News digest. 23 Feb
The industry has long been preaching for the development of rail, however, only now does it seem to realize the primary objectives of improvement and most importantly, evaluate the financial aspect of it.
Towards the fastest trains in Eastern Europe is the leitmotif of the decision of Russia and Hungary to join railway ventures. The company will start operating in spring with the primary objective to play the role of an operator and logistics forwarder on the New Silk Road. By April 2022, both parties plan to move to operational work, with a gradual increase in turnover. Priority to rail is now a thing for the majority of the EU big players in general, despite the needed recovery from the storms. Thus, more investment is needed. As one of the results of the European Railway Summit, the participants have signed European Railway Pact preaching for further development in a green, sustainable way. The UK, in turn, focuses on local development and thanks to the research finds out that Birmingham could be a much greater contributor to the net-zero carbon economy, so the development will be focused on it. The pivotal role of railway connection increases across all directions with a particular emphasis on China. Although China has been very rigorous with rail development lately, it is not a secret that the EU will benefit from it too. COSCO has launched a new train to Germany carrying raw chemical materials, auto parts, daily necessities, etc. The connection is another +1 to COSCO’s already impressive network in Europe. Maersk levels up its game as well by introducing a freight service linking Korea, Japan, and China to the Kaliningrad Region in Russia, the Baltic countries, and Poland through Trans-Siberian. Shorter transit times aim to move goods shipped from the Far East to Europe faster while reducing the impact of the supply chain crisis. In the meantime, a faster pace becomes a distinguishing attribute of the New Silk Road too, but it is not necessarily a good thing. The slowdown is due to decreases volumes because of the Chinese holidays and a slight drop in spot rates. Experts advocate for further digitalization and infrastructure investment in rail facilities.
Another challenge is the new road toll rules introduced by the EU that clearly favor operators of hydrogen and battery-electric heavy goods vehicles, as they will receive significant toll discounts. In this case, many say that road transport has more advantage in terms of competition than rail. Electric trains are green too however, they continue to pay without any reduction in rates. A long period of negotiations is ahead. Another legislative aspect that pops on the agenda of the EU leaders is the protection of member states from third-party coercion that may arise as a result of a closer relationship with China. As all the involved parties have expressed the need for cooperation, the question of the proper framework becomes essential.
Competition has been the burning issue not only for the rail. Ocean freight had encountered the unfair practices first. The UK, the US, Australia, New Zealand, and Canada are going to conduct investigations of unfair practices. According to some experts, the current supply chain disruptions are a direct result of anti-competitive conduct, which has only escalated during the pandemic and led to poor service and huge fortunes of the major players. The EU commission has not joined the initiative. The thing is there is such phenomenon as Consortia Block Exemption Regulation, which allows agreements between maritime shipping companies to cooperate in ‘consortia. The paper is due to expire in 2024, however, the Commission does not exclude the potential of prolonging it.
The trend of shippers accepting shipper-owned container requests was previously mentioned, and now it keeps growing because its biggest advantage is that it increases reliability for empty container availability. The tendency indicates that the current supply chain crises push industry participants to diversify their sources. However, the same crisis has requested more containers to be used due to the delays that continue to disrupt the performances of the companies, and many players fear the chaos that these containers are going to create once congestion eases. Container shortage is also due to the occasional container loss. The recent one occurred near the Netherlands. The disruptions are also toped with the new cyber attacks. Expeditors, a global logistics giant, has become the target and had to shut its operations. India’s top container port complex, JN Port Container Terminal, has also suffered from a cyber attack. However, four neighboring terminals are functioning normally.
After breaking another record, charter rates are expected to slightly decrease. However, even the high prices do not prevent daily hires from breaking out. Moreover, owners continue to be besieged with offers on the S&P market. The correction in rates will be possible due to the ease of congestion in Q2. The unpredictable dynamic does not prevent new players from emerging. This time it is a young, Alibaba-affiliated, liner Transfar from Thailand that has launched China-US east coast sailings.
