Global Logistics - Weekly Recap

The correlation between container markets and dry bulk has always been erratic. Nevertheless, the rise and collapse of both markets in tandem at an alarming pace have been spectacular for many in the industry, even for seasoned professionals. Never in history has the demand for container tonnage been so high as it was in 2021, and all the other subsectors of shipping have benefited from it, including dry bulk, MPP, heavy lifts, and RORO. As the saying goes, all good things must come to an end at some point (in this case detrimental to consumers, growth, inflation, etc.). SCFI is down almost 80% or 4065 points from its peak, and Baltic dry is down 87% or 4823 points from its peak. In some quarters, there is concern that the commercial sales budget for 2023 will not be met, but I am not complaining or maybe I will at some point. The 400 billion-plus earnings, however, should last for a decade or more. On the back of a drop in Capesize, the Baltic index fell to fresh multi-year lows. In terms of the overall index, which includes the rates for capesizes, panamaxes, and supramaxes, the index fell 26 points, or 3.7%, to 677, the lowest since June 4, 2020.

The Drewry’s composite World Container Index decreased by 2% to $2,046.51per 40ft container, and is 78% lower than the same week in 2022. Freight rates on Shanghai – New York dropped 6% or $191 to $3,241 per feu. Spot rates on Shanghai – Rotterdam and Rotterdam – Shanghai slid 4% each to $1,741 and $762 per 40ft box respectively. Similarly, rates on Los Angeles – Shanghai fell 1% to $1,131 per 40ft container. However, rates on Shanghai – Los Angeles gained 1% to $2,072 per feu. Rates on Shanghai – Genoa, New York – Rotterdam, Rotterdam – New York hovered around the previous week’s level. Drewry expects small week-on-week reductions in rates in the next few weeks.(Drewry)

Reports indicate that there will be a significant increase in containership demolitions in 2023. Over 300K TEUs are expected in 2023, which would be the most in almost six years. Ship scrap yards were ghost towns in 2021 and 2022. Since the demand for containerships rose to unprecedented levels during those years, neither owners nor operators had spare capacity. The deployment of new container tonnage in 2023 and 2024 will result in more demolitions of old tonnage as well as an increase in scrapyard activity.

2M alliance will no longer exist after two years as its members, MSC and Maersk, have mutually agreed to terminate its partnership in January 2025. In a joint statement, the chief executive officers of Maersk and MSC, Vincent Clerc and Soren Toft, commented, "MSC and Maersk recognise that much has changed since the two companies signed the 10-year agreement in 2015. Discontinuing the 2M alliance paves the way for both companies to continue to pursue their individual strategies."

The Federal Maritime Commission is reporting that it has received a strong response to the proposed rulemaking for key parts of the Ocean Shipping Reform Act of 2022 focusing on fees and the business practices of the leading carriers. The FMC is extending its process to solicit additional input while it also reported a strong increase in the complaints received in the second half of 2022.

Orders flood in for car carriers as vehicle demand outstrips capacity. The new year has seen a flood of orders for new car-carrier vessels, some from motor manufacturers opting to order their own ships to try and shift the logjam in automotive supply chains. One expert explained that the industry was experiencing major congestion, from a shortage of truck drivers and equipment such as low loaders, and not enough vessel capacity to meet increasing demand, boosted by requirements for more electric vehicles.

Munich Airport and Lufthansa are reaffirming and strengthening their successful strategic partnership. The two companies are now signing a letter of intent (LOI) to intensify and continue the sustainable development of Munich Airport. In the LOI, both parties commit to a shared sustainability strategy, to the expansion of Munich Airport as an intermodal transport hub, to the needs-based expansion of infrastructure, and to the promotion of digitalization and innovation in operations. This includes projects such as smart passenger handling and automated handling processes in order to make passengers’ travel experience more enjoyable and efficient.

Freightos has completed its merger with acquisition company Gesher and has commenced trading as a public company on the Nasdaq stock exchange in New York, US. The global freight booking and payment platform entered into a definitive merger agreement with Gesher in June last year.

Driver shortages: IRU and EU commissioner explore solution. IRU and EU Jobs and Social Rights Commissioner Nicolas Schmit met to discuss key social developments threatening the road transport industry and the broader EU economy. IRU, together with its member Fédération Luxembourgeoise des Exploitants d’Autobus et d’Autocars (FLEAA), met European Commissioner Nicolas Schmit to discuss current social issues and future developments that are particularly concerning for the EU road transport industry. The shortage of drivers was highlighted as a real threat to EU mobility and supply chains and, by extension, the economy. Without action to make the driver profession more accessible and attractive, Europe could lack over two million drivers by 2026, impacting half of all freight movements and millions of passenger journeys. IRU appreciated Commissioner Schmit’s open recognition of the essential nature of professional drivers, as demonstrated by the role that the road transport played during the COVID-19 pandemic. IRU EU Advocacy Director Raluca Marian said, “It is reassuring to hear Commissioner Schmit emphasise the strategic role of ‘front line workers’, and his full understanding of the dimension of the driver shortage issue and the subsequent problems it causes for the internal market.” IRU

Hungary submits railway plans for EU funding, crucial projects are missing. The Hungarian government submitted a funding request to EU’s Connecting Europe Facility 2 for several domestic railway projects. Although some of the railway schemes included in the proposal are relevant for rail freight development in the country, two critical projects were left out: Budapest’s Danube railway tunnel and the V0 line. Some of the most important freight-related projects that Hungary seeks to fund via the EU include the alignment of railway tracks between Kelenf?ld and Ferencváros with the triple track of the Danube railway bridge, and the construction of three new terminals within Budapest, in Nádorkert, K?zvágóhíd and Népliget.(RailFreight)

Logistics layoffs signal industry-wide culling, leave seasoned talent available. Flexport and C.H. Robinson won’t be the last big names to cut jobs as industry demand shrinks, experts say. Recent layoffs at big-name logistics companies could be the start of a wider culling of supply chain jobs amid economic uncertainty, according to experts, leaving plenty of talent available for firms still hiring. Freight forwarder Flexport laid off 20% of its workforce last month, citing a macroeconomic downturn that is hurting its customers. Other seasoned industry names including C.H. Robinson and DSV are also relying on layoffs or hiring freezes as a way to reduce their labor costs.

How will supply chain get tanks to front line in Ukraine? The US, UK and EU are providing Ukraine with tanks, but what are the procurement & logistics challenges of getting tanks from manufacturers to front line? When we talk of supply chain, usually it is with civilians in mind – retail, commerce and industry. Over the past two years the civilian supply chain has come under attack – first from Covid and then from Vladimir Putin, who has weaponised commodities such as oil and grain by undermining their supply, in a bid to destabilise and divide NATO allies.

West Coast Port Labor Contract Talks Remain in Limbo. Long-stalled West Coast port labor talks are showing no signs of progress, according to people familiar with the negotiations, extending uncertainty for U.S. retailers who rely on the coast to import goods from Asia. Shipping industry and Biden administration officials had hoped the talks, which began in May, would conclude last fall. But, people familiar with the negotiations say the parties haven’t made progress since the summer on regional issues that are delaying discussion of major contract provisions, including wages and automation. (WSJ)

Global economic growth is forecast to barely clear 2% this year, according to a Reuters poll of economists who said the greater risk was a further downgrade to their view, at odds with widespread optimism in markets since the start of the year. Falling energy prices, a slowdown in inflation in most economies from multi-decade highs, an unexpectedly resilient euro zone economy and China's economic reopening have led traders to speculate the downturn will be more mild. (RTRS)

Port of New York shatters trade record, but latest shipping data hints at California comeback. The Port of New York and New Jersey moved almost 9.5 million TEUs (twenty-foot equivalent units) for 2022, the first time in its history the port broke the nine-million container mark and another sign of its greater prominence in the global supply chain as more trade has moved away from the West Coast. The New York port has increased the number of containers moved every year since 2017, and in 2022, in particular, benefited from the threat of labor strikes at West Coast ports which led logistics managers to re-route trade. But the West Coast has an advantage in ocean travel time, which some experts say will ultimately lead more trade back to California if labor issues wane. (CNBC)

Hong Kong Exports Drop Most Since 1950s as Demand Weakens. Hong Kong’s exports plunged in December by the most since the 1950s, extending a monthslong streak of declines fueled by China’s slowdown and a global demand dropoff that probably pushed the financial hub into economic contraction last year. Overseas shipments plummeted 28.9% last month from a year earlier, the Census and Statistics Department said Thursday. That was worse than the 23.4% decline economists had expected and more severe than November’s 24.1% fall, already the worst since 1954.

DAVOS: DP World expects freight rates to drop by a further 15 percent to 20 percent in 2023, with the worst still to come as demand slows, the Dubai-based global logistics company’s deputy chief executive and chief financial officer Yuvraj Narayan told Reuters. Narayan said the first signs of a significant drop in demand were visible and freight rates on the shipping side had declined quite significantly on certain routes as agencies including the International Monetary Fund lowered growth forecasts.

It appears that the rather miserable weather conditions will soon end, and the upcoming weekends look promising with the Six Nations rugby matches beginning next weekend. Weekends where you are able to relax on the sofa with a few beers and watch the best sport in the world.