A mere luck or calculated negotiations? Why do some pay astronomical rates while others manage to get a better deal?
Although it may seem that there is no limit for shippers to pay for container onboard sailings, practice shows that for some it is still possible to agree on a decent price and adjust the contracts. Based on this dynamic, there will be a competitive advantage where some importers will gain market share at the expense of others, using the fact that customers chose them for relatively lower rates as means to build customer loyalty. However, there is the other side of it — a doubling of D&D charges has resulted in complaints across the US, Europe and Asia. Shippers claim that indeed, they have been charged thousands of dollars, without really knowing why. Experts see solutions in IoT devices.
The challenging context urges the companies to unite. Carrier alliances have been told they should enter talks with the operators of Port of New York & New Jersey to ease the return of empty containers. The call encourages each of the alliances to participate on the Council on Port Performance to address the tremendous strain on the supply chain and come up with possible solutions. Meanwhile, US west coast ports are looking to cultivate partnerships with inland facilities, which they hope will relieve their congested docks. The port of Long Beach has signed a four-year partnership agreement with the Utah Inland Port Authority that involves joint efforts to improve cargo flows between them. In general, ports in the United States including JAXPORT and New York-New Jersey continue to see eye-watering growth of container throughput. The trend of increasing amount of cargo transported globally by sea has driven a swathe of ports and carriers to commit to significant investment in expansion. The Port of New Orleans has issued a Request for Proposals for the development of the Louisiana International Terminal, a new facility capable of handling 2 million TEU annually. Right on time with Hutchison Port Holdings Trust and Shenzhen Yantian Port Group reviving a decade-old plan to build a new deepwater container port in the Shenzhen-Yantian area, which is targeted to have an annual capacity of 3 million TEU.
In turn, others believe that the more diverse, the more agile is a new way of addressing the crisis. CMA CGM has improved its inland logistics by acquiring Continental Rail, one of the leading rail operators in Spain. With this purchase, the company clearly does not hide the intentions to become a multimodal operator following the examples of Maersk and COSCO.
With the ongoing air cargo capacity crunch, the companies are bracing up for the approaching peak season. In particular, Cathay Pacific is converting more of its passenger aircraft into preighters. The company is ready to offer around 30% of its normal capacity by Q4, which still leaves a shortfall in vital belly space against anticipated demand.
The Port of Baltimore will start a new Asian container service through Southeast Asia/Vietnam and China with the launch of a new Maersk line. The service will include a string of up to 13 ships with carrying capacities of 4,500+ TEU. It will begin in July with the first ships arriving in Baltimore in late August.
A 737 freighter, operated by Hawaiian interisland air cargo carrier Transair, has crashed off Honolulu. Both pilots survived after it went down into the sea shortly after take-off, on a flight to Maui.
Despite the hardships, the rail industry is pacing up for further growth. Connecting the dots among the hubs, the companies facilitate collaboration.
Tables have turned — hauliers are claiming they are being pressured into unfavorable conditions by carriers and ports due to the lack of any other alternatives. They state that shipping lines are now big conglomerates, which have removed the negotiating position entirely, understanding their superior position in the current context. At least the complaints regarding delays have brought some results, with several hauliers telling wait times were slowly but gradually declining.
DP World is on the roll of transforming into a multimodal operator of the industry by acquiring a new supply chain solutions provider aiming to add compelling value to cargo owners across a wider market.
Whatever ocean freight development is planned, now it is becoming even more difficult to facilitate since the pandemic is migrating to other regions with the spread of the new Delta variant. Bangladesh will begin it’s shutdown, however, the activities at the seaports will remain open. Despite this, there are still concerns since the sanitary measures are strict and challenging to follow — currently vessels are facing berthing delays and further ones at transhipment ports.
The pressure is adding up, hence, recalling the famous song, it is the high time to sing...Rail must go on! A first test train from Railport Brabant in Tilburg travelled to the rail terminal Rzepin in Poland. It is the first phase of a broader project for a joint corridor between Rotterdam and Poland with a sustainable incline. TX Logistic upgrades its intermodal service between Kaldenkirchen in Germany and Malmö in Sweden. The company can run its intermodal trains again through Denmark and the Great Belt Bridge thanks to the Danish authorities lifting the ban on pocket wagons on semi-trailers. Another three departures will upgrade the rail freight shuttle between the Botlek terminal in the port of Rotterdam and the Italian Melzo. The latter is strategically important with many connections linked to Central and Southern Italy.
Although in nature there is no bad weather, when it comes to transportations this statement can be easily contradicted. Heavy rainfall and flooding in southern Germany are causing problems with rail freight transport. The disturbance occurred after a motorway bridge had collapsed. Consequently, freight trains stopped on the tracks in some routes, while others could not move from their departure terminals.
Another scourge of our times, the EU sanctions imposed on Belarus, have caused the Lithuanian Railways approximately a 24 million yearly revenue loss. It concerns the railway activities of LTG Cargo and LTG Infra that will see a reduction of 20 per cent in the transport of Belarusian fertilisers. Although sanctions will not be felt directly as they will apply to new contracts and not existing ones, if new Belarusian cargo stops running on Lithuanian infrastructure, the revenue losses will mainly impact infrastructure maintenance and development projects.
The Port Authority of Valencia sees rail as basic and fundamental because for years it has been building a port of reference in the Mediterranean based on intermodality. Hence, it will invest $ 284.7 million in railway upgrades to improve the flow of trade at Valenciaport and the Port of Sagunto.
Swissterminal celebrates the start of operations in France as it takes over the operation of three inland ports in the Alsace region that will be run through Alsaceterminal SAS, a wholly owned subsidiary.
Up in the sky: rates and air freight development.
As rates and volumes rise, the air market expects a relatively healthy peak season thanks to both e-commerce and stock replenishment driving demand especially in such key tradelanes like the US. In the light of the positive forecasts, Malaysia’s Airasia has made a bold step into the market with the purchase of its first 737-800F. In fact, air freight is becoming a saving grace in the aftermath of ports’ congestion — some ocean freight shipments are already “converting” to air due to the on-going logistics difficulties. The Port Authority of New York and New Jersey has signed a long-term ground lease agreement with Aeroterm for the development of a $145 million cargo facility at New York's JFK International Airport.
Will the ones who did not get on their vessels use the drones? Pun intended. Hellmann Worldwide Logistics is looking to launch a pioneering new transport service with unmanned aerial vehicles developer Dronamics to work together to develop the initial routes that they will be piloting for customers.
Trains are still among the traditional alternatives. Hupac is setting up a new cross-border liquid cargo service between Europe and China. The rail freight line is specifically designed for the chemical industry in Europe and runs to Lanzhou via Belarus-Russia-Kazakhstan.
Chinese government reports to have addressed the problem of tight container shipping capacity by boosting the availability of empty boxes and vigorously raising production of new units. However, the schedule reliability across the world has been disrupted throughout the year, which pushes the companies to adjust even more stoutly, as experts do not foresee a lot of improvement soon. Hence, Maersk will launch two new weekly services on the transpacific in August to operate outside its 2M alliance amid to coincide with the incoming peak surge.
Among the steps required to encourage return to normality, Yantian’s Port Authority is going to increase the number of laden containers allowed to enter the port by truck to 9,000 per day to speed up the box recovery. However, the visible results may take up to one month to appear. On the bright side it has been noted that carriers’ quick reaction to the Yantian crisis (by introducing hundreds of vessel omissions) has managed to prevent the fallout from bursting into a broader logistics chaos.
Meanwhile, average D&D fees at the world’s top 20 container ports have gone up 104% compared to a year ago, facing average fees of $2,638 two weeks after discharge, compared with just $132 at Busan.
Due to the spread of the Delta variant, multiple Asian countries that produce U.S. containerized imports are seeing high infection rates that will push more challenges for container supply chain. In China, restrictions at the Port of Yantian in the first three weeks of June will reverberate across U.S. import supply chains for at least another month as well.
Government aid seems to be an inevitable step. The Port of Savannah got a boost from the federal government, nearly $47 million federal grant to build an inland container port near. The inland port will be linked to the Port of Savannah by a direct intermodal freight rail service to divert truck traffic to and from the port. Florida’s JAXPORT boasts record container volumes. Total container movements rose by 37% year-over-yearto more than 128,900 TEUs.
The container shipping industry has come under increasing pressure in recent months, thus Seaspan Corporation has signed up for six 15,000 TEU modern newbuild container ships, in addition to recent orders and agreements with carriers.
Challenging times bring some down but lift others. Who is aiming to replace the glory of the Suez?
In the light of the Suez incident, Turkey is taking active steps aiming to become a global logistics power thanks to the launch of a new $15 billion project “Kanal Istanbul” that will relieve shipping pressure on the Bosphorus Strait. It is a needed development especially since the traffic is expected to increase to 78,000 vessels from the current 43,000 ones passing through the Bosphorus every year. India follows the example — its participation in advances of the International North-South Transport Corridor connecting it with Iran, Azerbaijan and Russia allows it to skip the Suez Canal on the way to Europe. Overall, the country is eager to explore and develop the region of Central Asia.
The madness with India’s ocean freight rates spurs on the waiting period to secure bookings that has again increased drastically. All majors liners have limited space, so whatever space is left they are trying to sell for premium. Many lines have intentionally kept higher rates on various routes to avoid new bookings. However, the problems are not solely about India. CMA CGM plans to stop calling at the French port of Le Havre for three months, citing congestion due to the lack of productivity. It is not expected to improve during summer.
The current context may be challenging for some, while for others it is an opportunity for another breakthrough. MSC, chasing its asset expansion, is acquiring additional five boxships following the recently purchased 60 vessels. In turn, Hapag-Lloyd is not planning to give up its positions either. It has ordered six ultra-large container vessels of 23,500 TEU capacity each, building on a previous order it made at the end of 2020.
However, the key possibilities for building momentum are for rail freight. Hupac is setting up a new cross-border liquid cargo service between Europe and China for the chemical industry in Europe. The aim is to make it a regular service with attractive transit times because the main route on the New Silk Road currently takes too long.
Green is the trend color of this summer. It has been decided that airlines must start measuring and informing customers of emissions for each aircraft on each tradelane. Transparency is one of the main pillars of a sustainable future, and it has to be addressed in all sectors. IKEA and Maersk seem to be sharing this idea by announcing that they will cut greenhouse gas emissions from the long-haul transport operations by shifting hinterland traffic at the Port of Barcelona from truck to rail using Maersk's solutions. In general, Maersk turns out to be everyone's go-to-choice and takes the lead even in the green development. It is signing a fully carbon-neutral transport agreement on ocean services with fashion company Bestseller.
To boost the activity of the port, the Port Authority of Valencia with Spain’s Ministry of Transport has formalised contracts for a $3.93 million of work to begin on the Logistics Activities Zone to improve the flow of trade. The UK is moving forward as well. The iPort Rail terminal in the South Yorkshire town of Doncaster has been granted Authorised Economic Operator status. It can now support goods moving in both directions through the Channel Tunnel. It is the first Strategic Rail Freight Interchange in the UK to achieve the designation. The positive improvement also concerns freight traffic through the Channel Tunnel between the UK and France. It is now recovering and reporting a 25% increase in operations. Moreover, the UK‘s Maritime Transport has announced a new rail freight service, which connects DP World London Gateway to Maritime’s intermodal freight terminal in Tamworth aimid to deliver a direct link to consumer and manufacturing regions in the West Midlands and south of England.
Is the post-pandemic world a new dawn for China? It is a tricky game of aiming to be first in the race. At least, Amazon can tell.
Among the candidates for the fastest recovery, China was probably the last one with continuous congestion, COVID-19 outbreak and the following lockdown. However, the forecasts about the virus crippling the country’s economy did not live up. Chinese exports are now much higher than they were before the pandemic, ships are full, and the county is experiencing the broadest economic upside. The ships at anchor waiting at California ports highlight the demand for Chinese goods as well, and despite all the talk of supply chain diversification, American sourcing remains China-centric.
In the light of the over-the-moon rates and disrupted supply chains worldwide, the most obvious solution would appear to be for the shipping lines to lay on more services and get things back to something manageable for importers. However, the lines are signing fewer long-term contracts and pushing customers, large and small, towards the erratic and extortionate spot market. The latter simply risk running out of cash.
Additionally, the reality is pushing shippers to pay 332% more per box than they were this time last year, according to the latest data. At the same time, yet they’re having to put up with the worst schedule reliability in the history of containerisation. Having taken this matter into account, some companies launched an initiative to provide full transparency on its schedule reliability for the sake of maintaining customer loyalty.
Major shifts in online retail might be witnessed in the near future as Amazon’s logistics arm, built around its Fulfilment By Amazon product, is in danger of being cut off from its online marketplace. If the US government paves the way into this initiative, Amazon will have to take onboard third-party business which can possibly lead to an increase in prices.
Meanwhile, e-commerce is on the rise for such companies as FedEx. It will invest in 20 more cargo jets as e-commerce continues to drive global growth of the parcel sector. In particular, it drove a 28% increase year-over-year increase in the company’s returns business.
As for rail, India aims to pace up developments in countries belonging to Central Asia thanks to the International North-South Transport Corridor as an alternative to the traditional routes carried out by sea through the Suez Canal and the Mediterranean, and the Baltic Sea. Can India become a leading rail freight force or will it have to move over?
While the question “to be or not to be?” will always be worthy of asking, another one about reshoring is up again. Experts note that accepting that there is scope for some ocean freight to migrate to air to get round the present logistics difficulties by ship, in most cases the business model of shippers is not able to bear the transport costs.
The stakes are very high for Canada where supply chains have already been under strain from the unprecedented volatility and surge in demand. Thousands of members of the Canada Border Services Agency are in the midst of voting on whether to authorize a strike . However, a shutdown of all ports is not planned.
MSC shows no sign of slowing down its buying spree with new data reporting the acquisition of another five boxships. The company already added around 60 secondhand vessels over the last 10 months, and now they have bought more Borealis Maritime’s 2,474 TEU.
Following an engine room fire that MSC Messina suffered, it has been reported that one of the 28 crew member team is missing. They flooded CO2 to control the fire, but once it was gained, the smoke was still coming out.
No time for rest — the spot rates are expected to grow as more obstacles come in sight. The UK’s importers are up for a challenge with the new context of post-Brexit reality.
The short-term freight rates are on the continuous rise this time breaching the $20,000 per 40ft mark from China to Northern Europe. Although these massively elevated rates include a premium fee guaranteeing equipment and space, shippers report that their cargo is still getting rolled. The situation is expected to get worse with the upcoming peak season. Similarly, rates on Shanghai-Rotterdam gained $779 to reach $11,975, a year-on-year change of 626%. Experts predict upwards pressure on essentially all headhaul trades.
The circumstances have also gotten more perplexed due to the Pearl River Delta port congestion that triggered another spike in volumes and rates for China-Europe rail freight. As a result, more delays and equipment shortages have been caused. The problem of the lack of space is becoming alarming since it is going to extend the growth of the rates. Now if shippers have the chance to ship goods, they are taking that chance and putting them in the warehouse already. Hence, strong demand will go on this year and there is probably no relief in the short term. Meanwhile, it has been reported that there are 17 blank sailings on the Europe to US east coast alone in the next 12 weeks.
The UK’s prestige route between London and Edinburgh is full, and rail freight is getting the blame. The government owned LNER had drawn a wave of criticism for its timetable proposals, which blamed the need for freight paths on its recast service. The company itself sees it as a disaster scenario for the North East and foresees the changes as a problem for the community.
The parcel flow from China to Europe will be hit by the end of exemption from duties on imports worth less than €22. From 1 July, parcels imported from non-EU origins will then require customs clearance, payment of VAT and, depending on national thresholds, customs duties. The €22 limit will be scrapped under a wave of protest from EU-based merchants, over a flood of cheap online purchases from China putting them at a competitive disadvantage. With the UK’s six-month moratorium on customs declarations coming to an end, importers are expected to fall into disaster. HMRC’s delay aimed to reduce strain on the system and provide importers sufficient time to adjust to post-Brexit procedures, but now they have too much on their plates to proceed the orders on time. Brokers believe the measure only postponed the inevitable crisis.
The train driver’s union GDL has conducted negotiations with Deutsche Bahn but the result has not been fruitful. Both parties agree to a wage increase, but GDL wants the increase earlier, while DB says it needs a longer term to cope with the financial corona damage. The call for warning strikes has been cancelled, but it does not mean that all issues have been cleared out. Deutsche Bahn has sharply criticised the GDL leadership’s blocking stance in the current collective bargaining round.
Sustainability is on and thriving. As part of the EU-funded Fastwater project which aims to demonstrate the feasibility of methanol as a sustainable marine fuel, Port of Antwerp has announced it is converting a tug boat to methanol propulsion. The European Commission approved the project. This decision will help the Port of Antwerp take another important step in its transition to becoming a sustainable and CO2-neutral port.
