Global Logistics - Weekly Recap

"Greed is a bottomless pit which exhausts the person in an endless effort to satisfy the need without ever reaching satisfaction" - Eric Fromm

Most who have worked in the industry were aware of how this would unfold, but very few spoke about it last year. I was among those few who advised my friends in the financial markets about how this would play out (If you refer back to my posts from the end of last year, you can see what I said about the sector.?). Having worked in the container shipping, ro-ro shipping, dry bulk, and project shipping markets for over 30 plus years, I didn't need a crystal ball to know where it was heading. In shipping, unlike the financial markets, where past performance cannot be reliably used to predict the future performance of an asset, the future can be predicted. Over the past 30 years, the boom and bust cycles have been the same. As the saying goes, "you can't teach an old dog new tricks". As a result of an external issue, there is a supply-side vacuum, rates go sky-high, and carriers forget those market restrictions are temporary and order/build ships at a rapid speed. As market conditions improve, they realize that available capacity plus that massive order book exceeds actual demand by a significant margin. It is a textbook example of what has been happening in the past few decades.?Only this time, carriers were able to make a bucketload of money, which could sustain them for some time. ?

Importantly be prepared, however, to experience vessel lay-ups, cost-cutting exercises, staff reductions (sadly not the very senior executives who ordered hundreds of ships), rate wars among carriers, and cutting out middlemen "Freight Forwarders, Brokers & Ships Agents". This has already started and will accelerate in the coming months.

Snapshot view of Xeneta Shipping Index by Compass (XSI??C, the Indices or the Index) represent BMR compliant indices for rolling short-term Freight All Kind (FAK) rates valid for less than 32 days, for a 40’ container. They are calculated daily and published at 4 PM London time.

It has been a grey season for container shipping and dry bulk, both of which are down 75.93% and 75.99% from their peaks, respectively.

Before discussing other global logistics news, I recommend reading the following article. The article highlights the shift away from China, albeit rather slowly. Perhaps "the great reset is on the horizon", but eventually, it is likely to occur. In China, things are not as cheap as many expect. Additionally, if there is anything we can learn from Covid, it is that we should not put all our faith in one country for our products/growth. Eventually, this will change both the dynamics of global trade and global politics.?

"Obviously, the technology manufacturing ecosystem in China isn’t about to disappear. But the people who built their careers and fortunes relying on China’s emergence as a production powerhouse have come to accept that the system they built is now in decline."

One of the hallmarks of supply chain resilience is change. Frank McKay, 捷普 SVP and chief supply chain and procurement officer, shares how companies must reevaluate their approach to processes, people, and technology to address today’s current supply chain challenges and the risks ahead.

On to other news......

Since August 2020, MSC’s brokers have completed the acquisition of nearly 250 second-hand containerships to usurp 2M partner Maersk as the biggest ocean carrier in capacity terms, suggesting the alliance deal may not be renewed when it expires in April 2024. According to Alphaliner data, the Geneva-headquartered carrier currently operates 709 vessels, for a capacity of 4.6m teu, compared with Maersk’s 711 ships and 4.3m teu.

The volatility, in terms of how many vessels more or less are sailing from week to week, has increased dramatically into the North America West Coast, according to the latest report from Sea-Intelligence. "Vessel delays/early arrivals, blank sailings, and extra-loaders, all increase the volatility in the number of sailings per week. Moreover, the fluctuations have increased sharply compared to before the pandemic," said Alan Murphy, CEO of Sea-Intelligence.

At a recent industry event in Hamburg, I had the pleasure of meeting Alan R. Murphy of Sea-Intelligence, who apart from asking all the right questions kept the event lively. Clearly, he must have been a real live wire at parties during his youth. An outstanding gentleman.

Data released by the International Air Transport Association (IATA) for October 2022 indicate that headwinds continue to affect air cargo demand. Global demand, measured in cargo tonne-kilometers (CTKs*), fell 13.6% compared to October 2021 (-13.5% for international operations). Capacity was 0.6% lower than in October 2021. Despite the year-on-year contraction, month-over-month capacity increased by 2.4% to prepare for the peak season at the end of the year. In October 2022, international cargo capacity increased by 2.4%.

Cargo volumes for European carriers decreased by 18.8% in October 2022 compared to the same month in 2021. This was the weakest performance of all regions and a decline in performance compared to September (-15.6%). This is due to the ongoing conflict in Ukraine. Inflation levels, particularly in Turkey, also impacted volumes. Compared to October 2021, capacity decreased by 5.2% in October 2022.

Air cargo pricing on some of the world’s major trade lanes continued to decline in November, bucking usual seasonal trends. The latest statistics from the Baltic Exchange Airfreight Index (BAI) show that spot and contract rates paid by forwarders on services from Hong Kong to North America slipped to an average of $6.49 per kg, compared with $6.74 per kg in October. Average prices from Hong Kong to Europe were also down from a month earlier, slipping to $5.62 per kg from $5.78 per kg in October.

Saudi Oil Exports Drop as Shipments to US and China Plunge. Saudi Arabia’s crude exports declined in November, as shipments to the US plunged to a multiyear low and flows to China slumped. Total observed shipments dropped to about 7.1 million barrels a day, the lowest since June, tanker-tracking data compiled by Bloomberg show. That compares with a revised 7.5 million barrels a day in October. Exports to the US fell to 83,000 daily barrels the lowest since Bloomberg began tracking the data in early 2017 from 387,000 in October. The November figure could rise, as ships hauling about 18 million barrels of Saudi crude that loaded last month still haven’t signaled their final destinations. (BBG)

Amazon is adding a supply-chain management service to its web services business, jumping into an increasingly competitive technology field as companies try to get tighter control of the flow of goods from factories to consumers.?Amazon’s launch of its cloud application, AWS Supply Chain, adds Amazon to a growing list of software suppliers, such as Manhattan Associates and Blue Yonder, that help merchants juggle increasingly complex cargo flows and inventory demands. Microsoft Corp. launched its own supply-chain management software platform earlier this month. (WSJ)

Automation & robotics the future of sustainable logistics. Net-zero targets are being driven by robotics & automation tech in warehouse logistics, though drone delivery has some way to go before widespread adoption. With supply chains typically being responsible for 80% of an organization’s carbon emissions, businesses are feeling the pressure to decarbonize logistics, and technology is the biggest single enabler when it comes to meeting net-zero targets.?Yet, technology is more advanced in some areas than others. Take drones, for example. Back in May, Walmart announced the largest drone-delivery system in the US, in a move designed to give it a competitive advantage in last-mile delivery.?

The European Union is proposing tough new rules to cut packaging waste and increase recyclability. Under the proposals, member states will have to cut packaging waste by 15% per capita by 2040, compared to 2018. Mandatory rates of recycled content in new plastic packaging will be introduced and there will be an aim that packaging is fully recyclable by 2030. The measures will apply to domestic and imported products. “European and non-European producers would face the same requirements,” said the European Commission (EC).

IAG Cargo, the cargo division of International Airlines Group (IAG), has worked with the FCDO, England and Wales Cricket Board (ECB), Lord’s Taverners, Football for Peace and the Sarwar Foundation to transport nearly 3,000 pieces of cricket equipment into Islamabad, Pakistan. The business has donated capacity to transport items such as cricket bats and balls, gloves, pads, helmets, other protective equipment, and cricket clothing (trousers, shirts, jumpers, and hats). This follows the recent flooding crisis the country is experiencing, where Pakistan is rebuilding not only its infrastructure but also human development.

A spectacular autumn day between Dollern and Hamburg a few weeks ago following an industry event and a quick weekend holiday......