Global Logistics - Weekly Recap

My New Year's resolution is to stop hanging out with people who ask me ?about my New Year's resolution :)

There is a slight change of course for the Far East to North European rates that is expected to last until the end of the Chinese New Year. The only caveat is that Covid's situation does not deteriorate further and China reverts to full lockdown once again. There has been a massive outbreak of covid in China, and testing requirements in the west are already making some supply chain professionals uncomfortable. In some parts of China, service providers report that up to 50% of their staff are affected by the current outbreak. It has been two Christmases in a row that my entire family has been affected by Covid, and I for one am very tired of it. The following are the main routes on Xeneta by Compass as of 3rd January.

Drewry’s composite World Container Index increased by 0.7% this week, the first increase in 43 weeks, but has dropped by 77% when compared with the same week last year. Freight rates on Shanghai – Rotterdam gained 10% or $168 to $1,874 per feu. Spot rates on Shanghai – Genoa climbed 2% or $47 to $2,926 per 40ft box. And luckily for us, rates on Rotterdam – New York dropped 6% or $400 to $6,589 per 40ft container.

Ocean carrier voyage results could soon start appearing in red ink as freight rates flirt with breakeven levels on major east-west trade lanes. Although the container spot rate crash appears to have bottomed out in the past few weeks, annual contract rates are also now in sharp decline. According to Drewry’s latest Container Insight report, carriers have “lost control of the container market” by failing to manage capacity and will “act on capacity only when they are forced to do so by heavy losses”.

Global fuel indices are on a downward trend again. According to the weekly outlook of Marine Bunker Exchange (MABUX) for fuel prices, global bunker indices after taking a short pause began to decline again. The 380 HSFO index fell to US$478.76/MT, the VLSFO index lost US$15.60 to reach US$669.58/MT and the MGO index also decreased to US$1,021.02/MT.

Year of two halves for dry bulk. Analysts reckon 2023 will be better for dry bulk in the second half of the year once the sector’s most important player, China, has got its economy on a more solid footing. Fearnleys had this to say on capes this week: “We are looking forward to a new year, where expectations to the first part are rather low, whilst the general sentiment is rather positive to the second half of the year.”

IATA condemns the “knee-jerk” reaction to the imposition of travel restrictions for Chinese travelers. The Director General of IATA has called the measures, which he says have been proven ineffective over the last three years “disappointing”. “Several countries are introducing COVID-19 testing and other measures for travelers from China, even though the virus is already circulating widely within their borders. It is extremely disappointing to see this knee-jerk reinstatement of measures that have proven ineffective over the last three years.?

A ‘glass half full’ for all air cargo stakeholders as 2022 bows out with less demand and lower rates. A turbulent 2022 for the global air cargo market ended in December with a ‘win/win’ outcome for airlines, forwarders, and shippers as the chargeable weight fell -8% on a year ago and the general airfreight spot rate registered its largest year-on-year decline of 35%, but overall average rates remained 75% above the pre-covid level, according to weekly market analysis by CLIVE Data Services, part of Xeneta. (ACW)

Global trade has taken a turn for the worse, with businesses hunkering down for a possible recession and the boost from China’s much-awaited reopening yet to materialize. The data is starting to catch up with the somber sentiment that’s persisted among the world’s manufacturers and exporters in the past few months. Nine out of 10 indicators on the Bloomberg Trade Tracker sit deep in the red at the start of the year. Trade volumes are down and the outlook is that things may yet worsen before they get better. (BBG)

Automakers face Senate probe over forced labor in supply chains. Automakers are facing questions from a U.S. Senate committee over potential forced labor in their supply chains following a December report that revealed exposure to materials and components linked to the Xinjiang region of China. The committee sent letters to Honda, Ford, General Motors, Mercedes-Benz, Stellantis (owner of the Chrysler and Dodge brands), Tesla and Volkswagen late last month. Letters asked for details on the company's supply chain practices, with responses due by Jan. 13 at the latest.

Nearshoring happening 'faster than expected', says Gartner. A Gartner study shows that 88% of small to medium-sized enterprises have switched to suppliers closer to home, as they fight economic & operational turmoil. The report suggests that small-to-medium-sized businesses (SMBs) are shifting to nearby suppliers in the face of ongoing economic and operational problems.?Findings show that 88% of SMEs have switched, or plan to switch, at least some of their suppliers to ones closer to home. The study has been published by Gartner-owned Capterra, a platform that connects businesses to the right technology.?The company surveyed 300 supply chain SME professionals in the US. (SC)

Here are some interesting charts from a Twitter friend of mine. In the following charts, we can see the mean reversion on most of the prices which went through the roof during the COVID period.?His question was, "Has inflation peaked?" 1st chart is Timber, 2nd Container freight costs.

Below are European Gas prices

And on the left is plastic prices. He is a good lad to follow on Twitter: @PracKapital

All the other charts can be found here -

The Biggest Problems with Supplier Diversity Programs and How to Fix Them. Organizations of every size are setting lofty goals and allocating money and time toward supplier diversity programs, recognizing that disadvantaged groups should get a bigger slice of their vendor pies. Is it working? Probably not as well as they’d like. A robust 85% of Fortune 100 companies have dedicated programs designed to source goods or services from companies helmed by women, veterans, people of color and other non-majority groups, according to a recent report by MIT Sloan Management Review. Yet only 59% of that segment reports how much they source from diverse suppliers. And how much do they utilize? A mere 10% of their supplies and services come via diverse firms.?

The majority of supplier bases to be local in three years. The geographic distribution of supplier bases is set to fundamentally shift from being mostly global to majority local by 2026 because of economic and geopolitical instability, according to a report. The report, by Capgemini, said 25% of global trade will relocate in the next three years, resulting in the current split between global and local suppliers – 57% to 43% respectively – being exactly reversed. The research, based on a survey of 1,000 supply chain executives at large organisations in consumer products, retail, manufacturing and life sciences across 13 countries, found 92% said the ongoing relocation of the global supply chain would impact them, but just 15% were equipped to deal with this. (CIPS)

U.S. Trade Deficit Narrowed Sharply in November as Global Demand Cooled. American imports fell more than exports amid high inflation and interest rates. The U.S. trade deficit shrank in November at the steepest monthly rate in nearly 14 years, adding to signs of a global economic slowdown through the holiday season amid high inflation and climbing interest rates. America’s imports fell more than exports, causing the country’s deficit in trade of goods and services to narrow in November by 21% to a seasonally adjusted $61.51 billion, the Commerce Department said Thursday, compared with a $77.85 billion gap in October. U.S. imports declined 6.4% to $313.37 billion, as Americans cut back sharply on holiday-related purchases, including items from abroad such as computers and autos. U.S. exports dropped 2% to $251.86 billion, reflecting weakening demand for American products, including natural gas and crude oil.

Joe Weisenthal is one of my favorite BBG journalists. The two of us have been connected on Twitter for a long time, and I missed him personally the few times when he was in London. Ryan Petersen is another talented lad in the digital forwarding business. The following is a transcript of their interview, which is worth reading or listening to.?

Laughed reading this bit "I think in the last two years relationships probably mattered more than ever because when capacity is tight and there's no space on the ship, it's who's been the best customer for these people over the long term, who plays golf? It's not Sven in Sweden by the way. It's Lars in Copenhagen."

Congratulations to Jabil North Asia Talent Acquisition Team, who recently won three awards! The North Asia Talent Acquisition team is pragmatic and innovative. Well done, team!?

I invite you to travel and visit my beautiful island. Sri Lanka is a place of unparalleled beauty. Leave the corrupt politicians aside, the country is blessed with golden sandy beaches, beautiful waterfalls, misty mountains, a wide variety of tasty food, and warm-hearted people.