International news digest
Chinese ports are under lockdown again and with the military conflict between Russia and Ukraine, the market is entering another coil of uncertainty and turbulence.
● If it seems like the container market has already seen it all, there is another turmoil to get ready for. Container movement and freight rates quickly reacted to the consequences of the Russian-Ukrainian conflict, and now they are set to react to the lockdown in China that was imposed in 19 provinces. Experts predict that a week-long shutdown of Shenzhen can cause far more disruptions than the notorious Suez crisis because the demand is expected to keep growing. There are also fears that China’s strategy of Covid elimination will be extended to other mainland cities. Due to the reduction in workforces as people are ordered to stay home and limited truck availability, ships are starting to queue at the major Chinese ports. Knowing how they are interconnected with the rest of the international network, the lockdown is going to affect major directions. In particular, India has already reacted. Indian shipping lines are struggling with labor shortages, slowing operations, and vessel turnaround as well as with container shortages because of the lockdown in China. If the situation does not improve, more congestion will be on the way. The importance of Asian presence is visible not only when it comes to congestion. It is reported that Asian shipowners have become the dominant force in global shipping.
● The disruptions caused by Covid and the military conflict are already making Europe to US trade run behind. Sanctioned Russian transhipment cargo from Asia has nowhere to go and keeps piling up. Meanwhile, a shortage of empty containers in Europe results in less equipment available for US exports and carriers that are unable to fill their ships.
● In order to provide sufficient support in medical products, food supplies, and so on for Ukrainian refugees, the terminal in Odesa has started releasing import containers for consignees. Despite the container crisis, many inland storage facilities in Ukraine are offering free storage and cargo-related operations to support civilian needs. While the ocean sector remains highly disrupted, Ukrainian railways show signs of becoming a key player in increasing its exports to the EU.
● More restrictions have been placed on the import from Russia to the US following Russia’s ban to export over 200 products including medical and tech equipment. The US is now prohibiting imports of alcohol, seafood and non-industrial diamonds from Russia. It is also not allowed to export luxury goods to Russia. The measures are destined to pave a way for higher tariffs on a wide range of goods. The EU adds up to sanctions by putting an import ban on Russian steel and iron, a ban on investments in oil companies and the energy sector, and restrictions on the export of luxury items including cars with a value of more than 50,000 euros. In the meantime, HMM suspended its services to the Far East of Russia, although the company has stated that it is due to the market conditions. Market conditions are indeed perplexed with a variety of challenges. Poor schedule reliability and continued delays are fueling the trend of companies starting to charter ships by themselves.
● The crisis is going to be visible across all transportation modes and European hauliers are beginning to worry. In addition to the problem of high diesel prices, another one has appeared. Many automotive components are manufactured in Ukraine and supply disruption will affect the production of trucks. At the same time, the aftermaths of the conflict spill over rail freight traffic between Europe and Vietnam has been suspended for the time being. The crippling increase of costs and drops in sales are happening in the US too, the agricultural sector has become the one that has felt them most prominently.
● The unprecedented chaos in global fuel prices has forced big players to take matters into their hands. MSC is going to review its fuel surcharges fortnightly for all spot and quarterly contracts on Asia trades.
● Major cut off of flights has resulted in some companies deciding to significantly reduce their staff. In the case of Volga-Dnepr Group, it has grounded almost all their aircraft and even the ones with European certification can no longer operate. In response to the EU shutdown, Russia has allowed airlines that lease foreign aircraft to fly domestically which has caused fury in European lessors.
● New routes alert: there is a new multimodal link from Turkey to Germany via France commemorating the increased interest in the Middle Corridor. Spain is about to launch the construction of a railway line to the port of La Coruña. Maersk is going East as well by announcing a call at the King Abdullah Port. Moreover, it has revealed a new cold storage facility in Houston for imports and exports. Also, Maersk is staying true to its green agenda as it becomes the first shipping line that has signed Amazon’s Climate Pledge initiative demonstrating that the shipping sector understands its responsibility and role in cutting CO2 emissions.
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