Asia | US news digest. 14 June
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.
