Global Logistics - Weekly Recap

We are on the verge of breaking a five-year low.

Last week was a rather hectic and exhausting one. Usually, I write this on Thursday night, but it was a busy week. So here we go.

Commentators and analysts estimate that capacity reductions for March are in the region of 12%, and an increase of 7% YoY into April. Due to the lack of positive news, most analysts and we expect freight rates to continue to decline. Despite a marginal drop in canceled sailings, it is almost twice as high as a year ago.

One analyst said contract rates are reverting back to 2019 levels. As per them, the Asia-USWC contract rates are settling at USD1,500-1,600/FEU with two large shipping lines offering as low as USD1,200-1,300/FEU. Are cutthroat rates back?

If I had some extra cash (hang on a second with three kids that's never gonna be the case) I would look at taking some short positions on elevated container carriers' equity. Check out what happened to ZIM. Several other shorts are just flashing red lights. Early last year, I tweeted about ZIM being a good short. ZIM, however, has a good dividend yield, but where you place your long entry matters.

It has been a few good weeks for the Dry Bulk industry, and this is pretty good news for the market players. A closer look at the commodities exchange Iron ore reveals a 52% increase in the last 18 weeks and no signs of a slowdown in the near future. The Baltic Dry index has increased 164% in the past three weeks. Hopefully, this trend will continue for a little while longer. Steel production in China has been increasing steadily, which is certainly good news.

On the back of stronger capesizes, the Baltic index gained for the third consecutive week. On Friday, the overall index, which includes rates for capesize, panamax, and supramax vessels, increased 45 points to 1,424, the highest since late-December 2022. For the week, the main index rose approximately 17.6%.

SM Commodities Index - February 2023 (Supply Management)

On to other news

Contract rates are the key to liner stability, as spot prices continue to fall. The latest rate war on the transpacific and Asia-Europe trade lanes could see some ocean carriers, overly exposed to the spot market, record their first loss-making quarter since the onset of the pandemic. In a worst-case scenario, rate levels “could mimic the extreme lows of 2016”, according to Vespucci Maritime CEO Lars Jensen.

Maersk opens a container route to Ukraine. Maersk has opened a container route to Ukraine via the Romanian port city of Constanta. In Constanta, the containers are transferred to barges, which bring the containers via the Danube Canal to the Ukrainian city of Reni, where they are transferred to trucks.

January 2023 sees passenger traffic close to pre-pandemic levels. Passenger traffic across European airports is nearly restored to pre-pandemic levels due to a rise in international and domestic travel. European airport trade body, ACI EUROPE, reported a 69% increase in January compared to the same month last year. (IAR)

Global air cargo tonnages rebound while average rates soften. Global air cargo tonnages show signs of rebounding slowly after several weeks of stabilisation – still partly driven by the annual post-Lunar New Year holiday recovery outbound Asia, but against a backdrop of some more-positive recent global economic indicators. However, global average rates seem to be continuing the gradual softening trend observed in previous months, possibly affected by growing capacity, the latest preliminary figures from WorldACD Market Data indicate.

Spain will invest 16 billion euros in the Atlantic Corridor. The Spanish ministry of transport, mobility, and urban agenda (MITMA) said it will invest over 16 billion euros in the development TEN-T Atlantic Corridor. Over 12 billion euros will be allocated to new constructions, while almost four billion will be reserved for renovation works. (RailFreight)

Recession requires supply chain risk rethink - Riskonneck. Global recession changes how firms must handle supply chain risks, says Andrea Brody, Chief Marketing Officer at risk-management specialist Riskonnect. Today’s supply chains are no strangers to disruption. Organisations have had to grapple with a variety of disruptive forces – severe supply constraints, record inflation, heightened geopolitical risk, and more – all at once.

GE lends helping hands to jet engine suppliers to sidestep supply-chain challenges. General Electric Co (GE.N) sent 12 machinists from its Rutland, Vermont, facility across the country last fall to help a sub-supplier in Arizona that was so short of workers it could not add a second work shift. GE's action on the day after Thanksgiving was not an isolated case, Chief Executive Larry Culp said. The company has deployed its machinists and hundreds of engineers to suppliers and sub-suppliers in the United States to address the bottlenecks that are hampering production of its jet engines.

Slowdown in E-Commerce Hitting Logistics Companies’ Payrolls, Experts Say. Parcel-delivery carriers, truckers and warehousing companies cut nearly 17,000 jobs in February. Trucking, warehousing and parcel-delivery companies cut a combined 16,900 jobs in February, following a drop of 2,200 jobs in January, according to seasonally adjusted preliminary employment figures released Friday by the U.S. Bureau of Labor Statistics.

Now that is a great idea: Drunk Drivers’ Cars Are Being Sent to Ukraine by Latvia. Cars seized by Latvian authorities as part of drunk-driving violations are being shipped to Ukraine in an act of solidarity with the war-battered country.

?4 Principles for Improving Customers’ Digital Experience. Companies, despite exploding technological power, are failing to keep up with rising customer standards. Customer service technology should build a customer dialogue and foster deeper relationships, just as the best human customer service representatives do. And then it should go beyond, using emerging technology to accentuate and improve what a human agent can physically accomplish. This is what we call “digital empathy.” teThe keys are to offer customers more control, keep the technology so intuitive it feels mindless, provide visibility at points of customer agitation, and blur the divides of the digital and physical domains.

Martin Stopford's "Maritime Economics" is one of my favorite books. Whether it is about shipping market cycles, supply & demand, or maritime forecasting and market research. It is a book that should be read by everyone in the industry. I read this a long time ago and thought it was worth revisiting. Even though a lot has changed since he first wrote this book in terms of the economics of ships and ship designs, it remains one of the best books in the field. This cash flow model of the shipping market caught my attention.