The drop in congestion has not lasted for long. The new epicenter has emerged, this time in the UK. 

The hopes to see the ease of congestions last for a bit longer have been crushed way before shippers had a chance to gulp fresh air as UK’s Port of Felixstowe has added up to the chaos. The notoriously famous drivers’ shortage has contributed to an immense backlog of the port that handles a significant amount of the UK’s containerized freight. The delays will affect all sectors from marine to retail and if the ice does not break, they can potentially impact nearly $2 billion of trade imports. As congestion continues, such big companies as Maersk chose to anticipate the problems and divert ships from Felixstowe. Sleepless nights are ahead for everyone trying to get out of the blockages as well for the Ports of Los Angeles and Long Beach that are officially expanding their operating hours to 24/7 schedule. The government backs the decision. Big retailers are also going to use night hours to move their cargo. Although the sector is still deep into a soaring demand, there are indicators that consumer behavior will eventually stabilize and now it seems to be shifting towards services. The question of “when” it is going to happen remains unsolved. The future is a mystery, besides, it is better and more pragmatic to focus on the present especially when the US congestion spills further in Asia. If before it was mostly Chinese blockages affecting the countries across the Atlantic, now it is vice versa. Normally outbound containers are moved into yards in the port to await loading, but because of the worsening congestion in the US West Coast ports, shipping schedules and high volumes of transhipped cargoes from China have led to a relentless arrival of outbound containers. As a result, Busan is becoming increasingly congested and forcing the officials to create temporary storage from the hinterland of the West Container Port in Busan New Port.  A further increase in spot rates is probably right around the corner. According to the predictions, on the global scale, consumer inflation will hit 4.5% by the end of this year with container freight prices and soaring commodity prices highlighted as a big contributor, adding 1.5% to the countries from the G20 list economic state. 

It is obvious shipping sector is one of the biggest and hulking when it comes to change. Indeed, the industry moves 80% to 90% of the world’s traded goods. From the environmental perspective, it contributes to 3% of global greenhouse gas emissions, so consequently, shipping has to contribute to the reduction of emissions the most. To put it in numbers, 70% of the shipping industry’s energy mix needs to be green hydrogen-based fuels by 2050. Experts claim that a realistic carbon levy will be critical, putting an adjustable carbon price on each fuel to prevent new fossil fuel investments and stranded assets. However, to follow the deadline, a much faster pace should be implemented. 

Congestion is not solely a marine phenomenon. To resolve the bottleneck on the rail, a new, large logistics center is going to be built in Malaszewicze, Europe’s main gateway on the New Silk Road in Poland. Despite the promising future, the construction will take significant time and investments, so In the meantime, delays will be the ultimate part of the daily routine. It is not only the EU’s headache – the total rail freight volume in Horgos, China’s closest port to central Asia and Europe by land transport, is up to 48.5% year on year leaving the country no other option but to develop intermodal. This is where partnerships become the biggest assets, thus Bangladesh CCBL is going to build a rail Inland Container Depot in Chittagong to boost the transportation of containers by trains. Among other developments, is the vigorous attempt of Hupac to strengthen its positions by taking over the operations of the Novara CIM terminal in northern Italy through a subsidiary. The company went further and projected further investments in upscaling of its services. Meanwhile, France taps into an interesting rail-river alliance. SNCF Réseau and VNF want to work together and improve operational complementarity between rail and river networks to enhance the modal shift. The focus will be on transparency, cooperation, and digitalization. Waahaven South in the port of Rotterdam sees a temporary solution for its fire extinguishing system. Although the final one is yet to be implemented in 2023, the current change might allow the terminal to continue operating. 

Post-pandemic talks to some extent remind of discussion about post-apocalypse. Well, taking into account the cost of all the disruptions, it does seem like one. Resilience is equivalent to the new armor that will protect the industry like a shield. When it comes to airfreight, the outlook is bright no matter the challenges. World trade is forecast to grow at 9.5% this year and 5.6% in 2022, e-commerce continues to grow at a double-digit rate, therefore, joint efforts and modernization should be the man pillars. Moreover, let’s take the positive effect of the mentioned e-commerce – south-it is a great opportunity for intra-Asia trade, as investments are already pouring into improving cumbersome cross-border logistics.

The market finally experiences a drop in congestions and spot rates, but is it really a moment to lay down arms? 

Everyone’s hearts must have skipped a beat when the notorious congestion in China has finally shown a sign of…relief? Indeed, the latest data has demonstrated a decline of 47% in just two-and-a-half weeks. What does it mean for the market? Are we in to screw the recent forecasts about postponed recovery or is it a mere exception? Rates have reacted almost immediately, dropping to $13,025 per 40’ FEU on Asia-US direction, however, it does not concern all indexes reporting the updates. With the confusion of surcharges and fees, the situation remains foggy – some shippers are currently able to ship without paying guarantee surcharges, while others are not. Having taken into account such factors as the time needed to solve backlogs, the rates for containerized freight, and the price for sustainable fuel that the industry is planning to switch to, experts assume that the rates will remain elevated and are less luckily to drop below pre-pandemic levels ever again.  In addition, nobody can control the weather as a massive disruptor. There is already a red alert in the ports around China’s Pearl River Delta where they have been forced to stop operations because of Typhoon Kompasu, so delays continue. 

Paired with inefficient management, port’s bottlenecks can become a real nightmare, and the case with Rotterdam serves as a perfect example. Due to poor yard management, barges with containers on board are being left to stand idle for a week as ECT Rotterdam first approves berthing windows, and then cancels them. Chaotic play board expands as far as India where its largest operator has suspended all containers to and from Iran, Pakistan, and Afghanistan. The radical decision has been announced after Indian officials seized nearly three tons of heroin worth $2.65bn originating from Afghanistan. Meanwhile, Canada is having a rough time too as the on-time arrivals have slumped to 16%. The surging traffic at the port of Vancouver causes major shortages and difficulties to transloading activities. 

Bottlenecks in the air logistics supply chains spark vigorous discussions on the future of the sector. It is clear that in order to move on, the industry has to get used to the “new normal” when the traffic is soaring. This realization should lead directly to the rethinking of the recruiting policy because more manpower is needed ASAP. Among other issues to be solved is better communication of the terminals and the question preighters that has proven to be not that effective.

The unbothered players are still shipping lines as more profits increases are on the way – it has been estimated that if the situation remains the same, the figure will reach a massive high of US$150 billion for 2021. Sustainability should not be understated as one of the drivers of future market changes especially when big companies continue to undertake major steps. MSC is strengthening its partnership with China in collaboration with China Waterborne Transport Research Institute amid to find the best ways for energy transformation for shipping. In addition, the Port of Rotterdam has become the choice of Norwegian clean energy company Horisont Energi and Koole Terminals for the development of an ammonia terminal, so the new technology could reach all clients thanks to Rotterdam’s favorable location. 

Although it is impossible to predict what can possibly disrupt rail next, there are some points that companies may consider and measures they can undertake to eliminate some of them. For instance, to improve the safety measures to minimize the number of accidents. The Sheffield station learns from mistakes. A long assessment has revealed the changes that need to be made to the implementation of processes for identifying high derailment risk locations; the implementation of safety-critical changes to its processes; standards governing fitment of check rails; and track geometry data formats. This will require significant infrastructure changes. Another country that taps into them is Moldova where FM-Moldova Railways agreed on a 23,5 mil. euros loan for rail development, especially in safer locomotives. Rhenus Logistics is also embracing the building momentum of the rail market and launching a landbridge service between South Korea and Europe. In addition, it makes an ambitious 80% acquisition of Belgium-based Wijnands Bulk Care to increase its range of services in the Benelux proving that intermodal solutions hold the prospects for the future. 

It is no secret that even such giant e-retailers as Amazon have been experiencing pressure on their supply chains, however it does not prevent the same Amazon from baring its teeth at outside deliveries. So far, it has not been its primary focus, but now the company is seriously considering diving into competitors’ shares and providing much cheaper delivery services. Hopefully, the e-retailer will not bit more than it can swallow. 

The rush of big revenues and high rates are making the heads of shipping lines go right round to the point when they start playing a trick on customers with surcharges, and the market chaos plays in their favor. The latest forecasts predict that they can enjoy this turmoil until 2022, a new deadline until when the awaited recovery might be achieved. The waiting game is already taking too long, so companies start focusing on the present and value immediate steps more than strategies for the long run. Thus, more ports’ are undergoing expansions, the authorities call for round-the-clock operating hours, significant investments in infrastructure are expected, and acquisitions take place not only in Europe and the US, but in the Middle East as well.  However, none of the additional financial expansions will do any good, if the most fundamental problems are not solved. Issues such as drivers’ shortage. The initial plan to wait until the new visa policy is implemented are long forgotten, and companies are going to focus on bringing back the drivers who left the industry for more attractive jobs.  Retailers are acting rapidly too, revolutionizing their delivery policies in accordance with what is really needed on the market – quality and speed. 

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?