Good Morning Clients & Partners,
We hope it’s been a busy and productive January so far. It sure has been for us! Below please find our 2nd Freight and Logistics update for January.
As always, we will keep you posted on any impacts to your cargo on an individual shipment level.
SEA FREIGHT – Global outlook:
- The World Container Index (compiled by London-based Drewry Shipping Consultants) is down 77% – and it may slide further, signalling the end of a record earnings run for shippers. Some industry experts are predicting a price war between shipping lines because of this.
- Simultaneously, this comes as the shipping industry is also preparing for a massive delivery of new vessels. 2023 will see the largest-ever addition of new ship capacity – about 2.5 million twenty-foot-long containers – unless some deliveries are deferred.
- Shipping companies will struggle to manage a simultaneous decline in global trade and a surge in ship supply unless they can form alliances to curtail sailings, sell excess capacity, and convince clients to sign on to long-term contracts.” [1]
- Consumer prices that took off last year are starting to flatten as supply chain costs start to retreat. [7]
- Slowing growth amid high inflation and interest rates in the US, and an energy crisis in Europe, may culminate in recession. [1]
RAIL FREIGHT – South African Context:
- Volumes in Transnet Freight Rail fell 9.2% to 81.5 million tonnes; with general freight crashing just over 15%, amid KZN floods and security challenges in the form of cable theft, vandalism, network deterioration and resource constraints. [9]
- Transnet’s dysfunction, which was also worsened by an 11-day wage strike in October, has been in the spotlight in 2022. Exports who have traditionally always used rail for their exports (such as coal exporters) were forced to turn to Road Transport. [9]
- In the financial year ending March 2021 Transnet posted a loss for the first time in more than a decade. Last month the government announced it would give it 5.8bn rand—its first direct bail-out in decades. [6]
- The bad news out the way, we have seen an increase in Rail volumes over the last month, and although Rail services are not where we would want them to be, they are vastly improved to what we saw at the end of last year.
RUSSIA/UKRAINE:
- The EU will impose a ban on imports of Russian diesel, jet fuel and other oil products starting on the 5th of February and will last 5 months, while the G7 also plans to implement price caps on those products. [3]
- The price cap, unseen even in the cold war between the west and the Soviet Union, is aimed at crippling Russian state coffers and Moscow’s military efforts in Ukraine. [10]
- With diesel prices already tight, many analysts are expecting massive volatility as the effects of the latest diesel sanctions will likely overlap with a recovery in demand for fuel from China – leading to further spikes in demand and fuel prices along with it.
CHINA:
- Cross-border supply chain operations between south China and Hong Kong are becoming more challenging due to rising Covid cases and the Chinese New Year holiday (21 – 27 Jan). [4]
- Container feeder services are scaling back, or even suspending, operations since factory volumes are down due to workers being out due to Covid illness and factories shutting down for the Chinese New Year holidays. [4]
- Ethiopian Airlines has become the latest carrier to add bellyhold capacity to the China market, following the easing of Covid restrictions from 6 February. Ethiopian Airlines operates freighter flights to Guangzhou, Shanghai, Zhengzhou, Changsha and Wuhan. [5]
- Air Cargo News reported that Cathay Pacific will also ramp up its capacity to China following the easing of Covid restrictions. The publication also pointed out that US carriers have no current plans to increase operations to China. [5]
References and for a more in depth read on the updates:
[1] https://www.freightnews.co.za/article/shipping-lines-no-longer-driving-seat
[2] https://www.hellenicshippingnews.com/ship-owners-face-losses-as-freight-rates-keeps-dipping/
[5] https://www.aircargonews.net/airlines/ethiopian-the-latest-to-increase-china-flights/
[7] https://www.wsj.com/news/logistics-report?mod=djemlogistics_h
As always, we will continue to monitor the situation closely and ensure we minimize the negative impacts to your supply chains.
Best Regards
JJ & The Inter-Sped Team
