The duality of the market
Ocean freight
Trans-Pacific spot rates are reaching a critical level, indicating a significant increase in shipping costs. As the second half of 2023 approaches, there is a possibility of a price war emerging among ocean carriers as they compete to increase their market share in the current economic downturn. However, carriers are observing stable rate levels on most Indian trades, indicating consistent pricing. The Indian market continues showing resilience despite global supply chain challenges and disruptions. Nevertheless, West India-Genoa cargo contract rates for a 20-foot box have moved up to $725, from $700 at the end of May, while for an FEU, rates have dropped to $700, from $800/FEU a month ago.
Overall, the profitability of carriers is severely impacted by the downward spiral of freight rates. Some experts think that companies may need to consider consolidation, capacity adjustments, or other measures to navigate difficult market conditions. For now, carriers have been resorting to aggressive pricing strategies and discounts to attract cargo and maintain market share but this approach is not sustainable in the long-run. Consequently, the charter market is experiencing a decline as carriers opt to off-hire or return ships instead of renewing charter contracts.
The pressure to lower rates is further intensified by the excessive number of new vessels entering the market. Recently an additional 624,000 container newbuild slots have been booked as shipowners and operators are strategically planning for future capacity requirements. It is also reported that MSC is soon to further increase its owned container capacity.
All these new bookings are expected to support the efficient movement of goods and contribute to overall industry resilience. In fact, data shows that schedule reliability has reached its highest level in several years. However, it is attributed to factors such as improved vessel performance and better operational practices rather than the expanded capacity. Digitalization and advanced technologies also play a significant role in achieving higher schedule reliability by enabling better data sharing and real-time tracking. Consequently, shipping lines are reducing the number of blank sailings as they strive to meet growing customer demands and optimize vessel utilization.
Ports
- The Canadian strike that started on July 1 is luckily to affect multiple ports across the country, including Vancouver, Montreal, and Halifax. The strike involves approximately 6,000 workers who are members of the International Longshore and Warehouse Union (ILWU) Canada. Efforts to resolve the labor dispute and avoid the strike are ongoing, but a resolution has not yet been reached.
- A new bill has been introduced to limit the power of unions in response to the recent strikes on the US West Coast. The bill proposes changes to existing labor laws to provide more flexibility in hiring and to discourage strikes. Supporters of the bill argue that excessive union power has contributed to prolonged and costly disruptions. Proponents believe that curbing union influence will enhance the competitiveness and reliability of US ports. However, critics argue that the bill undermines workers' rights and could lead to unfair labor practices.
Rail
- Union Pacific, Norfolk Southern, and CSX are joining forces to establish a new intermodal freight corridor in the US. It will link Mexico, Texas and the US south east as near-shoring drives capacity demand. The project is expected to bring numerous benefits, including reduced congestion, lower emissions, and increased capacity for freight movement.
- From July 1, CMA CGM reviewed peak season surcharges for shipments from the Indian Subcontinent to the US East Coast. The updated surcharge is $150 per 20' dry container and $300 per 40' and 45' dry box.
- Train traffic on the China-Kazakhstan border has seen a significant increase of 14.6% during this year proving the importance of the Belt and Road initiative. The trend of increasing train traffic is likely to continue as both countries seek to strengthen their economic ties and expand trade opportunities.
- Kazakhstan, Azerbaijan, and Georgia have agreed to establish a joint logistics company for transportation on the Trans-Caspian International Transport Route (TITR). It is a part of the New Silk Road initiative. The joint logistics company will focus on streamlining freight transportation processes, including customs procedures, documentation, and infrastructure development.
- Germany is facing the possibility of rail strikes in the autumn, following the disputes between Deutsche Bahn and the trade union GDL. The exact timing and duration of the strikes have not been confirmed. The GDL has expressed its dissatisfaction with the progress of negotiations.
Rotes, rates & services
- CMA CGM has expanded its multimodal capabilities by integrating Containerships that specializes in short-sea shipping and logistics in Europe and the Mediterranean region. The move aligns with CMA CGM's strategy to strengthen its presence in the intra-European market and diversify its offerings.
- CMA CGM has modified its BSMAR (Black Sea Medline) service route. The new rotation is: Constanta – Ambarli – Aliaga – Malta – Valencia – Algeciras – Casablanca – Tanger Med – Malta – Piraeus – Gebze – Constanta
- CMA CGM has rescheduled its Turkey Med Express 1.2 service (TMX1.2) with the new rotation: Izmit – Gebze – Gemlik – Aliaga – Valencia – Barcelona – Marseille – Djen Djen – Annaba – Izmit.
- CMA CGM has revealed plans to overhaul its Euronaf service, which serves West Mediterranean, the Tanger hub, and Algerian ports. The company aims to achieve this by consolidating four loops into two, resulting in a more efficient and streamlined service.
These are only several changes that occurred in more than 250 bn freight rates across 25 million routes with more than 1 million market players. Want to share some news about your company, services, and routes? Just post them on MAXMODAL, a multimodal network that digitally connects routes and rates worldwide to automate sales and operations across container transportation & logistics industry. Join to innovate.
Berry, where is your face or logo?
New Silk Road trains crossing the China-Kazakhstan border have increased by 14.6 per cent till May this year, with an overall volume of 5.903 trains. Alashankou terminal contributed to the volume with 2.714 trains whereas traffic via Khorgos terminal amounted to 3.189 with a year-on-year growth of 10.4 per cent and 18.4 per cent, respectively. This was revealed by China Railway, the national railway company of China.
When talking about New Silk Road trains, the China-Kazakhstan border in Xinjiang plays a significant role as the majority of the volume transported between Europe and China is reloaded here. Khorgos terminal ranked first as the busiest cross-border terminalin the country. It processed over 7.000 China Europe Express trains in 2022.
Alashankou, which used to be the busiest border crossing, is currently undergoing renovation for capacity expansion and therefore handled less trains. Currently, the Alashankou terminal has the capacity of handling 17 trains per day, 21 at its best scenario, with an estimated capacity of digesting 200.000 TEU per year. This resulted in cargo being redirected to the Khorgos border crossing this year, specifically cargo between China and Central Asian countries (except for Kazakhstan).
Expanding rail
There is an ongoing decline in freight rates and the possibility of a "liner bear market" in the shipping industry. Several factors are exacerbating the situation, including slow demand recovery, rising fuel costs, increased operational expenses, and oversupply of vessels. The latter is attributed to the influx of new container ships entering the market. In the current context, the container lines' profitability is expected to suffer in the coming months due to the inability to pass on increased costs to customers. Yet, some carriers are resorting to aggressive pricing strategies, including below-cost rates, to attract customers and gain a competitive edge. The industry's recovery is highly dependent on resolving supply chain bottlenecks and improving global trade conditions.
The shortsea market is experiencing turbulence. Weak demand, influenced by economic uncertainties and reduced trade activity, is negatively impacting its profitability. Shortsea shipping companies are exploring strategies like network consolidation, digitalization, and eco-friendly initiatives to improve efficiency and reduce costs.
Automobile
- The International Road Transport Union has introduced a new plan to address the truck driver shortage. One approach to addressing the issue and ensuring the smooth operation of essential road transport services involves implementing uncomplicated strategies to manage the global supply and demand of labor. This includes facilitating legal immigration processes and taking measures to prevent the mistreatment of non-resident drivers. However, the plan misses the underlying issues causing the driver shortage such as low wages, long working hours, and challenging working conditions.
Ports
- The deal between COSCO Shipping Ports and Hamburg's Container Terminal Tollerort (CTT) has been finalized. COSCO has acquired a minority shareholding in CTT (24.99%), strengthening its presence in the port of Hamburg.
Routes, rates & services
- Southeast Asia and China are working to enhance rail connections for the transportation of fruits. The first train left from Bac Giang in Vietnam and arrived in the border city of Pingxiang in China. Future connections will enable faster and more reliable transportation, making Southeast Asian fruit exports more competitive in the Chinese market.
- Kazakhstan's national railway company, Kazakhstan Temir Zholy (KTZ), has imposed a ban on the import of jet fuel by rail from Russia. The ban comes as a result of concerns over the quality and safety of the imported jet fuel. The ban will impact the supply of jet fuel to airports in Kazakhstan, potentially leading to disruptions in air travel and affecting airlines operating in the country.
- A new distribution center for the Yixinou China-Europe freight train has opened in Duisburg, Germany. The Yixinou train is part of the China-Europe rail network, which aims to facilitate trade and connectivity between China and Europe.
- Pacific International Lines has introduced a new service called the Korea-China Straits (KCS) service. The rotation will be Pusan – Kwangyang – Shanghai – Shekou – Singapore – Port Kelang (Westport) – Penang – Singapore – Ho Chi Minh (Cat Lai) – Nansha – Pusan.
- Rhenus Logistics and Kazakhstan Temir Zholy have formed a partnership to enhance the Middle Corridor. The collaboration seeks to attract more businesses and freight volumes enhancing the routes’ competitiveness. The Middle Corridor offers advantages such as shorter transit times, reduced costs, and lower carbon emissions compared to other routes.
- Regional Container Lines is expanding its focus beyond Asia in order to generate additional revenue and overcome increasing competition. The company aims to capitalize on emerging markets and trade opportunities in regions such as Africa and South America. RCL is also targeting more reefer business and fleet renewal.
- Barge operators along the Rhine River have implemented surcharges due to a rapid decline in water levels. The low water levels on the Rhine River have caused difficulties for barge transportation, impacting cargo movements. The surcharges aim to compensate for the lower cargo capacity and maintain profitability for barge operators.
- Orient Overseas Container Line has expanded its services on the China-Indonesia route. CIS2 directly connects multiple ports in China with Indonesia and the Philippines to cater to the increasing demand in the market.
- Samskip is expanding its operations in Central and Eastern Europe. Its services will connect key locations in the region, including countries such as Poland, the Czech Republic, Slovakia, Hungary, and Romania.
Other
- Despite a labor agreement, certain ships bound for the West Coast are still facing delays. The delays are attributed to various factors, including congestion at ports and ongoing supply chain disruptions.
- The dissolution of the 2M Alliance will bring significant changes to container trades. On the Far East-Europe trade, it seems unlikely that Maersk will be able to maintain equivalent port coverage as a standalone operator. In terms of transpacific trade, the situation is slightly different, primarily due to the Jones Act and the geographical layout of North American ports. These factors make transshipment a less feasible option for ensuring extensive port coverage. In reality, Maersk and MSC have already begun to separate their networks in this trade.
These are only several changes that occurred in more than 250 bn freight rates across 25 million routes with more than 1 million market players. Want to share some news about your company, services, and routes? Just post them on MAXMODAL, a multimodal network that digitally connects routes and rates worldwide to automate sales and operations across container transportation & logistics industry. Join to innovate.
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