News digest. 18 Dec
With LA and Long Beach still being severely congested, many vessels are heading east. Will the reshuffling help or are we forever stuck in the circle of improvements and setbacks?
The tough context of newly increased rates and challenging negotiations over contracts (as capacity remains extremely tight ahead of holidays) has been forcing shipping lines to find ways to solve problems that would be less costly. For a while, they have been prioritizing import over export by turning empty containers to Asia so they can reload them with higher-yielding import loads to the U.S. As a result, agriculture companies, which are now dependent on foreign markets for profitability, were left behind trying to wait for their turn to unload. In the end, they were not able to break through international markets and demands. Just to illustrate the damage: a shocking 59% of containers left the US ports unattended with goods. However, the shipping lines’ party is not going to last as the American government is determined to tighten its control around the sector and thus it is pushing lines to treat export and import equally. To support this call, it has also proposed players divert their attention to other, less congested ports on the West Coast. East has also become the alternative – the updates show that imports to East/Gulf Coast ports rose 9.9%, proving that indeed many container ships are now escaping LA, but will it help improve the situation? No matter the efforts put to reduce congestion at Long Beach and Los Angeles, it seems like they are only adding more disruptions. The problem lies in the continued influx of ships that are overwhelming the capacity of the ports no matter on which coast they are located. Consequently, it is affecting the rates, and many believe that they will decrease only after ships will return to Asia. In turn, more realistic forecasts predict that contract rates are destined to be record-high in 2022 as there are already signs of it with China to North Europe early bids averaging $11,900 per FEU. The same will be true for airfreight where unprecedented momentum has hit the transpacific direction. The sky is the limit they say, so the spot rates reach almost $16/kg this week. With port congestion and demand remaining high, this monstrosity is expected to continue beyond Christmas.
Reshuffling the lines is not only American ports’ thing. The same is happening in the EU as congestion fever goes on. Felixstowe, Rotterdam, and Antwerp remain the black sheep with a high percentage of canceled calls. Companies report that as soon as they see pockets of improvements, they face new setbacks shortly thereafter. The Asian ports that are on the “omitted” list are no better. CMA CGM has taken Yantian and Hong Kong out of the Southbound rotation, while Port Louis and Honk Kong have left the Northbound rotation. To tackle the problem, some companies upgrade their intra-Asia network. MSC goes for Russia’s Far East by introducing a call to Petropavlovsk-Kamchatsky. The new service now connects Russia, north China, and South Korea. The company is also planning to expand its Asia – US Santana service. In the meantime, Pakistan is following a famous “better late than never” proverb and is going to develop its containership fleet. However, it is still uncertain how big it will be as none of the market researches has been conducted yet.
Russia becomes an important part of the network riddle not only in the shipping sector but rail too. The New Silk Role has already become the Holy Grail for development, so no wonder that more players hop on it. A joint venture consisting of Russia, Hungary, and Austria will take the role of freight forwarder and logistics provider on the famous route. The initiative is particularly important for Hungary where The East-West Gate terminal could in theory be the largest intermodal terminal of Europe, if infrastructure upgrades in Hungary are completed as planned. Meanwhile, rail is increasing its role in the UK where Tesco starts including refrigerated goods for the first time in its rail service, as it seeks to improve its environmental footprint. However, the improvement is overshadowed by the looming disaster regarding Brexit border delays. The grace period that was giving importers to prepare for full costs that are coming up thanks to the new policy is reaching its end and nobody has used it accordingly. The truckers are not ready for new rulesand currently, everyone is trying to find a scapegoat instead of looking for a solution. Is not it too late? In addition, UK van drivers will be required to get new international goods vehicle operating licenses if they want to travel back and forth to the EU in 2022. The drivers’ shortages have been a very painful issue in the UK for months and many fear that the problem will escalate again.
