milan Maersk

The future of box shipping: less vessel cascading and fewer liner alliances?

Vessel cascading has been an ever-present feature of container shipping since liner executives first understood the benefits of economies of scale and began the box ship capacity arms race.

But over the next few years, there are likely to be only a few arenas where it will take place, according to Drewry Maritime Advisors’ director of ports, Neil Davidson.

Mr Davidson also suggested that, with an outstanding orderbook of some 130 vessels of over 10,000 teu still to be delivered, the main areas that cascading could take place would be the North American Pacific coast.

There the maximum vessel size is expected to grow from 14,500 teu to 18,000 teu, and the west Mediterranean, where it is forecast to grow from 14,000-16,000 teu to the 18,000-22,000 teu range.

Other trades where smaller vessels continue to be deployed – for example, the Australian trades this year saw its first 8,600 teu vessel call – would continue to be constrained by port dimensions, he said.

However, he suggested that the most recent increases in vessel size – the largest ships growing from the 18,000 teu Maersk Triple-E, to the 23,5000 teu vessels currently under construction – could well be the last box ship size increases for a considerable period.

“Our analysis is based on the orderbook, and although there are some units of 23,500 teu under construction, in terms of length and beam, they are not dimensionally larger.

“In fact, the impact of ULCVs on the wider supply chain suggests that the maximum vessel size may have be to large,” he added.

He was referring the widespread belief that one of the causes of the recurrent port congestion over the past few years has been the introduction of ULCVs and the sheer number of containers they can unload in a single call. This has put huge pressure on hinterland supply chains.

Mr Davidson added: “There are also clear commercial reasons for not going bigger – service frequency has had to be reduced to fill those ships, and there has been an impact on market share, and carriers have needed to enter into alliances to maintain market share and fill those ships.” And he believes this this could have a deep impact on how shipping alliances are formed in the future.

“In the long-term, the most interesting thing is that, if we have reached the ceiling of maximum vessel size, and if container volumes in the market continue to grow, operators that currently need alliance partners to help fill their vessels may well find themselves able to fill them on their own and we may begin to see the break-up of alliances,” he said.

Source: The Loadstar

air pollution

Maersk aims to achieve zero CO2 emission by 2050

Container shipping company AP Moller – Maersk has unveiled plans to completely cut carbon dioxide (CO2) emission from its operations by 2050.

In order to meet the goal, Maersk intends to have carbon neutral vessels commercially viable by 2030, as well as accelerate new innovations and adopt new technology.

The company has called for a strong industry involvement to reduce emission from the shipping sector, which is estimated to carry around 80% of the world’s trade.

Maersk has so far decreased its relative CO2 emissions by 46% from the 2007 baseline, around 9% more than the industry average.

AP Moller – Maersk chief operating officer Søren Toft said: “The only possible way to achieve the so-much-needed decarbonisation in our industry is by fully transforming to new carbon-neutral fuels and supply chains.

“The next five to ten years are going to be crucial. We will invest significant resources for innovation and fleet technology to improve the technical and financial viability of decarbonised solutions.

“Over the last four years, we have invested around $1bn and engaged 50+ engineers each year in developing and deploying energy-efficient solutions. Going forward, we cannot do this alone.”

According to Maersk, the shipping industry’s solutions to reduce emission should be different from those of automotive, rail and aviation.

The electric truck, which is yet to make a debut, is expected to carry up to two twenty-foot equivalent units (TEU) and is estimated to cover 800km per charging.

A container vessel carrying thousands of TEU can cover around 8,800km during a voyage between Panama and Rotterdam in the Netherlands.

Maersk noted that, considering the 20-25-year lifespan of a vessel, the industry should come together and start developing a new type of vessel that will be used for sea journeys in 2050.

Next year, the company aims to start an open and collaborative dialogue with all potential parties to jointly tackle the issue of climate change.

Source: ship-technology.com

cmg

CMA CGM back in the black in Q3

CMA CGM moved back into the black in the third quarter, and recorded a net profit of $49m for the nine-month period.

However, in the third quarter, the French carrier was beaten to its ‘best in class’ financial performance ranking by Hapag-Lloyd which reported a stronger recovery.

CMA CGM’s turnover during Q3 increased by 6.3% on the same period last year, to $6.06bn, earned from a 5.5% rise in volume carried, at 5.26m teu.

The carrier said the 5.5% jump in liftings was mainly attributable to the strength of its transpacific, India, Oceania and Africa tradelanes.

Indeed, according to research by Alphaliner, on the transpacific eastbound trade from Asia to the US the Ocean Alliance carrier was the main beneficiary of the botched start-up of ONE, which resulted in the Japanese merged carriers’ combined volumes plummeting.

“After consolidating for the volumes of APL and ANL, CMA CGM has overtaken ONE to become the second-largest transpacific carrier,” noted Alphaliner.

However, CMA CGM saw its average rate per teu virtually flat, at plus 0.8%, while its unit costs jumped 7.7%, an increase of $55 per teu, compared with Q3 2017.

The disappointing increase in CMA CGM’s average rate is surprising, given the boost in its transpacific liftings and the 70-80% leap in freight rates on the route during the period, as shippers rushed to beat the hikes in US duty on Chinese imports brought in by the Trump administration.

This suggests the carrier had to discount rates on other tradelanes in order to protect market share. One UK-based forwarder told The Loadstar that CMA CGM was “now perhaps the most aggressive carrier” between Asia and North Europe.

On 7 September, The Loadstar reported: “CMA CGM has shocked the market by reducing Asia-North Europe FAK rates at a time when most carriers are trying to drive them up.”

The carrier’s FAK rates, valid from 24 September, lopped $200 off its 40ft rate, to $1,800.

CMA CGM said its increased costs – mainly due to the hike in the price of bunkers – “was only partially offset by the introduction of an emergency bunker surcharge”.

Operating income declined by 57.5% for an ebit of $241m and a margin of 4%, versus the 10.4% margin achieved in Q3 the previous year.

The net profit for the period was $103m, 68% lower than the year before, as CMA CGM admitted it had failed in its endeavours to pass on higher fuel costs to its customers.

By comparison, Hapag-Lloyd’s revenue during the same period, from liftings of 3.1m teu, came in at $3.5bn for an operating profit of $252m, an ebit margin of 7.1% and a net profit of $137m.

Source: The Loadstar

china usa

China-US trade war tariffs force manufacturing moves

The failure of the US and China to agree on trade at the weekend makes further tariffs on Chinese goods to the US seem increasingly likely.

But while most economists agree that trade wars are ineffective and harmful, some players in the logistics industry are seeing opportunities – mostly in air freight, which typically benefits from chaos and change.

The likelihood of 25% tariffs on a wide range of goods has seen the ocean freight industry surprisingly busy in the past couple of weeks, as exporters look to move goods to beat the 1 January deadline.

But ultimately, shippers and logistics service providers are looking to new manufacturing possibilities – and therefore supply chains – in South-east Asia.

Large numbers of US companies are talking of shifting manufacturer. Robert Rucker, CEO of The Tile Shop, said in an October earnings call: “With the Chinese tariffs, we are looking at moving. And right now: we’re at roughly 50% of our product coming out of Asia, my goal is to get that closer to 25% or even lower, and the potential for doing that right now is very good. We’re not waiting.”

James Simms, CFO of Vicor Corp, said in his earnings call: “The cost, going forward, may not be inconsequential, given the volume of components currently sourced from China. We are seeking non-Chinese alternate vendors.”

And Todd Bluedorn, CEO of Lennox International: “I’m not sure the Chinese tariffs are going to be short term. And so we’re taking action to sort of avoid the tariffs by moving to South-east Asia and other low-cost countries that can meet our requirements.”

It will take a while for companies to build new supply chains, and in the meantime carriers are already benefiting.

“It is the peak for China to the US, but it’s compounded by tariffs,” said Robert van de Weg, vice president sales and marketing for Volga-Dnepr Group. “There is a build up.

“A lot of this inventory was supposed to go by ship, but it’s going by air to be on time.

“If tariffs have a general effect on the economy and trade flows, there will be some change before it settles down into the new equilibrium.”

The question for carriers will be when to add capacity – and to where.

“South-east Asia could see new trade flows, Cambodia, Malaysia, Vietnam, Indonesia and Bangladesh,” said Mr van de Weg. “There will be more opportunities out of South-east Asia and a degree of chaos, as the supply chains won’t be ready. Plus, factories will have to move. However, I don’t believe the change will be sharp and sudden.”

AirbridgeCargo (ABC) is the V-D group’s Asia specialist and is currently looking at developing its South-east Asian network.

“We are looking at increasing the frequencies and maybe opening new markets. You don’t want to be too early, you don’t want to be too late. Don’t miss the boat, but don’t lose your shirt. You need to be prepared to go in. Increasing frequencies to existing points is the first step.”

ABC currently operates to Ho Chi Minh, Hanoi, Singapore and Taipei.

Mr van de Weg added: “Bangladesh is interesting. We have made progress on ACC3 certification there. We also think Indonesia and Thailand have potential. There is more and more infrastructure and more overland networks with Cambodia and Vietnam, and there is also a strong import market.”

Air freighter volumes appear to be rising in the region, with Thailand seeing international volumes this year above the market average growth, at more than 6%.

Cambodia’s Phnom Penh saw 24% growth, year on year, in cargo volumes in September. The Vietnamese civil aviation authority is forecasting 18% growth annually in freight volumes each year up to 2020.

Source: The Loadstar

christmas

Christmas bookings for sea freight need to be organised as soon as possible

Remember to book your sea freight imports in time for Christmas! ?

Please contact a member of our team as we have very competitive rates for this month – email enquiries@supremefreight.com or call 02380 337778

We handle all types of cargo, including full container load (FCL), less container load (LCL) and NVOCC groupage shipments. We have long standing relationships with a global network of agents at all origin ports which means that we can offer you the best possible service.

We have over 30 years experience in the shipping industry, and we can arrange all the necessary documentation to make sure that your goods are transported as seamlessly as possible.

Demand will see a massive increase at this time of year and we can help make sure that stress levels are kept to a minimum!

bunker surcharge

CMA CGM group announce raise to emergency bunker surcharge from December 1st

CMA CGM Group, which includes ocean carrier APL, has raised its emergency bunker surcharge (EBS) to $100 per teu for all deepsea cargo movements from 1 December.

Introduced by the French carrier and a number of its peers on 1 June, in response to higher fuel prices, the controversial EBS was initially set by CMA CGM at $55 per teu.

The charge varied between carriers, for instance Maersk Line’s EBS was $60 per teu, while MSC did not publish its EBS and referred to it as a “temporary measure”.

Shippers expressed anger about the attempt by carriers to impose similar surcharges, which they suggested could be construed as price signalling, and also questioned the validity of the word “emergency”, alleging the container lines were attempting to claw back compensation for the gradual rise in bunker costs over the past quarters.

Indeed, the European Shippers’ Council (ESC) complained to the European Commission, saying: “The application of any emergency surcharge should be reserved for events that cannot be foreseen (such as a crisis influencing the availability of oil). In those situations, it would be unreasonable to have the carrier bear alone the impact on the price of bunker fuel.”

In practice however, many shippers had contracts that were inclusive of bunker surcharges and were therefore unaffected, while for spot business the EBS was gradually rolled up into the freight rate.

It is surprising therefore after the failure of carriers to make their EBS notices stick to see that CMA CGM is persisting with its surcharge.

CMA CGM justifies its EBS hike based on the historical average price of Brent crude in October. However, from its high of $86 a barrel last month its price has fallen to a six-month low of $72, due to supply and trade war concerns.

Meanwhile, most of CMA CGM’s peers are focusing on preparing shippers for a surcharge to compensate for the higher cost of low-sulphur fuel after the IMO’s new 0.5% sulphur cap regulations commence on 1 January 2020.

Equally controversial, given the opaque nature of the carriers’ various low-sulphur fuel surcharge formulae, many shipping lines are proposing to roll out their new bunker surcharge recovery mechanisms from 1 January next year – some 12 months before the IMO regulations come into force.

Currently, heavy fuel oil (HFO), which ships consume in the main legs of their voyages, is at around $450 per tonne,, whereas low-sulphur marine gas oil (LSMGO) is $200 -$250 per tonne more expensive.

Some analysts predict the ‘spread’ could double come January 2020, but equally there are a few experts that suggest that the gap could eventually be much narrower, given that in terms of supply and demand, the majority of ships will need to consume low-sulphur fuel, with perhaps only 5% fitted with exhaust gas cleaning scrubbers still requiring HFO.

They also put forward an argument that the higher demand for low-sulphur fuel will induce more refiners to produce more, leading to long-term decline in prices.

Source: The Loadstar

air freight

Peak season is upon air freight

Peak season is quickly coming upon the air freight industry. 

Forwarders are reporting limited capacity on Asia-US, with rates from Hong Kong into New York now hitting HK$36 per kg (US$4.58) on major carriers such as Cathay, Cargolux and Asiana. Los Angeles rates are marginally lower, hovering at between HK$30 and HK$35++.

“The air freight market is very busy in China and Asia,” said one Asia-based forwarder. “The rate is increasing every week. But space is still extremely tight, even with high rates.”

He said capacity ex-Hong Kong was particularly in demand, and bulky, loose or dense cargoes were struggling to find space – “It’s very busy.”

Forwarders have a three-day wait to fly cargo out of key hubs in Asia, he added.

Emirates is thought to be full already for the rest of the week, ex-Hong Kong.

Shanghai is also seeing strong demand, and there has been a rise in charter flights to the US, with charter rates increasing apace, and some destinations now not available.

Crucially, November 11, singles day, is coming up and forwarders are predicting higher demand from then through to the end of November.

One EU air freight forwarder said: “The market is going north quickly on air freight inbound flows from Asia. It’s the usual seasonal trend, but the market is tightening up.”

But, he added, he didn’t see the peak being as strong as last year.

“Last year was pretty special. But I reckon there will be some mega peaks and spikes in November,” he said.

“The transpacific market got really busy a week or so back and it is usually two weeks ahead of Europe. European carriers will go for the high dollar rates into the US – and then Europe rates will increase to win back the space. It’s market dynamics.”

Europe too is already seeing movement, but rates are said to be more unsettled, although rising, with some key tradelanes out of Shanghai already busy, with a four-day wait on ad hoc cargo.

Fuel prices are also on the rise, with many carriers raising surcharges, and all carriers out of Hong Kong will raise surcharges from Thursday.

The real question will be if airlines manage to profit significantly – and keep rates high by restricting capacity and selling as much ad hoc space as possible during the peak.

“As airlines went into blocked space agreement discussions this year, their view was that there was too much capacity contracted in 2017, and they didn’t get the results they wanted,” said Neel Jones Shah, head of air freight for Flexport. “So they kept it back this year.”

Another forwarder added: “There are a lot more capacity protection agreements this year that have been signed with the carriers. My gut feeling out of China is that it’s 50%  blocked space agreements and 50% the floating market – we are starting to get two market mechanisms, like you have in shipping.”

The other question is how e-commerce will affect the peak – and for how long.

Speaking at a CIFFA event two weeks ago, Jamie Porteous, chief commercial officer for Canada’s CargoJet, noted: “The peak is explosive, it takes off after Thursday and lasts to the end of January.

“It’s dominated by e-commerce. We have seen a real transition from single digit growth – we’ve now had double digit growth for ten quarters.”

Another UK forwarder added: “The cycle on e-commerce stops much later, people are ordering right up to Christmas. And there is a really early Chinese new year this year, so there will probably be a lot of air freight in January as the Chinese factories won’t have that long.”

Source: The Loadstar

Heathrow Cargo

Heathrow cargo spend set to increase

Heathrow has been given the green light to spend £43m on its cargo activities – but input from carriers could stretch the budget further.

Head of Heathrow Cargo Nick Platts has long campaigned for a freight budget, and now has a five-point plan for the cash.

But one item on his wish list – a “forecasting and insights workstream”, which would give the airport better information on its cargo activities – is actually data the airlines already have.

“It would give us a macro level forecast with forward projections. Then we can identify high-risk days for congestion, and that can be built into the planning model. It’s really about better resource planning,” he explained.

“Leicester University has developed a flight level tool – it looks at aircraft type, destination and tonnage forecast and could help us to establish demand at the control posts. You then look at the landside vehicle movements.

“We need better insight into what’s moving, when and how. All we find out is what has departed or arrived, with no visibility on trucks or transfer traffic. We estimate that about 45% of volumes are transfer traffic – but we don’t know. So we don’t know what facilities to provide.

“We know the US is a big tradelane – but what’s moving on that lane? Do we need special handling facilities? Should we change the terminal design? Should it be biased towards traffic to the US, or Asia?

“All the master planning designs are informed by passenger flows – we need to do that for cargo.”

The carriers already have the data, but Mr Platts said they did not want to share it with the airport.

“We don’t know our trade flows, and we need to know. If the airlines won’t work with me, we will have to spend money – their money in fact – on finding information they already have.”

Another item on his list is an airside transfer facility for aircraft-to-aircraft movements, with a Border Force station.

“Border Force has indicated that it would look favourably at a transfer facility,” said Mr Platts. “And we had one airline agree, and helped choose a spot for it. Then we got caught up in governance and the airline ended up changing its mind.

“However, another airline is interested and we will have more discussions about the building and what facilities are needed.

“It will be fairly basic for now, but as part of the expansion programme we have set aside additional land for screening and will work with airlines on that.”

The initial facility will cost about £1m, said Mr Platts.

Next on the shopping list is a truck park near Terminal 4.

“There will only be space for about 75 vehicles, but it’s a start,” said Mr Platts. “We will have to relocate the existing users, add toilets and showers for the hauliers and we are talking to landlord Segro as to how we link it to the cargo area.”

The park is one of the more expensive items on the list – at about £14m – as the site needs to be cleared.

Next up is a single examination area for Border Force, Customs and a new animal reception centre.

“It will be a more efficient use of inspection spaces and will reduce traffic,” said Mr Platts. “And it will be a much more efficient operational set up. The animal centre needs more capacity; we have identified a site and we have the broad requirements.

“It’s not just a new building, it’s about using new technology and introducing new ways of working.”

The new centre comes with a price tag of £23m.

Heathrow also plans to build a new stillage facility, with racking for empty ULDs.

“At the moment containers are stored on the ground, and we have found that they blow loose – and have even blown towards the runway.”

The rack will hold about 870 ULDS and was once all set to be developed, until the supplier tasked with building it went bust. Heathrow is now looking for a new supplier for the facility, which will cost about £3m.

Heathrow announced last week that volumes were up 1.5% in the first nine months of the year, reaching 1.3m tonnes, which it said was due in part to five new services to China.

Source: The Loadstar

 

christmas

Christmas bookings for sea freight need to be organised as soon as possible

Are you feeling festive yet?! Maybe not, but sea freight imports need to be organised soon to get them in time for Christmas! Time is of the essence.

Please contact a member of our team as we have very competitive rates for this month – email enquiries@supremefreight.com or call 02380 337778

We handle all types of cargo, including full container load (FCL), less container load (LCL) and NVOCC groupage shipments. We have long standing relationships with a global network of agents at all origin ports which means that we can offer you the best possible service. We have over 30 years experience in the shipping industry, and we can arrange all the necessary documentation to make sure that your goods are transported as seamlessly as possible.

Contact us as soon as possible with your needs so that we can make sure that you don’t miss out. Demand will see a massive increase at this time of year and we can help make sure that stress levels are kept to a minimum!

port terminal

Port terminals need to be more cost effective

Pressure is mounting on container ports to improve efficiency in terminal operations, as wholesale change in the shipping industry continues to increase competition and drive down revenue per box.

According to Mark Welles, Navis vice president and general manager Asia Pacific, terminal operators are “aggressively attacking their cost base and figuring out ways to use some of their tools to do more with less”.

This includes using automation to drive incremental changes that improve operational efficiency, whether waterside or at the terminal gate.

“Terminals are making the small or large changes they need to keep their businesses moving ahead against the challenges from consolidation on the carrier side,”

“Some terminals are handling more volume, but in some markets the revenue per teu is decreasing – or certainly not increasing the way it used to – so they’re having to manage their business in a different way.

“That efficiency drive has two parts: one is to be the better service provider [than regional port competitors]; but also to reduce your costs, which therefore either gives you more flexibility on the commercial side, or it means you’re a more profitable business,” he added.

Mr Welles was speaking after a visit to the Qingdao New Qianwan Container Terminal (QQCTN), which uses Navis N4, the port software specialist’s flagship terminal operating system (TOS).

“Full automation is working well for them and helping to set the stage for what’s possible in China and Asia, in terms of the success they’ve had,” he explained.

Navis has worked with ports to implement around 120 software “go-lives” at terminals around the world over the past two years. The port of Tianjin managed to install N4 at six terminals in less than 12 months, a feat Mr Welles described as “almost unheard of”.

The importance of a well-functioning TOS was brought into sharp focus by the IT failure experienced recently at Felixstowe. The botched installation of an in-house TOS led to prolonged operational interruptions and subsequent diverted vessel calls. The resulting supply chain disruption – which was at first contained to UK ports – has now spread to northern Europe.

It appears Hutchison, the Hong Kong port group that runs Felixstowe, was bucking a trend with the decision to develop its own TOS.

“It’s fair to say, from a macro-level, over the past five years we’ve seen more and more of the regional and global terminal groups partnering with an experienced solutions provider to ‘buy don’t build’,” said Mr Welles.

He claims ports generally prefer suppliers that provide turnkey solutions for the full spectrum of systems and equipment required for each aspect of terminal operations.

Source: The Loadstar