Port’s of Hamburg congestion forces companies to look for the alternatives, but are there any of them left? Container export freight rates have marked the 10th week of consecutive growth
Freight rates for container exports from the Port of Shanghai in Week 23 increased from the previous week on several trade routes, commemorating the 10th consecutive week of growth. Spot rates for moving containers to Europe picked up 7.9% to US$6,355 per TEU, while those to the Mediterranean were carried at US$6,272 per TEU, swelling 5.4%. Carriers lose patience with congested box terminals and dump their cargo at other ports. In addition, they are being asked to pick up the tab for inland on-carriage or relay to destination ports. While Hamburg is being omitted, the struggle for booking slots and surge in demand cause Liverpool’s container port to implode. As the result, real costs are being incurred and more charges are added. They demurrage for vehicles waiting more than 90 minutes at the port, as well as a £100 surcharge for end-of-the-week collections is imposed. For the time being, in the EU, export demand is expected to remain strong across all trade lanes.
The high hopes for rail freight to become one of the means for post-crisis recovery have been in the air for a while now. According to the experts, the China-Europe rail connections could come to the rescue indeed, since Eurasian trains have acquired a more prestigious position and are now a credible alternative to maritime transport in terms of reliability and prices. The new services that enter the market with an intermodal profile are equally important in this sense. The facilitation of rail development has become a primary objective for many companies. The Netherlands is participating in a new study on feasibility of a new train connection from Antwerp to the Ruhr area in Germany. The initiative addresses the issue of the rising industrial demand. Lineas follows suit. The company will connect the North Sea Port and Ghent directly to the Intermodale Milano Segrate terminal in Northern Italy. The new train service will have an intermodal profile and will run with five weekly roundtrips. Industry players believe that another strategically important direction for development in terms of recovery – the Rhine-Alpine corridor – could be improved with the help of additional investments. Instead, the Dutch port of Moerdijk bets on infrastructure and strives to increase the number of weekly trains. Meanwhile, the UK sees itself as the main driver of the rail freight locomotive based on the data that demonstrates the increased efficiency of the local rail network as a sign of market recovery. In turn, Britain’s biggest inland intermodal terminal – DIRFT – is swiftly moving to the largest stage of its development that will boost its capacity up to 32 trains per day.
However, the situation on the roads leaves much to be desired. The continuous, acute shortage of HGV drivers has reached a phase of critical importance on the national level in the UK. Experts claim that there is no quick solution to the problem in the current context and the government needs to take active steps especially after it intervened to change the tax rules and added drivers to the migrant skilled labor. In general, whatever measures authorities implement, they have to design them with respect to efficiency. This common knowledge might not be a common practice – Danish restrictions on road haulage are already affecting transport companies. FREJA Logistics experiences increasing capacity shortages that are very difficult to meet due to the imposed measures that are too bureaucratic and time-consuming to comply with. As the result, Danish hauliers cannot provide satisfactory solutions to the transport demand.
The air sector is still struggling, and yet the first steps towards an upward trajectory are being undertaken. Despite the ease of the lockdowns, rates from India to the UK are high, amounting to $3.2-$3.5/kg, which is an uptick, compared with the EU prices of $3-$3.2/kg, due to the limits on factory production and tight air and sea freight capacity. The latter continues to jeopardize the situation. In unison with other sectors, airfreight calls for government support. Logistics UK, together with the Aberdeen Investment Fund, has issued a call to arms to the UK government that could significantly improve the current state and maintain already achieved accomplishments. Among the objectives proposed by the companies, it has been suggested to expedite negotiations between the EU and UK on traffic rights to open up core markets and ensure the free flow of cargo. It seems like there is no better moment for it since the European market is so eager to move forward. The Italian market, which has long wished for its very own freighter operator following the demise of Cargoitalia, is set to see an all-cargo operator launch shortly. Aliscargo, to be based at Milan Malpensa, is in the final stages of getting its AOC after its first aircraft delivers at the weekend.
The U.S. shippers are getting more frustrated as rates grow further. Is the government able to help? Yantian offers a glimpse of hope that the congestion might resolve in the near future.
The current situation simply does not allow any room for further debates over strategies for improvement, since another week has brought a new increase in freight rates. This is particularly true for the Port of Shanghai on several trade routes. On the route to North America, spot rates climbed 0.9% to US $8,554 per FEU to east coast ports but fell 3.5% to US $4,658 per FEU to those on the west coast. In addition, thanks to the recent data, experts have identified the following pattern – the difference between the low range and high range of rates paid by shippers on the Asia-Europe trade had increased significantly on the spot market, from around $300 per FEU to more than $1,200 per TEU. By now, all caries have applied congestion surcharge on the refrigerated containers. The small shippers have suffered the most in comparison to the large ones. However, there is a glimpse of hope that things will improve – YICT has informed customers that the bottleneck at the port had eased. Current overall operational capacity has returned to 70% of normal levels, and container yard utilization has dropped from 100% to 70%.
The frustration of the U.S. exporters has hit its new milestone. They have accused carriers of billing for detention & demurrage charges even when empty containers have been returned. As a result, this increases costs and time spent battling with shipping line administrators – daily for some – to rectify errors. There are numerous complaints about the lack of export options and the overall state of the American supply chain. In turn, the National Retail Federation (NRF) has called Joe Biden to address port congestion crises. Having announced the creation of a Supply Chain Disruptions Task Force, the government is discussing taking drastic action to force global liners to take all US export container bookings, addressing the aforementioned issue with shippers. The U.S. ports are undergoing incredible pressure. The Port of Los Angeles stated that it had earned the distinction as the first port in the Western Hemisphere to handle more than 1 million TEUs in a single month. It has been reported that it is one of many U.S. ports that is having severe congestion issues because of the veritable tidal wave of imports.
Apart from dealing with multiple delays and skyrocketing rates, some of the companies become targets of cyber-attacks. It has been confirmed that the recent HMM’s incident was an attack indeed. However, most of the claimed damage has been restored and no information or data leakage was found.
In order to ease the tension at least in one of the sectors, the U.S. and the EU agreed to suspend tariffs on $11.5 billion worth of goods for five years. The list of goods includes food, wine and spirits, and machinery, which were embroiled in a dispute over subsidies to Airbus and Boeing. Although the trade blocs have resolved the aircraft dispute, the tariff suspension does not allow spirit importers and exporters to emerge, so the question of the efficiency of this measure is up for debate according to experts.
MSC continues its tremendous growth. The 60 ships bought have a combined capacity of 257,000 TEU and have taken MSC’s fleet recently past the 4m slot mark. Another industry giant, Maersk, has collaborated with ERS/BoxXpress.de to facilitate hydropower renewable energy, placing bets on sustainability. Seaspan Corporation is close to finalizing orders in China for 20 boxships of around 7,000 TEU, with deliveries set to begin in 2023. The Northwest Seaport Alliance has made a milestone by using four ZPMC Super-Post Panamax cranes to the Seattle Harbor. The new Terminal 5 cranes will begin moving cargo at the beginning of 2022.
Evergreen’s epos has been going on for 2.5 months already and yet, there is no light at the end of the tunnel in terms of an agreement between the sides. The SCA has reduced its claim from $916m to $550m, but firmly rejected an offer from the Japanese owner of the ship of $150m to free the vessel. It is going to be a long way for both parties to resolve the issue. However, the losses do not wait. The longer this saga continues, the greater will be the damage arising out of the incident. Experts urge the parties to consider all the options available including the release of the vessel from arrest especially now when containership capacity in such short supply and demand is remaining high.
Is too soon to place bets on rail as an industry savior? Perhaps, it is time to makes a leap of faith
The crisis has brought to light several pain points that no longer can be ignored – for years, shippers strived to make their supply chains as ‘efficient’ as possible – where efficiency was all about lower cost, lower inventory, just-in-time, faster lead times, etc., but in the process removing resiliency. Logistics coordinators also note that JIT in the supply chain suits the balance sheet only until there is a problem – then production stops and companies wonder why they made themselves such easy targets and there is no buffer transit time. The solution is viewed in approving smaller shipment lots, reducing factory stuffing FCLs, and improving LCL consolidation. The industry has to be reactive because although Yantian’s congestion is slightly getting better (the port's productivity has moved towards 45% of normal levels); the ripple effects of it are long-lasting. North Europe port of Hamburg has been under intense pressure in the past few weeks and recently, Hapag-Lloyd advised customers of a tightening of restrictions for export cargo deliveries at Antwerp. An advisory from the carrier said terminal operator PSA Antwerp had been forced to implement a seven-day cargo opening rule for export containers to its terminals.
The twin impacts of Brexit and the pandemic have harmed UK ports throughput in the first quarter of 2021. Recent data shows that total freight tonnage fell 9% year on year between January and March to 103.9m tonnes. Total imports were down 8% to 67.2m tonnes and exports down 11% to 36.6m tonnes. It is challenging to estimate which factor contributed the most to the damage, but what is certain is that traffic remains low and the driver shortages have reached their peak. The latter is in such a critical condition, that it was proposed to use army trucks to ensure enough vehicles and drivers to distribute food. However, an RHA spokesperson questioned the validity of using the military since it would need additional training and the crisis expects quick solutions. The current contexts pushed Logistics UK to call for an end to a post-Brexit rule banning lorries from parking in laybys for more than 45 minutes across several areas of the key southeast England county of Kent. The company considers this measure redundant.
There is significant international optimism that rail freight will play a huge part in the worldwide economic recovery over the next five years. What are the signs? The sector’s economic contribution has been valued at almost $ 250 billion and is predicted to grow annually by 20% in the next five years. Apart from playing a role in globalization, rail freight can increase economic integration in some regions of Eastern Europe characterized by groupings of many small countries by providing access to international and regional markets. The recent findings on the current state of rail freight are based on the data received from French national operator SNCF and DB Cargo and Genesee and Wyoming, the parent company of Freightliner in the UK. Great Britain in particular can become a forwarder on the way to decarburization. At least it was the message to G7 leaders from the Railway Industry Association. It believes that by acting strongly and decisively in 2021, rail will not only help the UK to achieve its green transport ambitions, but it will also give more weight to the Government’s call for other countries to follow suit when it comes to decarbonizing their transport networks around the world.
Unusual changes require unusual solutions, and the current situation is certainly out of the ordinary; therefore, the Russian military’s fifth railroad brigade reconstructed a 340-kilometer long rail track that is a part of the railway line connecting Siberia with the Far East part of the country. Experts are also watching over the proposed initiative (it has not been confirmed) to use prison convicts as workers to resolve the issue of labor shortages.
Ironically, the rail freight industry has been advocating for a shift to rail for many years, but now due to the high demand, its capacity on the westbound train is limited. However, there might be some tips that would allow booking on the train between China and Europe. According to industry experts, firstly, if you have considerable eastbound volumes, you are more likely to get space on the train going west. Secondly, e-commerce is prioritized over general cargo. Thirdly, companies like T.H.I. appreciate those customers that book space on the train all year round and advise doing it in advance.
Trying to come up with alternative solutions, Lamborghini and Rail Cargo Group have set up a new logistics concept. The luxury car giant will transport the Lamborghini Urus models by rail between their production site in Zwickau, Germany, and its parent plant in Sant’Agata Bolognese, Italy. The service will primarily use rail, with trucks involved only in the last 21 kilometers of the route between the Modena terminal and Sant’Agata.
Meanwhile, other initiatives push rail freight forward. Serbia and Montenegro have agreed to transport large amounts of copper through the port of Bar, with rail playing a leading role. The copper originates from the Serbian city of Bor and will be loaded on the train to the Montenegrin port. Intermodal operator Loconi has launched a new container train service connecting the Port of Koper and the Baltic Container Terminal (BCT) in Gdynia, Poland.
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Uncertain times bring unexpected players. Will the strongest or the wisest succeed?
Making lemons out of the current situation is becoming more and more difficult with the growing rates and weeks of congestions. However, some of the players do intend to capitalize and seek opportunities to launch new services. Rapidly expanding CU Lines will introduce a service from China to the US west coast next month using 2,500 TEU-sized ships. Meanwhile, BAL Container Line will launch a service linking China to California in two weeks. The CPX service will use four 2,400 TEU ships calling Qingdao, Ningbo, and Los Angeles. In turn, Thailand is getting back to the initiative to create a national flagship carrier. The Port Authority of Thailand (PAT) will conduct a feasibility study into the establishment of a national shipping line. Meanwhile, Samudera Shipping Line has joined a growing list of carriers that are expanding their services to Vietnam. The feeder operator started the Central Vietnam Service (CVS) to connect Singapore with Da Nang and Qui Nhon in Central Vietnam. The company will deploy the 1,060 TEU vessel, which has a 10-day turnaround. Vietnam continues to generate more containerized exports leading a number of carriers to expand their Southeast Asian connections.
The overall situation in the market continues to perplex the companies worldwide – rates are growing so fast that the indexes can no longer capture the true cost of ocean shipping. The index for Asia-East Coast surged by around 20% in just the past few days. The recent assessment for the Shanghai-New York route registered $8,251 per FEU, up 9% week on week (w/w) and 203% y/y. Asia-West Coast spot rate is at a record-high $6,341 per FEU, up 194% y/y. The weekly Shanghai-Los Angeles index is at $6,313 per FEU, up 6% w/w and 199% y/y. Rates for U.S. exports out of the West Coast to Asia have also jumped, albeit off a far lower base. The price of $20,000 per FEU all-in rates from China to Europe is no longer viewed as unreachable. Experts back this forecast. However, despite the obstacles, the aforementioned players seeking expansion, are not the only ones gaining profit in the current context. According to the data, some global carriers recorded a combined $16.2bn in operating profits in the first quarter this year, with 7 of the 10 carriers recording EBIT of over $1bn in the three months. Cosco reported the highest Q1 EBIT of $2.87bn, followed by Maersk on $2.7bn, and CMA CGM with an EBIT of $2.46bn. South Korea’s HMM recorded the highest EBIT per TEU of $970.8 per TEU, which means that HMM had an operating profit of nearly $1,000 for every TEU shipped.
Realizing the damaging effect of Yantian congestion, China seeks the alternative exit in the development of its southwestern hub port, not letting go off any of its strategic directions. Beijing has announced the Hainan Free Trade Port Law the premise of which is to advance a globally influential free trade port in Hainan province to strengthen overseas logistics links. Authorities are also exploring the improvement of transport infrastructure to reduce the time taken to move goods across the Hainan Strait. New cross-sea channels and unmanned aerial vehicle cargo logistics will be explored.
Apart from Yantian, the world has kept its close look over the congestion of the U.S. port of Oakland. According to the port authority, the two main reasons for the challenging situation have been a shortage of labor and the temporary loss of one of its four berths, which had been occupied with the arrival of three new post-Panamax cranes, the tallest currently deployed on the west coast. The recent suspension of two more container lines followed the footsteps of Zim, which was forced to divert the inaugural sailing of its Central China E-Commerce Express to Los Angeles. Taking into account that Oakland was performing extremely well (nn April, it handled 100,096 TEU of import cargo, the first time it broke through the 100,000-box barrier in its history), it was viewed as an alternative to Zim that had not lived up to the expectations. No matter the challenges, the U.S. has a great potential for further development of its trade connections with Mexico. For the second month in a row, Mexico was the main trading partner of the U.S., followed by Canada in second place and China in third. While the China factor is complicated, the country may tap into a more profitable partnership, especially in the context of the current crisis.
As retailers continue to struggle with pressure on supply chains, some decide to take the reign. Home Depot has chartered in a boxshipto move its own goods. It starts from next months and is going to be 100% dedicated to the company. Another example of this extraordinary phenomenon is the Chinese e-commerce giant JD.com. It will deliver products to the US within 48 hours following the launch of its own transpacific air cargo service. The retailer is planning to take control of its logistics chains by connecting supply from warehouses in Shanghai and Shenzhen.
The X-Pearl case has taken a new turn. Sri Lankan authorities said over the weekend they would seek $40m in damages from the ship’s operator. In addition, they will demand reimbursement of the cost of putting out the fire after the assessment of the damage.
Rates break through the roof. Does it mean that the sky is no longer a limit?
The need for governmental support for the green initiatives in the light of pandemic recovery has been confirmed by the European member states. Collectively, they will allocate at least 85 billion euros to sustainably transport as part of the National Recovery and Resilience Plans. The spectrum of objectives varies from the development of digital railway infrastructure and charging stations for electric cars to seamless urban mobility. Rail, in particular, may benefit from 50 billion euros that are planned in the budget for the enhancement of clean energy including hydrogen. Business follows suit and uses the opportunity since the Government has set the rail industry a stretching target to achieve net-zero carbon emissions by 2050. DB Cargo UK and Maritime Intermodal have announced they conducted trials of 100% renewable Hydro-Treated Vegetable Oil (HVO) on their rail freight services from the Port of Felixstowe to the East Midlands Gateway freight terminal. In turn, operatives at PSA Antwerp will conduct studies into dual fuel (hydrogen/diesel) straddle carriers.
The clouds are thickening above Yantian. The congestion’s aftereffects are spreading like circles on the water and top the effect of those of the Suez – 300 vessels are now waiting due to disruptions at various ports which accounts for 5.5% of all vessels. From Shekou to Seattle, Amsterdam to Auckland, containerships are backing up like never before in the 65-year history of the industry. Due to further measures being implemented, increased congestion and vessel delays upwards of 16 days are expected in Yantian port. Comparing to the past, there would be plenty of buffer in the system to handle most of these disruptions, but with the networks stretched thin, every additional disruption is adding to the backlog now. Carriers, faced with increasing congestion, low productivity, and a mounting backlog of exports in southern China have been forced to omit port calls. Ocean Network Express had to add a $1,000 surcharge on reefer cargo to Yantian to cover additional costs related to the unexpected but necessary arrangement of shipments and associated plug-in charges. The situation boosts spot rates even more edging towards $20,000 per 40ft. It is an incredible 1,000% increase for the trade. Consequently, many retailers will not be able to shift stock at skyrocketed retail prices. Experts warn that many UK importers will find themselves trapped, paying eight times more for freight than last year, and expect insolvencies in 2022. Globally, numerous shipment suspensions have been announced in several regions across the world: to Cabinda in Angola; Hapag-Lloyd has confirmed it temporarily suspends all imports into East Malaysia ports (Kuching, Sibu, Bintulu, Kota Kinabalu, Labuan, Sandakan, Tawau – all due to blockages.
Unusual situations require extraordinary solutions. Hence, CMA CGM has signed a five-year partnership agreement with the French government space agency, to develop a range of topics including smart ship routing, the maritime energy transition, upgrading of port activities and infrastructures, and contributions of the space sector to the logistics optimization.
Negotiations between the EU and the UK on the Northern Ireland Protocol seem to require a mediator. Washington has expressed deep concerns over the lack of common ground regarding the question whether an agreement should be based on ‘temporary equivalence’ (the UK) or ‘temporary dynamic alignment’ (the EU). There are clear solutions available – both sides tell they are in favor of a veterinarian agreement that would free up the most difficult trade in meat and dairy goods, however, the final decision has not been made yet. Meanwhile, business values its time – Unifeeder aims to strengthen its presence in Northern Europe and launches a new service connecting the Hubport of Southampton to the Irish Sea and the ports of Cork, Belfast, and Dublin.
The rail industry is actively moving forward regardless of the storm at sea. Cargobeamer is opening its first terminal in Calais on 16 June. The terminal will enable the loading of uncranable semi-trailers on the train. Curtici in Romania becomes key for transit to and from Turkey. The service is offered by Rail Cargo Group and is part of the connection between Istanbul and central European destinations like Budapest and Brno. The new terminal started operating a week ago on the Kazakh-Chinese border. The Silk Road getaway is a part of the major project – in the future, the terminal’s final capacity will reach 700 thousand TEUs. However, there is currently a potential disruption looming over the railway horizon. Asia-Europe shippers and freight forwarders using the overland rail routes have been warned of potential obstacles that may arise due to the recent diversion of a passenger plane. Additionally re-routing of a high number of flights to China, Japan, and South Korea that regularly fly over Belarusian airspace will increase flight times and will result in the reduction of cargo capacity.
The ice breaks among hauliers. Despite the shortages and capacity limits, such company as Fergusons Transport expands its partnership with Universal Wolf. Universal Wolf now uses Fergusons trailers and trucks to transport its goods across the country, so far clocking up nearly 50,000 miles across well over 100 jobs in recent months. For both partners, it is a long-lasting strategy to retain their leading positions.
