Sea Archives | Page 28 of 70

Container ship fires trigger operational and financial risks

Aug 19, 2024 | Insurance, Sea, Supply Chain

The temporary closure of the Beilun Phase III Terminal at Ningbo (one of the world’s busiest container ports) following an explosion on the YM Mobility on the 9th of August, is yet another example of the fragility of global supply chains and the inevitable ripple effects such events have on shipping operations.

Even though operations resumed on the 12th of August, the brief interruption is expected to exacerbate existing congestion at major Asian ports, leading to delays and highlights the vulnerability of global trade to sudden disruptions.

Shipping schedules are likely to deteriorate further, which will directly impact the timely delivery of goods, which could lead to cascading effects across industries, particularly those with narrow sales windows, or reliant on just-in-time delivery.

While there will always be options to mitigate these delays, such as rerouting through less congested ports, the full impact of incidents like the YM Mobility fire only become apparent in the ensuing weeks. And while it’s possible to protect the business from supply chain shocks, having comprehensive marine insurance to protect the businesses from financial shocks is equally critical.

The Ningbo fire is not an isolated incident. Just two days later, on the 11th of August, another fire broke out aboard the MSC Capetown III at Sri Lanka’s Port of Colombo. This fire, which began in the under-deck cargo space, escalated to an explosion.

Despite the successful containment of the fire, the incident once again brought attention to the recurring issues of mis-declared cargo and inadequate insurance coverage.

Fires aboard container ships are not uncommon, with recent events involving the Maersk Frankfurt (in July) and YM Mobility further emphasising the need for shippers to ensure their goods are adequately protected. Mis-declaration of cargo remains a significant problem, putting both the vessel and other cargo at risk.

One critical aspect that many shippers overlook is the principle of General Average (GA). In the event of an emergency where costs are incurred to protect the vessel and complete the voyage, all cargo owners are expected to contribute to these expenses. However, without proper marine insurance, shippers may find themselves liable for significant costs, even if their own cargo was not directly damaged.

Shippers must recognise that relying solely on the limited coverage offered by freight forwarders or carriers is insufficient. Comprehensive marine insurance, such as Metro’s All Risks cover, offers essential protection against total loss, damage, and GA declarations, safeguarding businesses from potentially catastrophic financial losses.

In conclusion, the recent fires at ports like Ningbo and Colombo serve as a critical reminder of the vulnerabilities within the global supply chain. Businesses need to be prepared for disruptions and protect their financial interests with adequate marine insurance, ensuring that they can weather the inevitable storms that arise in global shipping.

When General Average is called, the consignee will need to provide security for the cargo’s proportion of the General Average, typically a percentage-based deposit, or an Underwriter’s Guarantee.

Metro’s All Risk marine insurance covers the full value of your goods and protects you against all loss of cargo and the risk of General Average, including your Underwriter’s Guarantee.

For further information on our marine insurance cover and to ensure that you have full liability, please EMAIL Laurence Burford, Chief Financial Officer.

Bangladesh supply chain disruptions

Aug 7, 2024 | Air, International Trade, Sea, Supply Chain

Bangladesh’s Prime Minister, Sheikh Hasina, arrived in India this week following the army’s seizure of power after violent riots. This development adds another challenge to global supply chains, with the world’s third-largest garment exporter now experiencing the world’s longest vessel berthing delays.

Around 50 ships are queuing outside Chittagong port following weeks of protests, curfews and internet outages, all of which culminated on the 5th August with the resignation and flight of the Prime Minister, as protesters stormed her palace in Dhaka.

Chittagong, which handles over 90% of the country’s international trade, now has the worst berthing delays in the world, with many ships forced to wait in the Bay of Bengal for a week or longer.

The port is overwhelmed with tens of thousands of containers filled with imports and exports, with import boxes incurring substantial demurrage charges after four days, which the Federation of Bangladesh Chambers of Commerce and Industry has urged the government to waive.

The massive stockpile of containers now occupies about 80% of available yard space and typically, congestion begins to impede port operations when yard space usage reaches 60%, but with customs clearances at the port falling by 85%, the backlog is not being cleared.

Disruptions in rail transport have also impeded the flow of imported products, while cross-border links with neighbours including India and Bhutan have been closed for the past couple of days.

Bangladesh exports approximately $47 billion worth of garments annually to global clients. Any potential sanctions or trade restrictions could severely impact the economy. Therefore, maintaining diplomatic balance with Western countries is essential for Bangladesh’s interim leaders.

Meanwhile, airfreight rates from Bangladesh to major Western destinations have skyrocketed over the past two weeks, as 3,000 tonnes of export cargo have accumulated at Dhaka, the country’s main airfreight gateway.

Exporters claim that carriers are exploiting the demand surge, increasing rates by up to 20% to various destinations. With airfreight rates at Dhaka significantly higher than those at Kolkata.

Despite the delays, no additional freighters have yet been deployed at Dhaka to help clear the backlog, and relying solely on the belly-hold capacity of passenger planes means only 600 to 700 tonnes of cargo are being transported each day.

It is clearly going to take a little time to clear the cargo bottleneck and shippers may want to consider alternative services to direct air in the short-term, including air/air via Colombo, Singapore or Dubai. Road/air via Delhi, or sea/air via Colombo and Dubai.

We are closely collaborating with clients affected by the evolving situation in Bangladesh to ensure minimal disruption to their air and sea traffic.

Our dedicated operations teams and local partners are navigating the complex challenges at Chittagong and Dhaka, maintaining the integrity of our customers’ supply chains amidst ongoing regional tensions.

If you have any concerns about the issues discussed or would like to explore our range of contingency services, please EMAIL our Chief Commercial Officer, Andy Smith.

Asia westbound market update

Aug 7, 2024 | Air, China, International Trade, Logistics, News, Sea, Supply Chain

Air and sea freight from Asia continues to demonstrate remarkable resilience and growth, fuelled by robust demand, strategic capacity management, and dynamic trade routes, with India recording significant increases, driven by pro-industry government initiatives, eCommerce, and manufacturing growth.

Air Freight
The latest data from the International Air Transport Association (IATA) for June highlights significant demand for airfreight out of Asia, which has continued, potentially extending well into 2025, fuelled by sustained eCommerce demand.

For exports from the Asia-Pacific region, the World ACD index reported a 25% year-on-year increase, with Asia-Pacific to US shipments up by 67%. However, China-US tonnage declined by 8%, with China-Los Angeles experiencing a 23% drop, marking a three-month trend of decline.

Despite the LA drop, airfreight has largely remained impervious to political and economic challenges, with US customs crackdowns on eCommerce deliveries from China not dampening the market.

India’s air cargo market is particularly bullish. Total volumes at Indian airports in Q2 2024 rose by 14% year-on-year, with international flows up 20%. This growth can be partly attributed to a modal shift from widely disrupted ocean services due to the Red Sea crisis, especially for urgent or time-sensitive shipments.

Sea Freight
As we progress through the traditional container shipping peak season, analysing demand, prices, planned levels of blank sailings and capacity deployment provides valuable insights into carriers’ confidence in the 2024 peak season.

Ex Asia freight rates are anticipated to stay high until the end of the peak season, at least until the Golden Week, while strong increases in outbound demand from India have led to increased rates and equipment shortages.

For the Asia-North America West Coast route, carriers have planned to blank 4% of capacity, similar to pre-pandemic averages and 2020 levels. This is significantly lower than during the pandemic years when blank sailings were forced due to port congestion.

Capacity growth for the same period in 2024 is set to be 25% higher than in 2023, and 10% higher than in 2020, which saw peak capacity deployed in terms of TEUs. This strong capacity growth and relatively low level of blank sailings suggest that carriers are optimistic about the peak season.

On the Asia-North Europe route, the planned blanked capacity is 6% for the next 10 weeks, slightly higher than in 2020 and pre-pandemic averages, but not by much. There is no year-on-year growth in deployed capacity for 2024. However, in 2023, the trade saw a 13% year-on-year capacity growth, which was high compared to historical averages and exceeded the demand levels at that time.

The willingness of carriers to maintain this elevated capacity level in 2024, along with the relatively low number of blank sailings, indicates a strong and confident outlook.

However, with ocean supply chains still under significant pressure, concerns remain about a capacity crunch in the coming months, especially if disruptions such as the ILA East Coast strikes and China tariffs occur. Carriers flor now have opted to keep capacity elevated.

Port Congestion
The latest port congestion data reveals extensive dwell times as the Red Sea crisis continues to impact operations. The top five congested ports globally include Durban with an average 8 day wait time, Ningbo with 6 days, Vancouver with 4 days, Los Angeles with 4 days, and Chittagong which worsens each day.

Over 60% of the South-east Asian ports analysed saw rising congestion over the quarter, while in Europe, 12 of 18 analysed ports reported increases.

Singapore congestion is improving as ships are skipping the port, though Barcelona and Valencia are still congested and there is an ongoing risk of strikes in Hamburg and Bremerhaven.

With ongoing shortages in empty equipment, high vessel utilisation and port congestion, further exacerbated by shippers front-loading to avoid delays, rates are likely to stabilise at high level in the coming months.

The unprecedented demand for ocean freight, combined with ongoing challenges in equipment, capacity, and costs, suggests that the next few months will be complex and potentially turbulent.

We encourage you to contact us now if you have any urgent or high-priority orders on the horizon. Sharing your shipping forecasts with us will enable us to secure space on the best services to meet your deadlines and at the most competitive rates.

To discover how we can enhance your ocean freight solutions, please EMAIL our Chief Commercial Officer, Andy Smith.

US market update: Navigating high demand and looming strikes

Aug 7, 2024 | Air, Exports, International Trade, News, Sea, Supply Chain, United States

Shippers in the US are currently navigating a particularly challenging landscape, marked by elevated air cargo demand and looming threats of labour strikes on the East and Gulf coasts.

Air Cargo
Air cargo on the main trade lanes out of Asia remains in peak season mode. The situation is driven by distressed cargo from the Red Sea and sustained eCommerce demand, keeping spot rates high. The recent global IT outage at Microsoft, which caused massive flight delays, cancellations, and cargo backlogs, did not significantly impact the air freight market. Cargo load factors returned to normal levels within ten days.

Air freight rates from Shanghai to North America are currently 25% higher than last year. Growth in air cargo demand is expected to continue into August and September, with potential for further increases if the peak season extends into the fourth quarter.

Sea freight and the threat of East and Gulf coast strikes
The International Longshoremen’s Association (ILA) is seeking an 80% wage increase over its next six-year contract with maritime employers on the East and Gulf coasts. The ILA has issued a 60-day strike notice to the United States Maritime Alliance (USMX), warning of strike action by its 45,000 members if a new deal is not reached before the current contract expires at the end of September.

The ILA’s wage demand is significantly higher than previous agreements and follows other union victories in contract negotiations. Shippers using container ports along the US East and Gulf coasts have limited options if the ILA begins strike action on 1st October. Importers are advised to front-load cargo to these ports as outbound capacity from Asia has been tight for several weeks. Space on vessels needs to be booked immediately to ensure arrival by 30th September.

Canadian routings for inbound cargo are increasingly uncertain due to the threat of a country-wide rail strike, while diversions through Mexico present significant logistical challenges, including limited vessel space. Short ILA stoppages can be managed with East Coast ports capable of clearing backlogs quickly. However, prolonged stoppages of a week or more could take a month to recover from, causing widespread disruption.

Diverting services to avoid the US East and Gulf coasts poses its own challenges. West Coast capacity and container equipment shortages are likely to worsen, with US imports expected to increase by 14% year-on-year in August and resilient consumer spending maintaining demand. The current rate differential between East and West coasts is the widest since October 2022 but is expected to narrow as East Coast spot rates decline ahead of the potential ILA strike.

Carriers are booked through mid-August to the East Coast, keeping rates high at least for the next few weeks. However, this will change rapidly if the ILA takes action. Spot rates to the West, East, or Gulf coasts are unlikely to fluctuate significantly in the event there is no ILA strike. Additionally, no significant drop in rates is expected during the traditionally slow months of November and December.

Canadian Railways and unions resume contract talks
Canadian National Railway and Canadian Pacific Kansas City have resumed separate contract talks with the Teamsters Canada Rail Conference, representing nearly 10,000 railroad workers. Negotiations began last November but have yet to produce a new contract to replace the agreement that expired at the end of last year.

The Canada Industrial Relations Board is investigating whether a work stoppage would impact Canadians’ health and safety, with an announcement expected by Friday. While railroad workers cannot legally strike until 72 hours after the board’s ruling, the union has indicated that a work stoppage is likely by the end of August. A strike by Canada’s railroad workers would disrupt the daily movement of more than 900,000 metric tons of goods on Canada’s railways.

The US market is experiencing significant challenges in both air and sea freight sectors. With elevated air cargo demand and potential labour strikes on the East and Gulf coasts, strategic planning is more crucial than ever for shippers.

We are here to keep you informed and act proactively to help you navigate these turbulent times, ensuring the smooth movement of goods through your supply chain.

If you have concerns about potential ILA strike action, we can assess your situation and, if necessary, develop contingency plans to safeguard your import traffic. By exploring alternative access ports and adopting a collaborative approach, we will provide optimal solutions to meet your supply chain needs.

To learn how we can support your trade with the United States or for more information about our ocean solutions, please EMAIL our Chief Commercial Officer, Andy Smith.