News digest. 21 Oct
So far, the interconnected character of international terminals have been perceived as nothing but the reason of the domino effect and negative consequences, but what if the industry embraces it?
The roaring twenties of the 21st century surely have brought many surprises, and as the congestion crisis unfolds, the masterminds all over the world are preoccupied with finding the way out. It may seem that everything has been tried: around-the clock schedules, expansion of facilities, etc., and yet a new solution has emerged. Barge owners are calling for port operators to adopt “synchro-modality” based on complete reimagining” of how supply chains operate. The crisis has proven the interconnected character of all industry players, thus the focus must be on all stakeholders sharing vital information with each other, so that goods can move faster, more efficiently and as if there is a big wide web connecting international terminals. If we look at the current congestion state, it follows a 50/20/30 rule, in which 50% of capacity moves by barge, 20% by rail, and 30% by road. This would require prioritizing quay capacity, ensuring frequent rail services and ample gate space for trucking. Some companies are already building a system to fit this premise. Meanwhile, developing the routes promising sufficient volumes is another go for the win. The new Hamburg-Shanghai route can be one of such routes. The first eastbound train launched by DB Cargo Eurasia has the potential to keep exported volumes at a high level. However, it will still take time for synchro-modality to take off and the new facilities to have a desired impact on the congested supply chains; for example, the US ports are still struggling in California with $26B worth of cargo. In the meantime, such clogged ports as the Port of Felixstowe are still being omitted. Maersk reports increased consumer demand due to the approaching Christmas and the negative effect the UK bottlenecks are going to cause. At least the rates have plunged by 22% just in time for the new peak season. Moreover, in an attempt to attract large shippers, Maersk is going to handle only cargo from direct shippers, cutting out freight forwarders starting on November 1. Not all it seems – Maersk is seeking revenge because of the forwarders that have been taking contract rates, of some $4,000/feu from Asia to Europe, and reselling to customers for $20,000/feu. The “punishment” has not waited for too long to arrive.
However, if we look at the companies that really use Christmas as the main driver of changes, here comes China United Lines that has launched an express service to the Port of Tilbury to meet shipping demand. It is a big breakthrough because until now most liftings to the UK were delivered to Felixstowe (a new pain point of the EU), Southampton or Liverpool. The step aims to increase capacities, which comes on time with the new dynamic of the European ports – some are going back to the pre-pandemic level of container volumes. The same trend is at ports along the Gulf Coast because of the crisis on the west coast. Unfortunately, it seems like congestion in the UK will not be the only trouble – full customs declaration will come in full force at the beginning of the new year with no mercy for the pleading shippers.
Having identified the shipping sector as one of the main influencers on climate change, the environmental organizations have also granted it certain responsibilities such as a sped-up transition to carbon-free operations. The new deadline is 2030 despite that the big retailers chose 2040. The latter is decided as the most realistic one, according to the players. Nobody is refusing the commitments, however, it seems like the question of the deadlines will be the new stumbling stone between the industry and NGOs.
This week is topped with another railway freight service launched from Jinan, China, to Vorsino in Russia by Ruscon. Covering the all key transport hubs in Russia is the company’s primary strategy on the way to development and expansion. Jinan is an important point where the highways from Beijing and Qingdao intersect.
