Disruption of supply chain and outlook for container freight rate
Uncertainty over economic recovery and China’s lockdowns has seen a decline in volumes and rates in northern Europe. But longer-term contracts remain over twice last year’s level. Containerized spot freight rates have declined, continuing a trend since rates peaked in the first week of this year. Delays in container transport from Asia increased in the first quarter, even before the impact of the latest pandemic-related restrictions in China was felt. Growth rates for container demand are slowing, but supply chain disruption is unlikely to ease until next year. Inefficiencies will drive profitability despite rising costs. Carriers stand to see earnings before interest and tax rise to as much as $300bn this year on higher freight rates, despite a likely fall in volumes transported. Container freight rates have continued to fall steeply since the beginning of the year, but analysts say that attributing this to a collapse in freight markets would be “very wrong.” Chinese exporters could produce another trans-Pacific bullwhip when stalled shipments start moving again, with major stakeholders warning of a surge of delayed shipments. The longer China’s COVID lockdowns persist and manufacturing is interrupted, the more pent-up demand will build and eventually be unleashed into the trans-Pacific. Positive coronavirus cases were found in Waigaoqiao and Yangshan ports in Shanghai, with hundreds of workers forced into isolation since early April. According to carrier and port sources, some of the six box terminals in Waigaoqiao port saw dockside crane operators down their tools during the past week. The workforce shortage has reduced handling capacity and longer vessel waiting times.
Lockdowns in China affect ports in other regions
With lower volumes coming out of China and European ports remaining congested, equipment is running short. The influx when China reopens may only make problems worse. The war in Ukraine and pandemic-related lockdowns in China are putting pressure on the supply of container equipment in European markets, according to the latest analysis from equipment platform Container xChange. Capacity at the port of Antwerp is already maxed out, so a merger with the nearby port of Zeebrugge could provide some relief when the expected wave of cargoes arrives once COVID-19 measures are lifted in China. Key ports in Asia are closely watching the impact of COVID-19 lockdowns in China and taking steps to ensure their gateways don’t begin to suffer congestion and delays as a result.
Shipowners ‘disappointed’ by Suez and Panama canals’ toll hikes
Shipowner groups say they were caught off guard by recent toll hikes at the Suez and Panama canals and have called for greater consultation by authorities.
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A report on terminal automation was released before the US labor negotiations
A study commissioned by the Pacific Maritime Association says the automation of cargo-handling equipment at two marine terminals in Los Angeles–Long Beach resulted in more jobs for dock workers. The ILWU disagrees. The question of automation could again raise its contentious head in the US west coast labor contract negotiations in May, as the carrier and terminal representatives increasingly talk up its benefits.
FMC expands capacity, pricing monitoring of alliances
Amid heightened scrutiny from Washington, US regulators want the three major container shipping alliances to report more detailed information on pricing and capacity deployment on services they share slot capacity. Carrier Wan Hai has agreed to pay an $850,000 civil penalty to settle an investigation into detention fees it assessed on 21 containers in Southern California last year, according to an agreement with the US Federal Maritime Commission’s (FMC’s) Bureau of Enforcement (BOE). The ruling against Hapag-Lloyd could well be a bellwether for future actions against shipping lines relating to what shippers and drayage providers consider an unfair assessment of demurrage and detention fees. As terminal operators implement excessive dwell fees to get containers moving, importers are pushing the US Federal Maritime Commission to step in and regulate the charges under the same standards as demurrage.
The role of rail transportation in easing port congestion in the US
Federal Maritime Commissioner member Carl Bentzel said US Class I railroads need to hire and invest more to boost their intermodal service if the nation’s ports are to avoid future meltdowns and congestion. Logistics provider Valor Victoria is looking to reduce port congestion in Los Angeles–Long Beach by purchasing slots on Union Pacific trains and shipping containers to inland hubs such as Salt Lake City.
China proposes a market-based plan to spur shipping decarbonization
With an influential group of developing countries, China has proposed a market-based emissions-cutting scheme at the IMO — a significant move from countries historically reluctant to consider such measures. Argentina, China, Brazil, South Africa, and the United Arab Emirates have tended to vote down potentially costly green regulations. However, they have proposed an ‘International Maritime Sustainability Funding & Reward’ mechanism to lower emissions and spur uptake of zero-carbon fuels. China’s proposition would set upper and lower carbon dioxide emissions limits for ships based on the Carbon Intensity Indicator’s C-rating range: emit more than average, and you get taxed; emit less than average, and you get rewarded. Developing countries get extra slack and 50% of the revenue to help them cope with climate change costs. None of this is earth-shaking stuff, but it could garner extensive support.
Singapore cuts port fees for greener vessels
Singapore is cutting port dues for vessels that run on greener fuels. According to the Maritime and Port Authority, ships using zero-carbon fuels can now get a 30% discount on fees when calling at the port. It has also raised the bar for vessels entitled to a 25% port dues reduction. The policy only applies to tonnage burning low-carbon fuels in addition to liquefied natural gas. But it does not apply to those not exceeding the Phase 3 Energy Efficiency Design Index requirement by 10% or more. An additional 10% cut in port dues is now expanded to cover qualifying registered vessels serviced by low-or zero carbon-fuelled, MPA-licensed harbor craft during their port stay.
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Hapag-Lloyd to equip dry box fleet with sensors in 2023
Hapag-Lloyd will begin using sensors across its fleet of 3 million dry containers in 2023 to track its box inventory and provide better shipment visibility to customers. Installation of the devices will begin later this year. Hapag-Lloyd’s move to equip its entire box fleet with sensors could herald a new era that unlocks new tools beyond mere visibility for carriers, even if tracking devices aren’t a cure-all for shipper supply chain woes. Cargo visibility providers see Hapag-Lloyd’s commitment to installing trackable sensors on its dry container fleet as a boon to shipper business intelligence but caution that location data alone does not provide a complete picture of crucial container milestones.