Back to the West
The downward trend in container shipping rates continues. Overall, rates have dropped by 42% compared to the previous year, with May marking the ninth consecutive month of declining rates. Long-term rates also fell by 27.5% in the last month alone. The drop in rates is attributed to the conclusion of 12-month contracts in the US and the introduction of new agreements reflecting the subdued market conditions. The impact of these lower rates is seen throughout the industry. Liners, including Maersk, have reported a significantly changed business environment with limited growth prospects. Demand for containerized exports from the Far East has decreased, and there is a lack of appetite for imports into the US, which are two key drivers of global trade growth. With the current market state, the US import demand in 2023 is expected to reach a new low.
Nevertheless, despite the persisting challenges, the rent for the warehouses is increasing. The ongoing disruptions in global supply chains have contributed to the tightness of the warehouse market making the rent go up.
Hot topic
Beneficial cargo owners are shifting their traffic back to ports on the US west coast from the east coast. Previously, there was a loss of volumes to ports on the East and Gulf coasts due to concerns about potential lockdowns or congestion. The return of cargo is driven by a growing confidence that significant disruptions will not occur and the pressure to reduce costs. Since the beginning of the year, the west coast ports have processed 40% of US container imports.
However, the disruptions are not at all mitigated. In reality, despite the cargo owners’ hopes, the US west coast is experiencing a wave of strike action due to stalled contract talks between employers and staff. Dockworkers, represented by the International Longshore and Warehouse Union have been engaging in disruptive work actions, severely impacting operations at major ports like Los Angeles, Long Beach, Seattle, and Oakland.
The possibility of another labor strike is looming over Germany as the negotiations with labor union EVG have hit a major setback. EVG has rejected the offer presented by Deutsche Bahn.
Routes, rates & services
- Geodis has acquired a Swiss freight forwarder, ITS - International Transport & Shipping Ltd to enhance its network and expertise in Switzerland.
- Maersk has joined the India-US General Rate Increase push. The GRI initiative aims to increase freight rates on the India-US trade route to address the rising costs and capacity constraints. From 25 June, there will be a GRI levy of $800 per 20-foot box, $1,000 per 40-foot box, and $1,250 per 45-foot box for all types of shipments from India to the US East Coast and Gulf coasts.
- DHL and Etihad Rail have formed a 20-year partnership in the UAE. DHL will utilize Etihad Rail's rail network to enhance its logistics services and promote sustainable freight transportation by shifting cargo from road to rail.
- Construction is underway for a fresh railway connection between Mongolia and China. This railway line will establish a link between the Mongolian border point, Shivee Khuren, and the Chinese border point, Ceke.
- Freight train operations in Italy following severe floods have been resumed since May 30. Previously the floods had disrupted rail traffic, causing significant damage to infrastructure and tracks.
- The Poland-Belarus border has been closed for trucks originating from Russia or Belarus due to ongoing tensions. However, rail freight trains are still allowed to operate and cross the border.
- Victoria International Container Terminal welcomed COSCO's new Asia-North Europe (ANE) service. The rotation will be Melbourne – Bell Bay – Sydney – Auckland – Melbourne.
Other
- Hellmann Worldwide Logistics has partnered with PKZ Group as its new sea freight partner. The collaboration aims to enhance Hellmann's sea freight capabilities and expand its network in the Asia-Pacific region.
- Maersk has lifted the booking suspension on its Kenya-Zanzibar service. The suspension was initially imposed due to operational challenges and disruptions caused by congestion at the port of Mombasa. By lifting the suspension, Maersk aims to restore regular shipping services and improve trade connectivity in the region.
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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Falling market rotations
Box lines' attempts to implement a General Rate Increase (GRI) have failed three times. Despite their efforts, GRIs of about $1,000 per TEU on major trade routes have not been successful, resulting in a lack of consensus among carriers. This highlights the intense market competition and resistance from shippers to accept substantial rate hikes. Drewry’s composite World Container Index (WCI) decreased by 2% to $1,685.32 per 40ft container this week. The decline in US-Asia imports is adding challenges to the global container industry's recovery. According to the most recent analysis they have been consistently decreasing at a fluctuating rate of around -20% year-on-year. Experts note that the prospects of the traditional peak season to restore the situation are nothing more than wishful thinking at this point.
Some Taiwanese companies are already adopting a pessimistic scenario by shifting their focus towards third-party logistics, terminals, and yards to adapt to the changing dynamics of the shipping industry and diversify their revenue streams beyond traditional container shipping.
The same uncertainty also makes shippers refrain from long-term contracts. Instead, they are opting for shorter-term contracts and spot market bookings to maintain flexibility and take advantage of competitive rates in a market with ample shipping capacity.
Following supply chain disruptions, global container production is expected to reach a 14-year low in 2023. This decline will impact container availability and potentially lead to higher costs and delays for shippers worldwide. However, not everything is in gloomy colors. Despite the existing challenges, inland ports in the United States continue to make progress and expand their capabilities. Inland ports are investing in infrastructure, including rail connections and warehouses, to support the growing demand for logistics services
Hot topic
Amidst the challenges posed by the current market state and geopolitical uncertainties, companies are turning to near-shoring strategies as they seek to bring production closer to consumer markets and explore new business opportunities. For example, Apple and Amazon are looking into investments in India, and Tesla follows suit by starting its pitches to better understand pro-industry policy guidelines.
Routes, rates & services
- Quanzhou has initiated its maiden container shipping connection to the Persian Gulf. The service, operated by the newly established liner Global Field Line (GFL), follows a route from Qingdao to Busan, Ningbo, Quanzhou (Shihu), Nansha, and finally Jebel Ali.
- ONE has announced the upgrade of its IBESCO (IBC) service, adding a direct call to/from the port of Gdynia in Poland from June 16, 2023.
- MSC has announced that its Santana service will call at Port Everglades in Florida, US instead of Port of Miami. The revised rotation will be: Haiphong (Vietnam) – Shanghai (China) – Ningbo (China) – Busan (South Korea) – Rodman (Panama) – Caucedo (Dominican Republic) – Port Everglades (US) – Charleston (US) – Baltimore (US) – New York (US) – Boston (US) – Singapore
- MSC is reintroducing its Swan service, now operated as an independent MSC service, which connects major ports in China with North European ports including Benelux, Gdynia, Gdansk, and Klaipeda. The service will start on June 9th.
- Hupac has announced an extension of the suspension for its Pordenone-Duisburg rail service, affecting cargo transportation between Italy and Germany.
- The Italian government's unity in opposing China's Belt and Road Initiative (BRI) may be less strong than previously believed, as there are indications of potential divisions within the government regarding their stance on the BRI. While some ministers express concerns about strategic issues and national security risks, others see opportunities for economic development and investment through participation in the BRI.
- Freight volumes along the Silk Road via Russia keep declining. Companies still remain optimistic about the long-term potential of the New Silk Road and continue to work on improving the service by introducing new routes and enhancing collaboration with partners.
- Nevertheless, it is reported that in the first four months of the year, approximately 609,000 TEUs of freight were transported via China-Europe rail freight, with the majority of the business (90%) attributed to trade with Russia.
- PSA International and Kazakhstan Railways have signed an agreement to form a joint venture aimed at promoting the development of the Trans-Caspian route.
- The Saudi Ports Authority has announced the inclusion of the Dammam Port to South Africa freight route run by MSC.
- PSA International has expanded its logistics arm in Vietnam through an investment in Sotrans, a Vietnamese transportation and logistics company.
- Hapag-Lloyd has updated its Middle East India Africa Express (MIAX) service by adding the port of Hazira.
Other
- US shippers are being warned about the rising threat of double-brokering fraud, where freight is fraudulently brokered multiple times, leading to payment issues and potential cargo theft.
- German railway workers have received a new offer from Deutsche Bahn (DB) in ongoing labor negotiations. The threat of new strikes is now lower.
- The International Federation of Freight Forwarders Associations has released comprehensive guidelines for the transportation of dangerous goods.
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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