The latest news in the logistics industry 09/21/2023
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This newsletter's summary
Figure of the week
-1,2%
According to the World Shipping Council, global container shipping volumes decreased by 1.2% in August 2023. This is the first time since February 2022 that container volumes have contracted on a year-over-year basis. The decline in volumes is attributed to a number of factors, including: the ongoing war in Ukraine, high inflation, and rising interest rates.
Quote of the week
"It's critical that we drive digitization of supply chains, because without it, there will be no transparency, and without transparency, there will be no accountability.” Christian Lanng ?CEO & Chairman at Tradeshift
US Container Rates: The Paradox of Falling Imports and Soaring Exports Amid Navigational Chaos for Exporters
Container rates in the United States present a contrasting picture for imports and exports. Import rates?have reverted to pre-pandemic levels, with some lanes even seeing rates dip below those levels. For instance, the Shanghai-Los Angeles import spot index?is down by 9%?from September 2018, and the Shanghai-New York index has dropped by 16%.
However, export rates?continue to surge, with both spot?and contract rates?standing at double-digit increases compared to pre-COVID levels. The Los Angeles-to-Shanghai spot rate, for example, has risen by a remarkable?66%,?while the New York-Rotterdam rate shows a substantial 27% increase?when compared to rates from five years ago.
Despite these rate hikes, the most pressing issue for exporters?is not the cost of shipping, but rather the disruption caused by irregular sailing schedules and inadequate communication from ocean carriers. These inconsistencies have led to higher expenses in terms of detention, demurrage, storage, and trucking costs.
Exporters find themselves grappling with a lack of timely and accurate data, such as the earliest return date?of ships and precise arrival information, which results in significant logistical challenges. The uncertainty created by these challenges dwarfs the impact of increased freight rates, making effective communication from carriers a critical need for the industry.
Air Belgium Pivots to Cargo & ACMI Amid Financial Struggles
Air Belgium?has decided to discontinue its passenger business?and concentrate solely on cargo?and ACMI services for passenger and cargo flights?due to financial difficulties that have led to debt accumulation. The airline made this announcement in a press release on September 18, citing chronic un-profitability?in its passenger business due to increased competition and various economic and geopolitical challenges.
These challenges include the impact of the?Covid pandemic, the Ukraine conflict, high?fuel prices,?inflation, and reduced consumer spending. These factors, combined with current market challenges, have compelled Air Belgium to change its strategy. According to the airline, cargo?and?ACMI services?represent two profitable lines of business with growth potential.
Despite numerous investments in recent years, the passenger business remains unprofitable, and turning it into a profitable venture would require substantial additional investments, which are not feasible. As a result, Air Belgium's Board of Directors has sought judicial reorganization?through an amicable agreement to negotiate with creditors for debt reduction. All passenger flights scheduled after October 3 will be canceled.
The company faced financial challenges due to the pandemic, which led to a drop in revenue?while fixed expenditures remained constant. Further hardships followed, including rising fuel costs?triggered by the?Ukraine-Russia conflict, economic challenges?tied to inflation, and a decline in consumer spending. In March 2022, the airline discontinued flights to unprofitable destinations and shifted its focus to South Africa?and Mauritius.
Air Belgium?entered the all-cargo market in 2021, initially operating Airbus A330-200?freighters?on behalf of CMA CGM?and subsequently adding Boeing B747-8 freighters to its fleet.?For more information on the airline's plans for its aircraft, inquiries have been made to Air Belgium.
Weekly logistics trivia
Hannibal Barca, one of history's most renowned military commanders, demonstrated a remarkable understanding of logistics during his audacious campaign against the Roman Republic?in the Second Punic War. Hannibal's success hinged on careful planning and resource management.
Hannibal's legendary march across the Alps in 218 BC showcased his logistical prowess. He meticulously calculated provisions for his army, ensuring they had adequate food, clothing, and weapons for the treacherous journey. He also leveraged local support by forging alliances with tribes along his route, securing additional supplies and intelligence about Roman troop movements.
Moreover, Hannibal demonstrated innovation and adaptability?in his logistics strategy. His use of elephants as both a symbol of intimidation and a practical means of carrying supplies through rugged terrain was a testament to his willingness to embrace unconventional solutions.
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In the end, Hannibal's strategic approach to logistics allowed him to achieve remarkable military successes against a formidable adversary, cementing his place in history as a master of warfare and supply chain management.
The key takeaways from Hannibal's story are:
All of these elements combined can turn the tide of even the most challenging endeavors.
China-Europe Freight Trains: A Decade of Resilience Amid Shifting Trade Landscapes
For an?NDRC official (National Development and Reform Commission) , China-Europe freight trains?have played a?significant role in international trade and economic cooperation over the past decade, serving 217 cities?in 25 European countries. These trains have completed approximately 77,000 trips, transporting 7.31 million twenty-foot equivalent units of freight valued at over USD 340 billion. Their efficiency has improved, with five dedicated routes that are 30% faster on average than ordinary routes, providing a more reliable service.
Despite challenges such as changes in trade structures and competition from ocean freight, China-Europe freight trains?remain resilient. They are becoming increasingly important for transporting goods, particularly high-value items. However, smaller logistics firms may face difficulties due to uncertainties in the business landscape.
While?the tumbling price of ocean freight affects rail cargo, operators believe that a market-oriented system will eventually dominate the sector, and subsidies?may need to be reduced as the industry evolves. Competition will drive improvements in services and routes, benefiting the long-term growth of China-Europe freight train services.
As the world grappled with the COVID-19 pandemic, China-Europe cargo trains served as a crucial alternative?when sea routes were blocked, demonstrating their reliability during difficult times. Although the global trade landscape has been impacted by weak demand in Europe and North America, the rail sector's impact has been less pronounced compared to the?maritime sector, especially for medium- to high-value goods transported on the China-Europe routes.
Changes in the structure of China-Russia trade, influenced by regional conflicts, have led to increased transportation of oil, gas, commodities, and chemicals via China-Europe freight trains.?While operators face challenges, the long-term outlook remains positive, with competition expected to drive the development of more reliable services and better routes in the future.
Customs & Regulations
???Until Next Week
DocShipper Team
Sources
https://www.reuters.com/business/global-freight-cycle-may-have-reached-lowest-point-kemp-2023-05-25/