News digest. 20 Nov
With a creak, at a snail pace, but finally the closed-off systems start to lift cabotage restrictions to make ports more attractive. Nothing calls for action better than the need for foreign investments.
The need for more space and services will eventually open up even the most closed-off systems and the Chinese one is no exception. If previously foreign liner operators could not offer transport services between Chinese ports, or circumvent cabotage restrictions by chartering or buying slots on China-flagged ships, now things are about to change. The authorities have decided to temporally lift the restrictions. The next steps will probably include relaxation of cross-border payment, overseas consumption and the flow of people because the recovery is simply impossible without foreign investment. The Chinese government is aware that it has to make ports more attractive to international partners especially during this unprecedented time when the spot rates dynamic remains uncertain. On the one hand, there are offers from Chinese-based forwarders, with prices down to $13,000 per 40ft for mid-December, and on the other – for Mediterranean ports from Asia some indexes were unchanged, at $12,420 and $13,168 per 40ft. The troublesome congestion at California’s ports continues to have a strong grip around shippers’ throats and many experts report that significant rate reductions across liner trades could take almost three years. Although the US ports reportedly are making progress toward easing supply chains – the goods movement is now faster. The main problem is now the fact that the rise in the cost of shipping between Asia and the West Coast has made it is more profitable for the ocean carriers to quickly load empty containers or return without a full ship instead of waiting for loaded containers to get into the port. The global alliances dominating the sector make it difficult to resolve this issue as their influence is hard to combat. The White House has again underlined the harmful effect of the monopoly on export and import for the marine sector. The country knows its “heroes” – 2M, Ocean Alliance, and THE Alliance – control about 80% of the global liner shipping market and 95% on the East-West trade lanes, according to the latest analysis. FMC has been promising to take action for weeks, but the destiny of competitions of American ports is still at mercy of the big players. Perhaps, the promising stimulus of expanding the FMC’s $30m annual budget will become the needed measure. The battle with major companies takes place outside of the US as well. In Abu Dhabi, the growing presence of DP World is pushing Abu Dhabi Ports to boost the fleet by ordering its third ship, ready to serve the Persian Gulf and Indian sub-continent.
However, adding capacity gives no guarantees that the situation will improve, and airfreight is a great example of this premise. Despite the new services, air cargo rates have climbed further. Europe-US ones go up 4% to the East Coast to $5.24/kg, and hit $6.08 to the West Coast, which is a 10% increase since the start of the month. Demand and congestion are to blame which once again highlights the importance of addressing all the key issues altogether, instead of concentrating solely on one because they limit how much cargo can be processed regardless of the space on a plane. Hence, the added capacity makes no difference.
Meanwhile, the idea of free ports, special areas with different regulation that includes tax incentives, has finally gotten its spin-off with the opening of the UK’s first new freeports for business. Now businesses situated along the Thames will potentially reduce the cost of ownership by 50%. In addition, a collaboration between port operators DP World and Forth Ports, Thames Freeporthas become an economic zone connecting Ford’s Dagenham engine plant and the global ports at London Gateway and Tilbury. The goal is to make it a customs sub-zone. Russia hops on the port development train and focuses on the construction of a major transshipment hub on the Baltic Coast. The facility is planned to be able to transport a cargo turnover of up to 65 million tons/year at the seaport of Primorsk. Possibly, the new terminals will soon be filled with zero-emission boxships. For the start, the first one has already completed its maiden voyage in the Oslo fjord. It is the result of the collaboration between The Yara Birkeland and Kongsberg. It will cut 1,000 tonnes of CO2 and replace thousands of trips by diesel-powered trucks a year. Way to go to the green future.
Eco-friendly transportation solutions have hit intermodal sector as well. CMA CGM is going to work on two new dedicated block-train service offering in Germany. It will be able to handle a weekly capacity of 96 TEU, connecting with the services from and to Asia. However, Asian railways are not operating smoothly. After the renewal of the railway trade between China and North Korea, it was shut again due to the new COVID outbreak. This time the closure probably will not last long as both sides can no longer bear financial losses. Canada, on the other side of the world, knows all about losses caused by the weather. Floods have cut all rail freight traffic to and from the port of Vancouver. The companies are trying to divert the traffic to the US, but floodwaters from the Nooksack River have poured across the Canada-U.S. border.
