo that important. It used to be the afterthought, but the capacity shortage revealed the pain point of the lack of focus. Now we are in for a big restructuring. Many believe that cargo strategy will now go into aircraft and network decisions, and as it has stepped into the spotlight, more talent will be attracted.
So far, the UK is not the one to be with empty shelves, at least thanks to the rail. Tesco is determined to increase its use of trains to distribute produce by almost 40%. However, the biggest issue of the lack of electrification remains unsolved for the railways to become the ultimate success. In fact, the UK is electrifying its railway at less than half the rate needed to decarbonize by 2050 due to the lack of expertise and the government falling behind its economic recovery initiatives. Meanwhile, STM and Kazakhstan’s Silway Transit join efforts to deliver new electric locomotives that will be especially useful during heavy train operations.
If there is one thing the post-pandemic reality has taught the market players then it is to be ready for unexpected disruptions (or at least try to). Although the industry had experienced a significant drop in Asian congestions and spot rates, it was soon topped with elevated bottlenecks in North Europe and new records in the US ports. The UK, being the new epicenter of the blockages, seems to be finally making the needed steps towards solving drivers shortages. Despite that the companies are still waiting for the government to stop pulling the cat by the tail, the authorities have introduced new measures regarding the cabotage movement that will provide short-term relief. Meanwhile, companies keep looking for alternative ways to charter their vessels in an attempt to deliver their goods on time.
Airfreight is still turbulent and as more talks about the future of it arise, it becomes obvious that even if the new services are introduced, it is the lack of qualified manpower that slows down the recovery. The same is true for intermodal. Some companies go as far as introducing networks between rail and rivers, but will it make sense if there is no one in the workplace? The strike in Italy temporarily causes new troubles. Sign up on MAXMODAL to receive the latest news updates.
When the congestion fills North Europe to the brim, the UK government seems to be ready to act. Why does a threat of collapse appear to be the only stimulus?
Oil on canvas: containerships waiting at ports have become a common scene for the canvases of the EU, The US, and Asia. Even when the situation in NorthEurope is less severe than in the States (although some of the vessels at anchor in northern Europe are far larger than those in San Pedro Bay waiting to berth), the recent data has shown that, at least 20 boxships heading towards Antwerp, Rotterdam, Hamburg, Felixstowe (where the stack density is reaching 92%), or other major ports are queuing. America keeps breaking new records. The Port of Long Beach has registered its second-highest September as unprecedented numbers of vessels wait off the West Coast to unload cargo. At the same time, empty containers moved through the port also dropped by 3.6%. Overall, there is a 5.9% decline in throughput compared to the same period in 2020. So far, moving operations to the 24/7 work schedule has seemed the only solution. Rates and capacity are still tight as more ships start to omit ports; the spot rate for a 40ft to the US West Coast jumped by 8.5% on the week, to $17,377. For East Coast ports, the spot rate increased by 6.5%, to repass the $20,000 marker at $20,695 per 40ft. On the EU tradelane, the rates are still plateaued at $14,492 per the same container in North Europe, and some experts are hopeful for a possible decline. The ships’ prices are soaring too alongside the elevated spot rates. This disrupts the intention of the South Korean authorities to provide funding to local liner and feeder operators through ship sales and leaseback. The plan was crashed after the prices went up, leaving the officials waiting for better times when the residual value drops.
The fate of the businesses struggling with drivers’ and overall delivery options has become a routine for the UK companies long ago. After the government After the UK government botched attempt to belatedly relax visa rules for a limited number of EU hauliers, many enterprises failed to attract significant interest to the sector by using their stimulus. It became clear that the solution is in the hands of the officials, thus they proposed a possible temporary unilateral legislative extension of road haulage cabotage. The proposal is to allow unlimited cabotage movements of heavy goods vehicles for up to 14 days after arriving on a laden international journey into the UK. However, it is still a short-term solution and does not diminish the importance of developing a more diverse domestic workforce.
With shipping prospects rising, there is still a problem of the existence of too many shipping stocks instead of consolidated categories. Although an updated analysis has shown that this number is shrinking, the remaining public players are no bigger. Consolidation has been the major cause of it as well as takeovers by shipping companies – a big trend of acquisitions that goes beyond U.S.-listed shipping stocks all the way to North Europe. Another trend of companies starting to charter their vessels is evolving too. Amazon decided that it would send boxes on the deck of the Norwegian multipurpose operator that is ideal for carrying unconventional containers.
With more challenging on the way, the environment will continue to encourage companies to explore methods to organize their supply chain models in an effort to get their products to market and avoid shortages. This search for a new strategy concerns other sectors that Amazon is willing to explore. For example, airfreight. Some sources report that Amazon is going to acquire a significant number of long-range, wide-body freighters that could fly goods from China and the Asia Pacific region to the US to tackle the problem of bottlenecks. The e-giant has declined this statement, although this method (especially since airbus freighters announced their commitments to e-commerce) should not be underestimated as it would allow the company to establish an ex-Asia airbridge, channeling shipments directly into airline arm Amazon Air’s US network of dedicated airport hub, avoiding delays. The latter is extremely important in the light of the peak season and the forecasts that air capacity will tighten before we even blink. Amazon has already missed the moment when transport costs surged. Now it is trying to induce consumers out of their homes to collect their online purchases from a drop-off point nearby. Anticipating the coming issues, such companies as FedEx have already launched additional flights.
No sooner did the EU recover from the German strikes than the new ones crushed it, this time in the south. Following the introduction of “corona tickets” at workplaces, hundreds of strikers have flooded the Port of Trieste’s area. Supply problems are expected, however, they probably will not last for long as the majority of the ports support this sanitary measure. As for Germany that is gradually recovering, the recent initiative concerns the strengthening of the freight traffic via the Betuwe route – where up to 70% of the traffic between the countries occurs – by starting the new tests of the Automatic Train Operation. The goal is to have a locomotive ready for testing on the route in 2025. More connections are on the way in India as well. APM Terminals Pipavav has become the first Indian port to connect to the Western Dedicated Freight Corridor after
