Global Logistics - Fortnightly Recap

You may have noticed that this report is now produced fortnightly rather than weekly since the end of April. The primary reason for this is that it is summer, and I am involved with my son's cricket and coaching junior teams, which leaves me with very little time over the weekends to prepare the report. The report will return to a weekly format in October as the sports season winds down.

In terms of ocean freight, except for Asia to US rates (both east coast and west coast) & Asia to East Coast S.America, rates are still declining. The dispute between dockworkers and ports over wages may once again cause some painful delays on the US West Coast. At the moment, I do not see this affecting any other major trade lanes.

This week, Drewry's composite World Container Index remained stable at $1,681.04 per 40ft container. Rotterdam - New York freight rates decreased by 9% or $339 to $3,375 per feu. Shanghai - Rotterdam's rate decreased by 6%.?Shanghai - Genoa rates decreased by 2% to $2,130. Rates from Shanghai - Los Angeles and Shanghai - New York increased by 6% and 5%, respectively.

SCFI declined 4.75% this week as well, compared to last week.

The Baltic dry posted its best week in almost three months. As a result of a rebound in capesize and panamax vessel segments, the overall index, which includes the rates for capesize, panamax, and supramax vessels, rose by 15 points, or 1.4%, to 1,055 on Friday. As a result, the index increased by 14.8% for the week, its largest weekly percentage gain since March 10.

The iron ore futures market advanced for the second consecutive week on Friday, driven by optimism in China.

Many investors will be concerned about the carriers' YTD equity performance. It is only halfway through the year, and there are no signs of a peak season as well. It is likely that many investors and long-only funds will be wondering whether the carriers will perform worse in the second half of the year than they did in the first.

Project Cargo Market - MPPs survival of the fittest

When you consider the number of players involved in breakbulk & project cargo conferences and networks, I wonder whether the margins are as good as they were in the past. My career in Breakbulk and Project Cargo chartering began in 1996 in Dubai. I was familiar with most of the players in the EPC sector, as well as the carriers with MPP tonnage and the brokers in the region. During those years, only a few brokers were involved in this niche market. Making 5% brokerage (50K per shipment) on decent freight was not difficult for brokers.?There is no doubt that project cargo forwarders may earn 300% more with all the value-added services they provide, but my concern is for brokers.

In those days, there were only a few carriers with regional chartering offices in major hubs. However, the industry has undergone significant changes over the years. The majority of MPP & HL carriers have offices in all of the major hubs. There are chartering divisions and/or managers in most freight forwarders' offices, small or large, and even the dry bulk cargo brokers have expanded into the project cargo market. Most notably, container shipping lines have invested and expanded heavily in the project cargo market, with teams dedicated to sales and chartering all over their major ports. This last entrant into the market has led to a great deal of concern for small MPP players. Particularly during times of falling container rates, more and more liner carriers are picking up small to medium-sized heavy loads and project cargo. There will always be a market for heavy lifts, but can breakbulk and small MPPs survive? Is it still possible for brokers to earn 50K commissions as they did in the first decade of the century? There are opportunities in this market, but I believe it is a challenging one. There has been a decline in MPP charter rates for six consecutive months.?

No doubt, the EPC industry has experienced significant growth in recent years as a result of factors such as infrastructure development, industrial expansion, energy projects, and public-private partnerships. EPC Market CAGR is expected to grow around 5.5% from 2023-2029, indicating a positive and consistent rate of growth.??I have been in this industry for more than 26 years and have arranged scores of charters ranging from oil rigs, dismantled plants, and yachts to regular BB parcels. However, I have the feeling that there are far too many players vying for very little business.?

Important snippets

• HAMBURG Süd has been hit with a $9.8m penalty for retaliating against a shipper after it filed a complaint against the carrier with the US Federal Maritime Commission.
• Panama Canal draught restrictions could cut boxship loads by 40%
• HSBC reports growing concerns regarding the second half demand recovery, and overcapacity in containers, but optimism as a result of muted dry bulk and tanker supply
• The demand for air cargo has declined due to macroeconomic factors, while capacity continues to increase. The total global capacity is 30% higher year-over-year and 3% higher than 2019 levels, according to BofA.It has been reported that passenger belly space, which accounts for 30% of airfreight capacity, has increased, with flights up 74% year-over-year (after falling 50% from pre-pandemic to January 2021). The capacity is expected to exceed that of 2019.
• A sixth consecutive week of oil and gas rig cuts has been reported by US drillers. The number of U.S. oil rigs rose one to 556 this week while the number of gas rigs fell two to 135, their lowest level since March 2022

Key Economic News which could impact the Industry

• Fueled by Long Credit Binge, China’s Economy Faces Drag From Debt Purge

• Charting the Global Economy: Weak Trade Shows China Struggling

On to others.....

Container lines see important decline in revenues and earnings in 2023 first quarter. Sea-Intelligence said there were indications of a weakness in the market in the second half of 2022, which has manifested fully in the first quarter of 2023. Revenues declined quite sharply, in the range of 35%-70% year on year, while in terms of earnings before interest and taxes (EBIT), there was a stark difference for the first quarter of 2023 versus the previous two years.

Hapag-Lloyd CEO bullish on prospects for a peak season. Hapag-Lloyd’s CEO believes there is a “better than 50%” chance of a normal peak season this year. During a virtual live information session this morning, Rolf Habben Jansen said that, although there were pockets of inventories remaining elevated, “by and large they are starting to come down.”

Kongsberg Present Feeder Ship Designed for Alternative Fuel Transition. Kongsberg Maritime and Deltamarin have developed a new design for a feeder containership that they believe presents a critical migration path for shipowners to manage the coming transition in fuels while also providing other innovations to increase the efficiency of operations. Known as Cobalt Blue, they report that the design has been reviewed by the classification society DNV and received Approval in Principle.

Dry Bulk Market - Weak Coal Demand is Hurting the Market. With China switching to shorter-distance coal imports, the dry bulk market and, more specifically, seaborne coal trade seems to have taken a hit. In its latest weekly report, shipbroker Xclusiv said that “Europe’s appetite for coal import is limited as there are decent thermal coal stockpiles at European ports, along with strong natural gas storage levels and renewable energy generation, potentially leading to exportation to other areas, such as Asia.

Business group urges Biden to intervene in West Coast ports labor dispute. The largest U.S. business group on Friday urged President Joe Biden to intervene immediately and appoint an independent mediator to address a protracted West Coast ports labor dispute. West Coast ports stretching from California to Washington state are critical to U.S. supply chains and the nation's economy. More than 22,000 dockworkers at those trade gateways have been working without a contract since July. U.S. Chamber of Commerce CEO Suzanne Clark, in a letter to Biden, cited "continued and potentially expanded service disruptions at these ports heading into peak shipping season."

El Al gets clearance to operate freighters. Israeli airline El Al has secured regulatory approval to operate dedicated freighters from the Israeli civil aviation authority as it awaits its first converted aircraft. The extension to its commercial license gives the airline the right to transport freight using all-cargo aircraft until June 5 next year.

Ukraine can now fund transport projects via CEF. An agreement between the EU Commission and Ukraine allows the second to benefit from the Connecting Europe Facility (CEF) funds. The deal is an important milestone towards post-war Ukrainian restoration, especially concerning transport infrastructure and rail. Simultaneously, it is a step forward for Ukraine’s integration into the EU single market.

DfT funding awarded to drone project for rural logistics. The Department for Transport (DfT) has awarded ￡1.96 million in funding to 67 projects centring around transport technology as part of the UK government’s Transport Research and Innovation Grant (TRIG) programme.

China to Host Country’s First International Supply Chain Exhibition. Chinese officials announced on June 9 that the country will host the inaugural China International Supply Chain Expo in Beijing from November 28 to December 2, 2023.

Supply Chain: FDI illustrates the nearshoring movement. In the first part of our survey on supply chain diversification, we looked at recent developments in world trade, which help to identify short-term trends. However, the changes observed may be affected by multiple factors, such as the re-opening of China and inflation.

Retailers Are Shrinking Logistics Operations in a Changing Consumer Market. Retailers are shedding warehouse space and paring back their logistics networks now that the disruptions that slowed supply chains during the Covid-19 pandemic have largely receded and consumer spending patterns are shifting toward services.?

‘Sold Out’ Warehouse Operator in Mexico to Invest $700 Million. Demand for industrial park space in the Mexican northern cities of Tijuana and Ciudad Juarez is so high that Prologis Property Mexico SA has wait-listed companies looking to set up shop or to expand their current space.

Oil Has a Pricing Disconnect—and a Trust Issue. Oil prices fell 1.8% this past week even after OPEC and its allies extended production cuts through 2024 that have taken 3.5 million barrels a day off the oil market. Saudi Arabia also said it would reduce output by a million barrels more in July, reducing its daily production to nine million barrels—the lowest since 2013, outside of the pandemic.

It was a fantastic win for the Crusaders. On to the Semi-finals ????