News digest. 29 Aug
Shipowners have splurged on tonnage like never before boosting containership to unbelievable volumes. Will expanded assets guarantee staying afloat?
Since shipping reliability continues to worsen (down a massive 39.7% from last year), spot rates are on their rise hitting the 19th consecutive week. The composite index across eight major East-West trades increased 2.1% or $204 this week, to reach $9,817 per 40ft container. Freight rates on Eastbound Transpacific lanes surged 4% or $393 to $11,362 from Shanghai to Los Angeles and 5% or $631 to $14,136 from Shanghai to New York per 40ft container. Rates from New York to Rotterdam dropped 1% to reach $1,142 per FEU.
Meanwhile, the chaos reigning over supply chains has led suppliers and manufacturers to hike up prices for their customers. As a result, companies are considering switching to new ones, but this may lead to more difficulties, as now supplier reliability is one of the most important factors helping to stay afloat. Players are paying close attention to customers’ reactions to higher prices while trying to negotiate with suppliers for more convenient conditions.
Liner operators have proven to benefit the most from the current situation in the past several months and they still do. Recently they have added 23 transpacific services boosting nominal capacity by 33%. The 2M alliance of Maersk Line and MSC account for the largest growth in transpacific capacity. However, let’s keep in mind that this is nominal vessel capacity, and with the congestion in ports, actual working capacity is reduced. For example, Long Beach has set a congestion record – there are now more than 40 ships waiting outside.
In the meantime, shipowners have splurged on new tonnage like never before. A total of 619 containerships are now on order for future delivery. Players either go big or do not go at all; it is now the game of survival where the tonnage is one of the tools for remarkable competition.
The industry needs an alternative routing that would be as reliable and stable as shipment, so OOCL Logistics and OOCL have offered a multimodal container service from China to the US East Coast. It is operated by an ocean carrier, using the Asia-Europe land bridge and the Atlantic Ocean to avoid the current high levels of traffic seen on routes to the US West Coast and through the Panama Canal.
If only the driver crisis in the UK could be solved solely by the relaxation of immigration rules, the situation could have already been improved. However, UK government ministers appear to be resisting calls to reconsider the current policies. They have stated that a package of measures to tackle the HGV driver shortage that was put in place will bring fruitful results soon. The drivers believe it is just a temporary solution. Data estimates driver shortage at around 100,000, with some suggesting the number is much higher. Meanwhile, more and more hauliers apply driver retention surcharges which have caught some of them off-guard as haulage firms increase rates by roughly £50 a load. The British Ports Association has also voiced its concerns about post-Brexit immigration rules for European-based HGV drivers and warned that the lack of action will be devastating for the British economy.
German railways are still dealing with the consequence of the strike. Paired with the recent floods, the situation is extremely complicated to resolve. Maersk and Hapag-Lloyd stated that some of the services on the Germany-Czech corridor that had been supposed to start operating earlier are still taking time to resume. In particular, Maersk has decided to omit Hamburg on the next six voyages and divert the discharge moves on these voyages into Bremerhaven.
Not only Chinese ports contribute to congestion, but also airports that are causing cancellations and a lot of uncertainty for ex-China air cargo, pushing up air cargo rates. The update has shown spot prices ex-Shanghai rising 15-25% to US destinations this week and 12-15% to airports in Europe.
The US rail is expecting major difficulties with operations serving facilities at Chicago, Cleveland, Atlanta and Memphis, Tennessee, because of chassis shortages.
Labor shortages in the seafarer workforce keep worsening with more than half of HMM’s employees signing letters of resignationfollowing management refusal to meet payment demands. Meanwhile, terminal operators in Busan are preparing contingency plans for moving cargo if the strike hits the port.
CMA CGM is going to apply new Peak Season Surcharges in the number of ports globally. It will also push up its rates from Europe to several destinations in America: $470 per dry and reefer container from North Europe, Scandinavia and the Baltic Seaports.
Shippers from Ukraine are vigorously criticizing the decision of Ukrainian Railways to increase the tariffs for rail freight operations to support infrastructure upgrades. Despite the initially positive intention, it will raise the prices of coal transportation. It is said that logistics providers will not tolerate the higher tariffs and move their enterprises to the road.
