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.
In the spirit of mutually beneficial cooperation we are glad to support your domestic and international logistics needs [CHN, AM, AZ, UZB, KZ, BY, KG, RU, MD, TJ, UA, TM, EU, USA] via road, air, sea, railway freight transportation services (Containerized, Non-Containerized, Tanker, etc.).
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The big players have already emptied everything they could down to the smallest feeders, and now they are extending charter deals. Do the new rules even leave others a slight chance to survive?
The COVID-caused closure of Ningbo-Zhoushan port is slowly easing up as operations are expected to resume by the end of August. It has been observed that this congestion was the worst in the last seven years at the port. However, despite the improvements, it has triggered an already tight equipment shortage. It is likely that container prices will rise on lower availability in the coming weeks depending on whether the industry sees a further spike in container prices at Ningbo, how much cargo was disrupted at the port, and if there are additional shutdowns later.
Maersk backs the premise that the shutdowns in China and Vietnam will continue to bring chaos in the supply chain and over-the-roof container demand is destined to rise. The increase in the US alone is expected between 2-4% year-on-year for 2H 2021 and reflects in the 18.7% rise in global container trade in 2Q 2021 among major destinations. Did not a similar dynamic occur after Yantian? Back in the day, the lockdown resulted in a 180% spike in the price of containers; all box sizes sourced from Yantian, surged from $5,515 in June, to $15,336 in August.
On a charter market, ocean carriers are on a mission to charter new vessels. Cosco has joined others in trying to turn the heads of shipowners with substantial daily hire offers for 36-month periods. The updates state that this fixing spree follows a wave in June, which saw Cosco fixing and extending six classic panamaxes for periods of 36 months in the low $40,000 a day level. Experts have mixed feelings about the charter market dynamic – big carriers have taken everything off including the smallest feeders, so others are having troubles covering commitments with their clients. It is especially challenging now when owners are asking them to agree to new long-term extended charter deals at vastly inflated hire rates.
On the railway arena, the tension between China and Lithuania continues to draw the attention of the experts. Although China has contradicted the news that it would suspend rail communication with Lithuania because of Lithuania’s cooperation with Taiwan, the New Silk Road is not only a crucial artery but also a diplomatic tool. A tool that works both ways – the potential suspension of railways would cost Lithuania billions of dollars and the blockage of an ideal transit point Western and Northern Europe would cut China off.
A major development of rail connections Afghanistan has been in the talks for quite a while as it could open up Central Asian markets for countries in the southeast of Asia, most notably India, but the situation is about to take a new turn because of the Taliban. It is traditionally friendlier towards Pakistan, a political rival of India, so its further strategy could be the end of the Chabahar port project. India is not the only country noticing this cloud. Iran too is concerned about the future of its rail connections with Afghanistan.
The changes in the UK customs (there will be new safety and security requirements surrounding exports) processes bring concerns among cargo owners and hauliers. Shippers will be required to supply exit summary declarations for further movements, like empties being moved under a transport contract to the EU, and consequently, they do not understand what exactly exit summary declarations are. The government is yet to clarify and adjust the new regulations to the drivers’ crises and other constraints.
Another strike is looming over this time involving HMM's union after the company’s management rejected its demands for a generous salary increment. Both sides are in the process of negotiations because everyone understands that in case of a strike, there will be disruptions that the company simply cannot afford.
Shanghai Pudong International continues to undergo major delays as it mounts the new COVID outbreaks. Since nobody knows how long the pressure will last, some freight forwarders are considering alternative export methods, including a combination of ferry and air service via South Korea, or container shipping and air service via Singapore or Dubai.
The question of sustainable future or at least how realistic it is definitely a subject to collaborate approach. In order to cut carbon emissions at major ports, greater collaboration among stakeholders is essential when it comes to investments. The biggest trend ports will see in the near future is the development of hydrogen supply chains, but there will also be other areas of investment, including waste-heat networks and digital efficiency development. One of the recent examples is the Port of Tallinn that is teaming up with partners to design the hub of the Baltic Sea green infrastructure in Estonia.
Focusing on its growth, Ocean Network Express and Universal Container Services have opened a container storage center at the Port of Hamburg. The facility is not the first product of their collaboration – before it was a similar one at the Port of Rotterdam.
