Is the new trend of softening freight rates and overcapacity the calm before the storm or a needed gulp of fresh air?
Who would have thought but in contrast to the predictions that demand will stay elevated, it has started softening, at least on the Asia-Europe trade line.
● The battle for capacity has been replaced with EXCEEDING capacity that carriers are forced to take care of. The first to react among the big players is the 2M alliance by blanking its scheduled loop sailings for the next two weeks. Spot rates, in turn, have also shown a steady erosion. After hitting another high of $15,000 per 40ft at the end of January, they now plummeted to $12,685. However, on the transpacific route, the situation does not change and keeps living up to predictions about the increased demand and tight capacity.
● It is true that every sector on the market has become extremely sensitive to cyberattacks, and MAXMODAL was covering this subject in the past updates. Meanwhile, the notorious trend continues and many fear that in the current context, the logistics chain would be more likely to be impacted by the fallout from cyber-warfare in Ukraine. Among the expected targets are the energy, finance, and operational technology sectors. Experts warn that the impact of the potential cyberattacks can be even bigger than those of 2017 since this time, there is congestion, vessel schedule reliability remains extremely low, and everyone is in the same boat. One attack at a vulnerable target and the domino effect may fall onto many other players. What is also damaging the hope of recovery is the skipped calls to ports. Companies have been using them as a way to manage the capacity of their heavily utilized fleets.
● Russia’s participation in the global trade is too big of a fish to exclude so easily, thus in order to ensure more or less stable partnerships on which so many things from workplaces to delivered goods depend, some countries have started searching for alternative payment ways to ensure shipping’s access to trade. One of them is India where shippers fear already surging rates and potential damage their activity will experience if the sanctions are prolonged. India is one of Russia’s railway partners as well thanks to the important North-South Transport Corridor. The corridor goes through Azerbaijan which recently has upgraded its railways on this route connecting India to Russia. This corridor has a lot of potential as an alternative to the sea shipping route via the Suez Canal. On the contrary, Bangladesh has suspended its shipping to Russia which has resulted in piles of containers at the Port of Chittagong. Apparel factories are also under uncertainty as they do not know if the production for Russian buyers will continue which would be devastating for both sides since Bangladesh has annual trade worth US$1 billion with Russia.
● While some of the freight rates are going down, bunker prices have increased since the beginning go the military conflict between Ukraine and Russia. For the high-sulfur fuel oil, the index rose to $765.93/MT; low sulfur fuel oil has gone up to $1038.07/MT. Some of the companies are self-snctioning Russia and refuse to perform contracts with it, but as a result, they become exposed to contract damages and a big risk of breaching existing commitments.
● The New Silk Road, just like any other important route, has been experiencing a rather turbulent period. However, all the tension has had a positive effect as well. It is reported that congestion has dropped significantly since many companies are omitting Russia and Belarus. For a long while, transit times were more than 30 days, now it is less than 20 days, for example, to Poland. Consequently, new alternative transit routes did not wait long to appear. Germany bypasses Russia through Turkey for cargo from China. Does this commemorate the rise of the Middle Corridor? It is a matter of time, but for now, it has definitely gained its appeal for many western companies.
● In the meantime, Turkey has lost one of the facilities of its Ekol Logistics that has been destroyed during a bombardment in Ukraine. It covers a wide spectrum of transport solutions, and luckily, no was no casualties.
● Despite the difficult situation in Europe, there is still room for new services. At least in Asia. COSCO has announced the launch of a new Daily Express Service between Yantian International Container Terminal and Hong Kong. In addition, the company has celebrated the completion of the Cogent Jurong Island Logistics Hub in Singapore. COSCO has also started a new initiative to build a green port network in the Iberian Peninsula around the ‘dual pivots’ of Valencia and Madrid. China is also pushing on the railway direction and is planning to introduce the second train of the China-Nepal railway service. But the competitors are on the way. Vietnam is developing a non-Chinese outlet for new containers with an annual capacity of 500,000 TEU.
● Sustainability has not left the radar of companies. Maersk has partnered with six companies in sourcing green methanol. The move aims for a faster transition to green energy and decarbonization. The UK has started SHORE green shipping project. Under it, the government is planning to develop the infrastructure to enable zero-emission technologies and power new-age vessels. When it comes to intermodal. Felixstowe breaks a new record in handling containers. Operators are looking forward to maritime work to further increase the ship handling capacity at the port.
