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Transitory illusion
Recent improvements in container shipping volumes and rates are likely to be temporary and do not indicate a sustained recovery for the industry. Although some shipping lines have reported strong results for the first quarter of 2023, the underlying fundamentals of the market, including overcapacity, low freight rates, and weak demand, have not really changed. Despite the efforts of the container shipping lines to push rates up by reducing capacity and canceling sailings, they have been hampered by weak demand. The current market conditions are likely to persist in the coming months and container shipping lines should focus on improving their operational efficiency and reducing costs in order to remain competitive instead of trying to put pressure on shippers to accept higher rates. For example, securing long-term contracts on the trans-Pacific trade lane is already a losing game because of declining export volumes from Asia, combined with overcapacity in the market.
Hot topic
- The ongoing conflict in Sudan has led to the closure of several key transportation routes, including major highways and rail lines. Maersk and Hapag-Lloyd have suspended cargo bookings for the African nation until further notice.
- Chinese companies are moving their supply chains out of China to manage risks. India and Malaysia are becoming the keu destinations instead. While many companies are looking to diversify their supply chains and reduce their dependence on China, the process is likely to be slow and challenging and will require significant investments in infrastructure, technology, etc.
Routes, services & rates
- The shipping rates between Europe and the US have been declining due to decreased imports from Europe. A due to mong the factors that contributed are The Suez Canal blockage and the shortage of containers, canceled sailings, and decreased demands in the post-COVID era.
- Contrary to the decreasing rates between the EU and the US, the Indian ones dropped because of an oversupply of container capacity, but negotiations over long-term contracts between shippers and carriers have helped to stabilize the situation. Experts suggest that this could lead to a more balanced market in the future.
- Shippers are concerned that a recent Bangladesh’s court ruling that opening its two seaports, Chittagong and Mongla, to Indian domestic cargo could lead to increased congestion at the port of Chittagong.
- MSC has announced updates to its India Africa Service (IAS). The new rotation: Mundra – Nhava Sheva – Colombo – Abidjan – Lomé – Tema – Coega – Abu Dhabi – Jebel Ali – Mundra.
- MSC has made changes to its Gulf and South America East Coast (SAEC) String 1 services. The new rotation: Veracruz – Altamira – Houston – Mobile – Cristobal – Cartagena – Santos – Itapoa – Navegantes – Paranagua – Santos – Rio De Janeiro – Salvador – Cartagena – Cristobal – (Veracruz).
- A new railway line connecting Iraq and Turkey is back on the table. The project has been under discussion for several years, but has not yet been realized due to various challenges. The proposed railway line would run from the city of Mosul in Iraq to the Turkish port of Iskenderun.
- The first French Postal Express freight train departed from Chengdu, China, bound for Europe. It is the first time a French company has used the Chengdu-Europe railway route for express postal services.
- Canadian National Railway (CN), Union Pacific Railroad, and Ferromex subsidiary GMXT have launched a new intermodal service connecting Mexico, the US, and Canada. The service will run between Monterrey in Mexico and Winnipeg in Canada, with connections to major US cities.
Other
- The U.S. Environmental Protection Agency has awarded $400m in federal grants to reduce truck pollution at ports across the country. The grants will support projects to replace older, high-emitting trucks with newer, cleaner models, as well as other initiatives to reduce emissions from port-related activities.
- The EU recognizes governments’ importance in coordinating their efforts to support the transition to sustainable fuels in the trucking industry.
- MSC is planning to expand its standalone network of services following the end of its 2M alliance with Maersk. The company plans to add new services to its existing network, with a focus on connecting Asia, Europe, and the Mediterranean.
- Deutsche Bahn and the German Train Drivers' Union have failed to reach a wage agreement for the third time in recent months.
- European ports have fallen below pre-pandemic levels due to ongoing supply chain disruptions and reduced demand in some sectors. While some ports have seen a rebound in traffic, particularly those handling essential goods like food and medical supplies, overall volumes remain lower than they were before the pandemic.
- FMC has been granted new powers to block anti-competitive agreements between ocean carriers, a move aimed at promoting fair competition and protecting consumers. Under the new rules, the FMC will have the authority to block agreements between carriers that could lead to price fixing or other anti-competitive practices
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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Going up! The Drewry World Container Index has ended its decrease due to a surge in transpacific spot rates by 3.8% The trade lane between Shanghai and Los Angeles, which had seen a notable decrease in prices, experienced an 11% increase in prices during the week. They rose from $1,674 to $1,856, marking a significant recovery. Industry experts have started to express the view that the container shipping sector has turned the corner after the supply chain disruptions more confidently. Blank sailings are believed to have contributed the most to the improvement since carriers have been trying to prop up the General Rate Increases (in some cases, not so successfully).
However, industries like the US trucking can hardly feel the positive changes. Following the "freight recession," with weak demand and oversupply leading to a prolonged period of low rates and low profits, many smaller trucking companies have been forced out of business, while larger firms have struggled to maintain profitability. Despite the challenges, some analysts believe that the industry is likely to rebound in the coming months.
The upward trend also affects charter rates and is making ship owners hold back their plans for vessel scaping. Companies are reluctant to dispose of vessels that could still command high charter rates that, in their opinion, were boosted by stronger demand for shipping services.
Yet again, as companies hurry to reinstate previously canceled sailings on the transpacific and Asia-Europe trade routes, in anticipation of a rebound in demand for shipping services, it may be too early to do so. Some industry experts have expressed doubts over whether the carriers' optimism is justified, noting that the market remains highly volatile. Carriers who ramp up capacity too quickly could end up exacerbating the supply-demand imbalance.
Hot topic
- Longshore and Warehouse Union and the Pacific Maritime Association are on the way to a consensus about a new labor contract for West Coast dockworkers. Some blocking points still remain in regard to the use of temporary workers and the scope of work for union members.
- CMA CGM is in talks with the Bolloré Group to acquire its stake in logistics and transportation operations. The acquisition would give CMA CGM greater access to the logistics and transport market in Africa, where Bolloré currently has a significant presence.
Routes & services
- Vietnam is emerging as a significant destination for US-bound container exports, with a growing number of US shippers choosing to route their goods through Vietnamese ports instead of Chinese ports due to a variety of factors, including lower costs, fewer delays, and the ongoing trade tensions between the US and China. Overall, Vietnam saw a growth rate of 156% in containerized trade into the US between 2017 and 2022.
- Hupac is launching a new direct rail freight service between Warsaw, Poland, and Rotterdam, the Netherlands. The service, which will start operating on May 1, 2023, will run five times a week.
- On April 19, 2023, Russia, Kazakhstan, and Turkmenistan formed a joint venture to increase freight transport along the International North-South Transport Corridor to develop a more efficient and cost-effective transport route linking the Indian Ocean with the Caspian Sea and beyond.
- ÖBB Rail Cargo Group has announced the launch of two new intermodal connections between Italy and Austria. The first service, which started operating on April 11, 2023, connects the Italian city of Bologna with the Austrian town of Wels, while the second service, which will start on May 8, 2023, links the Italian city of Padua with the Austrian town of Wolfurt.
- The rail border between Poland and Belarus is still experiencing delays, causing disruptions to freight transport along the China-Europe rail corridor. The delays are due to stricter border controls implemented by Belarus in response to security concerns.
- CMA CGM has imposed discharge restrictions on the Port of Douala in Cameroon due to concerns about the safety and security of its crews and vessels. The restrictions, apply to all cargoes destined for Douala and will remain in place until further notice.
- ONE has announced changes to the port rotation of its Philippines Express (PHX) service. The new rotation will be Singapore – Manila (North) – Cebu – Singapore, with a bi-weekly frequency starting from M/V CONTSHIP ERA 081N/S.
Other
- Schneider National and Canadian Pacific Kansas City, a joint venture between Canadian Pacific and Kansas City Southern (CPKC), have announced a new intermodal partnership to connect Mexico with the Midwest region of the US combining Schneider National's trucking expertise with CPKC's rail network. The service will run from the Port of Lazaro Cardenas in Mexico to Chicago.
- The European Commission has proposed a new Carbon Border Adjustment Mechanism (CBAM), which would impose a carbon price on imports of certain goods from outside the European Union.
- The ongoing disputes in France are not expected to have a significant impact on the cargo backlog on the River Rhine. Despite the disruption caused by the protests against the French government's policies, the flow of goods on the river has remained relatively stable.
- Taiwanese TS Lines has sold two more feeder vessels as part of its ongoing fleet streamlining efforts.
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.
A new China-Europe logistic and trade exchange center, spanning 100,000 square meters, is set to arrive in Budapest. Koeman, owned by China’s Tonglinada logistic supply chain company, will develop the project on land leased from Nonfungo, a Hungarian firm. The parties signed a land grant contract towards this end on Monday 17 April.
The center will be located in Pest County, an area surrounding Budapest. According to Chinese media reports, the project will receive over 30 million US dollars in investments. It aims to build a logistic center that will provide functions such as warehousing, distribution, consolidation, bundling and re-export trade.
The project has received support from Hubei (Wuhan) and Heilongjiang provinces in China, as well as Pest County in Hungary. The first phase of the project will involve constructing the main warehouse structure, supporting facilities, and railway lines. It is planned to be operational at the beginning of 2024, facilitating the storage and transportation of over four million tons of goods per year. This new logistic center could further strengthen Budapest’s function as a rail freight hub on the New Silk Road.
Budapest and its potential
As a rail freight center, Budapest shows its advantages. It has good infrastructure, good connections and there are a lot of industrial companies settled here, a lot of them from China. However, that is not to say that the city does not know of any challenges. The popularity of the city also has its consequences, namely the heavily congested network. This congestion is not to be resolved until the freight-only V0 railway line is constructed.
Chinese operator Andy Luo from Dimerco explained the reason behind such popularity. “The transit time of this route is about seven days faster than the traditional route via Malaszewicze; at fastest, Budapest can be reached within fourteen days. In addition, Budapest has a complete railway distribution network. After the goods arrive in Budapest, they can be delivered to Bucharest/Constanza, the port of Koper, Duisburg and Hamburg within 2-3 days.”
Budapest has its potential, and the new China-Europe logistics center could help expand that potential by directing traffic and ultimately, give shippers and forwarders some ease.
