China Archives | Page 17 of 26

Transpacific container shipping

Feb 21, 2024 | China, Sea, Supply Chain, United States

If we were to try and define a single factor that defined transpacific container shipping (along with most other routes) in 2023, it would probably be shipper complacency brought about by the rebalancing and normalisation of supply chains, following the unprecedented disruption of the COVID years.

However, ‘normal’ tends have a very limited span in shipping, and the next cycle of disruption is never far away.

The first warning signs began to emerge last summer when the Panama Canal Authority first began to restrict canal transits due to the historic drought impacting Central America.

Then in December the Red Sea Crisis first made headlines and within a matter of weeks hundreds of container ships were forced to divert away from the Suez Canal routing to avoid attacks by Houthi rebels off the western coast of Yemen.

The resulting diversion around southern Africa’s Cape of Good Hope has absorbed much of the capacity carriers had laid up during the lull, delayed cargo deliveries, and doubled rates on some lanes, while also prompting carriers to implement war-risk and other surcharges.

Cooling spot market
Spot rates from the Far East into the US have softened since the last round of GRIs at the start of February, with FAK rates into both the West Coast and East Coast falling slightly, but remaining at very elevated levels.

But a cooling spot market doesn’t mean the crisis is over, with spot rates from the Far East to the US West Coast still almost 200% higher than the end of 2023, with East Coast rates up 140% and the shipping lines will be doing everything they can to make the latest mid-February GRIs stick.

How long the Red Sea disruption will continue is unknown, but it’s likely that shippers will face pressure on prices and disruption through the first half of 2024.

Uncertainty and unease
While the Panama Canal situation did not result in excessive delays during H2 2023, it has created disruption and added cost, encouraging many US importers to seek East Coast services and/or overland rail connections from the West Coast.

And now we learn that, with the drought continuing, water levels in the reservoir that feeds the operation of the Panama Canal will sink below the record low levels seen last year – around 8ft lower than ideal for safe navigation.

If established rainfall trends hold, reservoir water levels will fall well below last year’s record lows, forcing limits on the number of vessels that use the canal, restrictions on vessel utilisations and surcharges of some 6.5%.

Add to that the uncertainty surrounding labour negotiations that will begin in the spring on a new longshore contract on the East and Gulf coasts, and 2024 is shaping up to be a year of great unease for transpacific shippers.

If you have any questions or concerns about the issues raised in this article, we can review your situation and explain your options, including alternative carriers, ports and routes.

To discover how we can support your transpacific or transatlantic trade, or to learn more about our ocean solutions, please EMAIL Metro’s Chief Commercial Officer, Andy Smith.

China dumping fears growing

Feb 21, 2024 | 4PL, Automotive, China, Customs, Economics, EU, International Trade, Retail

The United States is voicing increasing concerns that Chinese manufacturing overcapacity will hit world markets, while the EU launched an anti-dumping investigation into China’s EV industry last year.

Senior US Treasury officials told the Financial Times this week that a visiting US delegation made its concerns clear that Chinese policies are focused on supply and that overcapacity will hit world markets.

The US is most concerned about advanced manufacturing and clean energy sectors such as electric vehicles, solar panels and lithium-ion batteries, while the EU has already launched its own anti-subsidy probe into imports of Chinese electric vehicles.

Chinese brands exported 280,000 vehicles to the EU in the first ten months of last year, with BYD, China’s biggest EV maker, selling 526,400 EVs globally last year. Yet the carmaker wants to increase its sales in Europe to 10% of global volumes by 2030, equal to 800,000 vehicles a year.

Elon Musk has already gone on record to say that China’s EVs are extremely good and that if there are no trade barriers established, they will pretty much demolish most other car companies in the world.

However, exports from China have been affected by RoRo capacity shortages, with BYD among the manufacturers that have commissioned their own RoRo vessels.

The EU launched its anti-subsidy probe into China’s EV industry last year, alongside several other investigations into allegedly unfair Chinese trade practices, including punitive tariffs on imports of plastic for bottles and opening a probe into suspected dumping of biofuel.

China has launched reciprocal anti-dumping investigations and their commerce ministry this month announced plans to support the healthy development of overseas EV expansion, with BYD planning to build an assembly plant in Hungary.

The Chinese point to the fact that the US Inflation Reduction Act makes it cost-prohibitive to import Chinese lithium batteries and EVs, while nearly one-third of Chinese EV exports last year were cars of Elon Musk’s US company Tesla, produced at its factory in Shanghai.

And while US Treasury secretary Janet Yellen is expected to raise Chinese overcapacity with her G20 counterparts when they meet in São Paulo later this month, western manufacturers are facing US pressure to sever links with China following claims of forced labour in its supply chain.

US Customs impounded several thousand new VW vehicles because a Chinese subcomponent is alleged to have been manufactured in breach of forced labour laws.

And while we have seen significant spikes in demand from Thailand and Vietnam, with fashion brands in particular diversifying sourcing, there is still a huge proportion of the global supply chain reliant on China.

While leading global brands including Apple, Samsung, Sony and Adidas have shifted some production out of China, it only represents an incremental shift and it is clear that they are not leaving the region.

We continue to monitor the diversifying growth in production around south-east Asian countries, Latin America and EMEA, to support our customers’ diversification and sourcing strategies.

We have fixed price and long-term global capacity agreements in place with sea and air carrier partners, to support all your sourcing requirements with resilient, consistent and reliable supply chain solutions.

Our cloud-based supply chain management platform, MVT, simplifies global sourcing and vendor management, by making every milestone and participant in the supply chain transparent and controllable, down to individual SKU level.

EMAIL Andrew Smith to review our current freight profile movements to and from China and Asia.

The transpacific container shipping outlook

Feb 7, 2024 | 4PL, China, Sea, Supply Chain, United States

Transpacific container shipping lines are imposing surcharges and higher freight rates due to the ongoing Suez and Panama Canal disruptions, with the cost burden felt most by small volume shippers, but the biggest cargo owners are also feeling the heat.

Since the major container shipping lines began diverting vessels around Africa’s Cape of Good Hope in mid-December, spot container rates have, on average, doubled globally.

Shipping lines have told the US government that the longer transit around southern Africa increases the distance a container ship travels from Asia by about 3,300 nautical miles. Resulting in an additional five to 16 days of transit time depending on the destination.

Along with the higher operating expenses of a 40% longer voyage, the lines argue that they need to rewire their entire global network. Which means making schedule changes, adding ships to maintain weekly port calls on a service loop and repositioning containers, all of which point to higher costs for carriers.

The sudden and sharp increase in ocean freight costs came as the market was expecting normalised demand and a surplus of new ships to keep freight rates suppressed during 2024.

Since the unfolding of the Red Sea crisis, and the drought impacting ship transits on the Panama Canal, carriers have levied an array of surcharges, but the surcharges are not being widely applied to BCOs, as they often have protections in their contracts, and mostly carriers are honouring those protections.

But ocean carriers are now looking for ways around those protections. In January, the FMC granted waivers to its 30-day notice period for adding new surcharges, allowing carriers to immediately add the charges due to the urgency of the Red Sea security situation.

A poll of the biggest shippers, beneficial cargo owners (BCOs) found that only 35% of them are having laden containers accepted under their original contract terms, with the vast majority being pushed to FAK [freight-all-kinds] spot market rates, which include added surcharges.

BCOs in the United States believe that ocean carriers have been targeting certain customers for higher rates and surcharges, pushing them towards FAK spot rates that are 400% higher to the US West Coast and 300% higher to the East Coast, for cargo loading in the second half of January.

Many major BCOs with volume commitments above 60,000 FEUs annually are still paying their contracted rates, which suggests an unwillingness by the transPacific shipping lines to upset their largest customers, particularly for gains that may be short-term.

Ocean carriers including Maersk, Hapag-Lloyd and CMA CGM are also using emergency clauses to say they cannot fulfil existing contracts under current terms, requiring shippers to pay surcharges to move their freight.

While ocean freight rates are nowhere near the highs experienced during the pandemic, increases are not just being applied to directly impacted cargo, but also to other routes, because of equipment availability, with shippers often subject to “emergency operational surcharges” on various trade lanes due to the Red Sea crisis.

The impact of Suez-related surcharges and rate hikes on shippers will be the focus of a Federal Maritime Commission hearing this week, to ensure the new fees and surcharges actually cover real costs and are not intended for profit.

We negotiate long-term and protected contracts with shipping lines across the alliances to secure space and rates, so that we can provide the best alternatives and options, whatever the situation.

To learn how we can support transpacific trade, or to learn more about our ocean and air solutions, please EMAILour Chief Commercial Officer, Andy Smith.

The Gemini Cooperation

Feb 7, 2024 | 4PL, Chemical, China, eCommerce, Economics, Exports, International Trade, Sea, Supply Chain

On the 17th January 2024, the 33rd day of the Red Sea crisis, Maersk and Hapag-Lloyd announced that they were forming a new shipping alliance – The Gemini Cooperation – in a major shake-up to the container shipping market on the East-West trade lanes.

Industry analysts have been predicting that with 2M’s demise already in the works for 2025, the remaining alliances would be breaking up over the coming year and we would see a new alignment of partnerships on the east-west trade.

Hapag-Lloyd will exit THE Alliance and link up with Maersk in February 2025 after the dissolution of the 2M Alliance, to form the Gemini Cooperation’

Operating a combined fleet of 290 vessels (equivalent to 3.4 million TEUs) Gemini will cover seven global trades, including coverage of the Europe – Middle East and Indian Subcontinent trades, besides the East-West trades.

Gemini’s network will be structured around 12 ‘hub-and-spoke’ terminals in Asia, EMEA, North and South America, from which Gemini will offer 26 mainline services, with schedule reliability in excess of 90%, a level that would differentiate Gemini from other alliances.

This leaves ONE, Yang Ming and HMM in a very vulnerable position, potentially unable to build a network matching those of the Ocean Alliance, MSC and Gemini.

The pressure is then on these three carriers to either lure a new partner out from Ocean Alliance, or re-invent a new service concept.

But, with the playing field having changed so radically the pressure is also on Ocean Alliance members CMA-CGM, COSCO and Evergreen, who will be asking themselves whether the current alliance setup is still fit for purpose or whether a new partnership might be better.

Additionally, the removal of the EU anti-trust exemption by the end of April 2024 could add to the pressure on Ocean Alliance as they will be significantly larger than the other groupings, and could well become the focus for competition authorities if they have a political need to show action following the exemption removal.

While Maersk and Hapag-Lloyd will be part of the Gemini partnership for three years, after which a 12-month notice period will be required, Alliances tend to have a lifespan of roughly 5-8 years, which means the re-calibration we see now is most likely be the shape of the market on the East-West services into the early 2030s.

If you have any questions or concerns about the Gemini Cooperation, or would like to discuss the wider implications of the shipping alliances, please EMAIL our Chief Commercial Officer, Andy Smith.