News digest. 22 Aug
The crisis is forcing companies into transformation. Supplier relations, agility, volume capacity and other factors that used to matter less are now coming to the spotlight.
The problem of growing volumes and lack of reliable suppliers Maersk is vigorously trying to solve moving forward like a bull this time enhancing the new opportunities in Russia thanks to its first inland container at the Port of Novorossiysk, the largest Black Sea hub that is planning to handle up to 25,000 boxes annually. The main goal is to convert much of the bulk cargo in the region to container traffic.
If lately, it has been ports dealing with significant delays, airfreight did not manage to avoid the same disruption. Mandatory Covid-testing in Shanghai has revealed a positive case, which caused a number of cancelations at Shanghai Pudong Airport (PVG). The fact that PVG plays an important role means that disruptions in other airports can be expected as the consequences. There are rumors that cargo terminals PACTL and Eastern Air Logistics will stop accepting cargo, too.
Overall, local outbreaks of Covid-19 continue affecting all major trades with no transport modes succeeding in getting away. Experts observe that the pressure on capacity and the subsequently inflated rate levels will not be subsiding in the immediate future. The transatlantic trade will be somewhat more stable albeit with rate levels remaining high from a historical perspective. The only region where slight ease in capacity and rates can appear is the US.
Although it might seem like everyone is bearing major financial losses, which is mostly true, shipping lines are once again proving to be profiting from the ocean freight chaos. The fresh data shows that profit margins for carriers have risen from 5% in Q1, 2020 to 30% in Q2, 2021. Moreover, tonnage providers are making most of a hot market asking for 24-month contracts rather than the normal six or 12-month charter hire, knowing that the clients who want lower rates have no other choice but to comply. The sensitive state of the market makes it difficult for the shippers to frontload cargo so that their inventories do not run short. Instead of pushing the volumes up, it only increases the rates.
What are the alternatives for development? Well, the US sees potential in Marine Highway Program and announces the designation of six new Marine Highway Projects and a new Marine Highway Route. They are supposed to improve the movement of freight by water on inland waterways and to Guam and the Northern Mariana Islands. In general, nearly US$11 mil will be awarded to advance marine highway projects.
The disruptions have surely served the mission of a wake-up call for the supply chains worldwide. Companies are forced to reconsider their relationships with suppliers and their sourcing strategies in particular due to the current shortages in raw materials. This comes at the same time with an outrageous demand – in the era of endless choices customers do not want to wait for their products, thus the main prerogative for the industry players is to look for ways to become more efficient and agile. A more responsible business approachis definitely on its way.
Without a doubt, Asia is having a lot on its plate; however, the difficulties do not prevent Thailand from snapping up its largest ship. RCL has bought two 12,000 TEU ships under construction for $115m each from a Japanese provider. Another country, Bangladesh, has set a target to complete the construction work of Bay Terminal that will improve the Chittagong port’s capacity, the port that suffered severe congestion not so long ago.
German two days strike was not a piece of cake to handle, bringing significant disruptions: trains unable to cross Germany and reach the Netherlands, Poland, and the Czech Republic. This has brought experts to the debate of the strikes are even an effective tool in modern business. So far, it has been nothing but harmful – the resolution can only be achieved through negotiations.
The UK drivers do not seem to support the statement above as more of them have voted in favor of the new strike regarding shortages.Meanwhile, it is clear that the retailers will be the ones bearing the burdens of the financial incentives, which might force them into passing them onto the customers. The battle is expected to intensify as drivers keep abandoning container loads for the more lucrative delivery sector.
Among the steps amid to address supply chain congestion in the US, Norfolk Southern will reopen its intermodal facility in Pennsylvania to bring its Greencastle facility back online.
The Korean small shippers are again raising concerns about their abilities to handle the peak season. In response, the government has promised supportive measures such as securing ships and subsidizing freight rates through the emergency.
Kazakhstan’s rail continues to benefit from its new terminal at Dostyk on the border with China. Cargo to EU countries is a priority for China. Therefore, the terminal plays a crucial role.
The Network Rail will be disrupted on the Ely to Peterborough line because of the recent farm tractor and freight train collision. Most luckily, the freight will be re-routed, further exacerbating the disruption caused by the recent arrival of the Ever Given container ship.
