News digest. 31 Oct
Nothing encourages more to take action than success of the competitors. Following the ambitious plans of China, Russia unfreezes its intentions to become the leader of the Eurasian corridor.
You know it is not a drill when big giants like Maesrk warn that the situation is alarming. This applies to China’s power curbs that continue to hold the industry in fear of the financial losses that they are causing. Power prices may rise to 20% higher than current levels or to pre-approved benchmark prices set by the government. Paired with rising raw material costs, port delays and shortage of shipping containers, this news is suffocating shippers with the already tight belts. With the crippling winter, the country will face the general need for electricity, which will surely have an effect on the supply chains. However, Maersk is not doing that bad on its own despite the disrupted schedules. The new updatesshow that overall, the reliability improved marginally in September 2021 by 0.6% to 34%, maintaining the range of 34% - 40%. This plunge is also followed by the drop in spot rates as soon as everyone has accepted the fact that goods will not be delivered on time for Christmas. Asia-US rates fell by more than 6% on both coasts and Asia-US West Coast prices are now 22% below the mid-September peak. Delays are the new reality that is impossible to escape because although rail and road play a vital role, they are at full capacity and cannot help the marine sector. If it seems like the shippers are already paying a lot thanks to all these constraints, the authorities of the Port of LA and Long Beach do not think so. From now on, they will charge $100 per container for boxes dwelling nine or more days that move by truck and those dwelling six days or more that move by rail. What is the point? The plan is to forcibly unclog the terminals and get containers moving faster, however, experts predict catastrophic consequences. Not only will the ports suffer. In addition to the shippers’ misfortunes, there are now worrying updates on imports. Although the import boom of cargo into the US is now sufficient to keep pace with sales, it is still not high enough to rebuild retailer inventories. It is believed that part of the physical problems in the supply chain in the US is capacity problems in the warehouses while some sectors see rapidly escalating inventories, meaning they need to get more warehousing space leading to shortages.
The motto “if there is not enough space, expand” seems to have been imprinted in the strategies of the players worldwide and Russia is no exception. Following China’s ambitious railway projects, the country has picked up on its abandoned plans regarding the intention to connect the ports of the Pacific and Indian Oceans with the Northern Sea Route.“Siberian Meridian”, includes construction sites such as the Northern Latitudinal Passage, and new thousand-kilometer lines in Siberia and the Arctic. The project has already attracted significant investments and the attention of Gazprom and other hydrocarbons’ majors. It is aligned with Russia’s strategy to strengthen the railway sector. Moreover, it has recently launched the rail freight service connecting Rotterdam with Moscow. Is the new Eurasian corridor on the way? As China moves forward – in all frontiers as it announces the opening of the new shipping route the Yangluo Port and Busan Port – Russia is looking for a New Silk Road alternative route with a potential ally with Kazakhstan.
The alternative routes are as necessary as alternative means of transportation. Especially when the airfreight is still turbulent. Spot prices this week from Hong Kong to Europe rising to $7.24 a kilo, with rates from Shanghai to Europe trailing a little at US$6.59/kg. The calmest direction is still the EU where the demand is steady. However, the debates in the UK over CHIEF to CDS may cause trouble at the customs. Meanwhile, Britain introduces the initiative amid reduce CO2 emissions and bypass highly strained truck networks by carrying packages on commuter trains. Another breakthrough is made by Nokia joining DB Schenker and Lufthansa Cargo’s effort to extend their weekly CO2-free freighter flights. The company will use the world’s only freighter flight running on 100% Sustainable Aviation Fuel produced from renewable waste. The shipping sector has been fruitful for the green results as well. The hard work has paid off in the Port of Long Beach that has reported record reductions in diesel particulates and nitrogen oxides in 2020, meeting its 2023 air goals. The port has never been close to its goal to go emission-free as it is now.
The elevated demand for overland cargo routes and the fact that more ocean freight forwarders are experiencing intermodal shift have pushed Geodis to expand its Southeast Asia road freight network to Vietnam. The decision is justified by the significant upward trend moving via FTL in this direction.
