Martina Li, Asia Correspondent

Further slides in the Shanghai Containerized Freight Index (SCFI) are continuing, and it is expected that in December, freight levels will be at pre-pandemic levels.

On 18 November, SCFI stood at 1,307 points, plunging 74% from an all-time high of 5,110 points on 7 January, and bringing the index near the 1,000 points seen in January 2020, just before the Covid-19 crisis erupted.

Shanghai-North Europe freight rates, having peaked at US$15,600/TEU on 14 January, dived to US$2,350/TEU on 18 November. On the same date, Shanghai-US West Coast rates fell to U$1,550/FEU, from a high of US$8,100/FEU in February. Shanghai-US East Coast routes lost 67%, from a high of US$11,800/FEU in January to US$3,900/FEU on 18 November.

Declines were also registered for shipments from Shanghai to the Persian Gulf, South America and Australia.

The all-time high rates are not reflective of what shippers actually paid, as tight container availability compelled them to pay premiums to be assured of slots.

The chief cause of the weakening rates is a drastic fall in headhaul cargo demand, a trend going back to August.

Global inflation, spawned by rising energy prices following Russia’s invasion of Ukraine in February, has discouraged consumer spending. In turn, retail sales have been sluggish, resulting in warehouses in Europe and the United States becoming full.

Container Trades Statistics show a massive drop in the Far East – North America volumes of 25% in September. Volumes shipped from Asia to Europe are also estimated to have plunged 20% in the same month. The usual Q3 peak effect of extra shipments at the end of September before the Golden Week holidays in China in the first week of October did not materialise this year.

 Sam Chambers November 23, 2022

Much has been written about the fleet expansion at Gianluigi Aponte’s Mediterranean Shipping Co (MSC) during container shipping’s boom era. Since August 2020 the Geneva-headquartered liner has bought more than 250 secondhand ships, as well as building a 1.7m teu orderbook, a period of expansion on a scale never seen before in any commercial shipping sector. This period of expansion also saw MSC surpass alliance partner Maersk at the top of the liner rankings at the start of the year.

Putting some perspective on MSC’s expansion, its orderbook today is roughly the same as the entire extant fleet of Hapag-Lloyd, the world’s fifth largest liner. Putting its extreme sale and purchase activity in context, Alphaliner data shows that the number of MSC purchases since August 2020 are greater than the next seven largest buyers combined.

While historically MSC, whose roots date back to 1970, has had a strong focus on chartering in ships, this has changed during liner shipping’s record earnings period of the last couple of years. Since the start of 2020, MSC’s share of owned ships increased to 69% from 51%, according to Linerlytica.

Last month MSC agreed to acquire 100% of the share capital of towage operator Rimorchiatori Mediterranei. In September the carrier debuted MSC Air Cargo, something that will take to the skies from early next year. The cash-rich line has also bought many other assets including Bolloré  Africa Logistics and Log-In Logistica.

Originally hailing from Naples, the secretive Gianluigi Aponte has amassed a personal fortune of as much as $100bn, Swiss media reported last month, firmly putting the family as the richest in Switzerland, three times as wealthy as the second-placed family.

If the $100bn wealth was confirmed that would place the Apontes in sixth place on Forbes rich list, nestled between Bill Gates and Warren Buffett.

in International Shipping News 21/11/2022

While there was a shortage of containers at the height of the pandemic, the global economy is now facing the opposite problem: too many containers. On top of falling freight rates, data shows container depots — used to house containers after they are unloaded — are now filling up or full. It points to more signs of falling global demand and an impending economic slowdown.

Traders and shippers say the decline in global consumer demand is not a sign the global economy is normalizing after a frantic post-lockdown consumption rush but a downwards shift in consumption appetites.

“There is just not enough depot space to accommodate all the containers,” online container logistics platform Container xChange chief executive Christian Roeloffs said in an industry update this week.

“With the further release of container inventory into the market, for example from the disposal of leasing fleets, there will be added pressure on depots in the coming months.”

Turning away new clients
Italian container depot owner Sogese chief executive Andrea Monti told Container xChange his depots are full.

“Whatever was coming in and out of, for instance, our Milan depot is quite stuck. And the container volume at the depots is increasing to an extent that we are returning some requests for depot service agreements.”

“We are in a situation where we are not able to accept new clients for some locations.”

Monti told Container xChange that the peak season of goods shipments — as Christmas looms — “technically did not happen this year.” Retailers are cautious about the high level of inventory they have on hand, Monti said.

“There is enough inventory with retailers,” Monti said.

“What has happened now is that the cargo is ‘on time’ again and hence you’ll see a slowdown in new ordering as companies adjust to more efficient turnaround times in ocean freight delivery.”

To combat full and overflowing depots, ports such as the Port of Houston have started levying fees for empty containers sitting in terminals for more than seven days, according to global claims management provider Sedgwick’s national marine manager Darin Miller.

“What many don’t realize is a lot of the time, the containers within the depots are empty,” he told CNBC.

“Often left sitting for weeks on end, the sheer number of containers on ships or at ports, leaves us with insufficient depot space which only exacerbates our ongoing supply chain crisis as it impacts container repositioning and movement.”

Consumers can expect retailers to offer discounts in order to clear inventory, Miller added.

The latest Drewry composite World Container Index — a key benchmark for container prices — has fallen again to $2,773 per 40-foot container. That’s 73% lower than the peak rate in September last year.

Sailings canceled
Blank or canceled sailings are also on the rise in what is usually the opposite, as the year’s biggest spending period approaches.

A blank sailing happens when a shipping company decides to skip a port or an entire leg of its schedule to manage changes in demand and capacity.

In its latest canceled sailings analysis, Drewry said between late November and early December, 14% of sailings have been canceled across major container shipping routes.

Last week, major shipping group Maersk warned during its third quarter results that freight rates have peaked amid easing supply chain congestion and falling demand. The company told investors to expect lower ocean shipping profits.

Nearly 60% of the 200 freight forwarders, traders and shippers that Container xChange spoke to in a survey last month said they were grappling with geopolitical, economic and political risks which have imposed downward pressures on consumption and therefore demand for containers.

“We know already that the market is bearish on consumer demand because of multiple factors like recessionary fears and inflationary risks,” a Container xChange spokeswoman told CNBC.

“So of course, there is a significant dent in consumer demand which then leads to less demand for freight and cargo, and therefore, a proportionate dent in container demand globally.”

Shippers are giving containers away to reduce crowding at depots while many have resorted to blank sailings, Container xChange added.
Source: CNBC

Port of LA

The decline in inbound US container volumes accelerated in October, falling by 9.4% across the 10 largest US box ports.

Gary Howard | Nov 18, 2022 – Seatrade Maritime News

Inbound volumes of 1.9m teu were the lowest since February 2021, according to analysis from the McCown Report. Highlighting a difference in fortune between coasts, East coast imports were up 9.5% on the 28-month average, while West coast ports were 22.7% down, giving an overall 6.8% deficit on the 28-month average.

West Coast ports led the decline with a 23.3% drop on-year in October inbound volumes, the biggest decline seen in over seven years, according to analysis from the McCown Report.

“Concern regarding possible labor unrest on the West Coast continued to play a role in additional volumes shifting eastward,” said John D McCown.

Despite the steep drop over the pandemic inflated inbound volumes of the pandemic, McCown said the figure represents a 2.4% compound annual growth rate over the past three years, suggesting a return to more normal growth.

The report forecast further large drops in volumes on-year for November and December as the market recovers from pandemic impacts.

The continued shift eastward of volumes comes despite congestion easing dramatically at the port of LA/Long Beach. For October, there was an average of 6.1 ships waiting for berth compared to 103.5 at the start of this year.

Some of the congestion has shifted eastward, with queues of 32 and 17 at Savannah and Houston, respectively, but McCown’s estimates puts the number of vessels awaiting a berth at 70 across the entire US, down from 99 a month ago.

McCown again stressed what he called the “perilous impact of container rates on inflation”, with his estimate that the US economy has absorbed around $113.2bn in annual inflation based on the difference in container freight pricing between the fourth quarter 2019 and third quarter 2022.

Copyright © 2022. All rights reserved.  Seatrade, a trading name of Informa Markets (UK) Limited.

 Sam Chambers Splash November 18, 2022

0 2,641 1 minute read

Fast growing AD Ports Group has bought Spanish ports firm Noatum for $660m.

This will be AD Ports Group’s third major international acquisition in 2022, following the acquisition of a 70% equity stake in Transmar and TCI in September, and the announcement in November of its acquisition of an 80% equity stake in Dubai-based Global Feeder Shipping (GFS).

Noatum, whose origins date back to 1963, operates in three business areas – logistics, maritime, and port terminals – with market-leading positions in Spain and Turkey and a significant presence in the US, UK, China, and Southeast Asia.

Noatum’s global logistics business is best known for its heavylift expertise while its terminal operations include 15 roro, dry bulk, general cargo, and container terminals in Spain. Its maritime division provides shipping agency services, including outsourcing and ancillary services, and cargo services, such as liquid bulk, breakbulk cargo, reefer and dry cargo.

Subject to regulatory approvals, the transaction is expected to close in the first half of next year. As part of the transaction, Noatum’s management is locked in for a period of three years.

Falah Mohammed Al Ahbabi, chairman of AD Ports Group, said: “This ambitious acquisition brings a major global logistics platform into the AD Ports Group family, significantly enhancing our global connectivity and extending the range of maritime, logistics, and ports solutions we can offer as we continue to pursue a determined strategy for growth. This acquisition makes AD Ports Group one of the most significant global players in finished vehicle logistics, which we intend to expand in our home and core markets.”

 Sam Chambers November 3, 2022

AD Ports Group has made its largest ship investment to date, spending $800m to take an 80% stake in Dubai-based Global Feeder Shipping (GFS), creating a feeder giant in the process.

GFS has 26 owned and operated vessels with a total capacity of 72,500 teu, covering the Middle East, Indian Subcontinent and Southeast Asia with services connecting the UAE to India, Pakistan, Sri Lanka, Egypt, Sudan, Djibouti, Yemen, Saudi Arabia, Bahrain, China, South Korea, and Vietnam, among others.

Our ambition is to become one of the world’s leading shipping companies

AD Ports Group will look to integrate GFS with other group companies SAFEEN Feeders and Transmar, bringing the group’s fleet to 35 owned ships with a total container capacity of 100,000 teu. As a combined entity, the 100,000 teu capacity would place AD Ports 20th in Alphaliner’s global liner rankings.

Subject to regulatory approvals, the transaction is expected to close in Q1 2023. GFS’s existing management will remain in place with the founders retaining a 20% stake in the company.

Falah Mohammed Al Ahbabi, chairman of AD Ports Group, said: “Our acquisition of a majority stake in GFS, which is the largest external investment in our company’s history, will deliver a step-change in the range of services we can offer and significantly enhance our global connectivity.

Our ambition is to become one of the world’s leading shipping companies, offering the most comprehensive range of maritime services, and this investment moves us significantly closer to achieving that goal.”

The top two port operators in the United Arab Emirates, AD Ports and Dubai-based DP World, have led much of the consolidation seen in the feeder sector in recent years with the latter assuming control of brands such as Unifeeder, Transworld Feeders and Feedertech among others.

 Sam Chambers November 9, 2022

The container party might be showing signs of fizzling out, but that is not stopping a number of Asian liners seeking listings.

TS Group, the parent company of TS Lines, has filed an application for a Hong Kong stock exchange listing, as has Chinese freight forwarder LC Logistics, parent of BAL Container Line.

TS Lines has Taiwanese origins, but is incorporated in Hong Kong. It currently operates 49 ships of 106,203 teu, making it the 19th largest operator worldwide, according to Alphaliner.

BAL Container Line, meanwhile, has roots in Qingdao. It has four ships in its fleet at the moment but is due to expand significantly in 2025 when it takes delivery of two 14,700 teu ships from Jiangnan Shipyard.

To the north of Hong Kong, another Chinese stock exchange is also gearing up to welcome a shipping line to its ranks. Ningbo Ocean Shipping Co (NBOSCO), Ningbo-Zhoushan Port Group’s shipping subsidiary, will list on the Shanghai Stock Exchange shortly, using cash raised to expand its fleet.

NBOSCO’s owned fleet today comprises 28 boxships, six multipurpose vessels, seven bulk carriers and one general cargo ship, as well as 30 chartered containerships.

By Sim Tze WeiAssociate Foreign News Editor, Lianhe Zaobao

Superior EMS’s factory in the Vietnam-Singapore Industrial Park in Hai Duong province. It is using small modular machinery to automate its production lines. (SPH Media)

Headlines such as “Vietnam’s exports overtake Shenzhen” and “Is Vietnam the next China?” have drawn attention in China’s media and online forums, reflecting anxiety that Vietnam might usurp China’s position as the world’s factory.

Western media, meanwhile, have focused on how China’s zero-Covid policy has caused orders to be diverted to Vietnam. In a June report by German newspaper Frankfurter Allgemeine Zeitung with the eye-catching headline “Goodbye China, Hello Vietnam”, one manufacturer said, “Vietnam seems to be a better and cheaper China.”

In the second quarter of 2022, Vietnam’s exports rose 21% year-on-year and economic growth hit an 11-year high of 7.7%. The country has emerged from last year’s slump, when lockdowns in several cities – including the capital Hanoi – caused GDP to shrink 6.2% in the third quarter.

With its land border with China and a coastline of over 3,000 km, Vietnam has a highly strategic location and an advantage in maritime logistics.

After Vietnam’s government pushed mass vaccination in a bid to coexist with the virus, the full resumption of factory operations and border reopening enabled a rapid rebound. The contrast with China’s zero-Covid stance propelled Vietnam into the spotlight, with some international media hailing it as the new “Super Factory”.

Top choice for a ‘China+1’ strategy

Business owners and executives of foreign enterprises in Vietnam told Lianhe Zaobao that a few years before the pandemic, Vietnam was already emerging as a key beneficiary of the China-US trade tensions that began in late 2018. Many foreign companies started to mitigate supply chain risks by setting up manufacturing operations in nearby Vietnam, or diverting orders there from China.

With its land border with China and a coastline of over 3,000 km, Vietnam has a highly strategic location and an advantage in maritime logistics. Other factors making it attractive for a “China+1” strategy are cheap labour, young demographics, favourable policies, free trade agreements with several countries, and friendly relations with both China and the US.

Superior EMS, from Hong Kong, is one foreign manufacturer that set up in Vietnam to spread its risk. Director Charles Wong met Lianhe Zaobao at the company’s factory in Hai Duong province, about one-and-a-half hour’s drive from Hanoi. With Superior having invested in China for over two decades, the similarities between China’s and Vietnam’s systems were one reason to enter the latter. “It’s easier for us to adapt,” he said.

Superior’s main business is toy production and production line automation. It has two factories in the southern Chinese city of Dongguan, and a plant in the Vietnam-Singapore Industrial Park (VSIP) in Hai Duong, operating since March 2020. It makes high-end technology products in China, and simpler products in Vietnam.

Superior’s decision to set up in Vietnam was customer-driven, Wong said. Many clients started shifting their operational focus to Southeast Asia three to four years ago, and set new requirements for supply chain security.

“They’re worried that problems in one place might cause a breakdown in the supply chain,” he said. “If suppliers have factories in different countries, supply would be more secure.”

… for March alone, the gap was US$34.62 billion, with Vietnam’s exports almost twice that of Shenzhen’s.

Gaining from China’s zero-Covid policy

The China-US trade war triggered the first recent wave of shifts. Now the world has noted how China’s zero-Covid policy has led to prolonged production shutdowns. Once businesses – both foreign and Chinese – decide to relocate, will Vietnam benefit from a second “China +1” wave?

According to Vietnam News Agency, the country received US$7.7 billion in foreign direct investment in the first five months of 2022, up 7.8% year-on-year. For the first quarter of 2022, Vietnam’s total exports exceeded Shenzhen’s by US$27.75 billion; for March alone, the gap was US$34.62 billion, with Vietnam’s exports almost twice that of Shenzhen’s.

Singapore’s Sembcorp Development has been involved in managing the Vietnam-Singapore Industrial Parks (VSIPs) since the first was launched in 1996, with 10 across Vietnam now.

Kelvin Teo, CEO of Sembcorp Development and co-chairman of the VSIP Group, said that as of 31 December 2021, the VSIPs have attracted 850 companies with total investment capital of US$15.6 billion. From 2017 to 2021, the parks saw 104 entrants and new investments totalling US$400 million.

Teo said that it was hard to pinpoint flows from mainland China, as there are different possible channels: via Hong Kong; through origin countries of mainland-based foreign enterprises; or through joint ventures with Vietnamese enterprises. “But we can assume that the Chinese are part of the increase in investments into Vietnam over the years,” he shared.

While the VSIP has been receiving enquiries about investing in Vietnam, he is “not able to ascertain if these are due to the Covid-19 situation in China”.

Chien Chih Ming, chair of the Taiwanese Chamber of Commerce in Vietnam, noted an increase in enquiries from Taiwanese firms looking to invest in Vietnam – including some based in mainland China. He said, “If the factory stops work completely because of the pandemic, and the boss has to keep paying salaries, interest and loan instalments, which company can survive this?”

The interview with Chien took place in Dong Nai’s industrial zone, about one-and-a-half hour’s drive from Ho Chi Minh City, where the construction firm he set up over 10 years ago is headquartered. In the early days, both Dong Nai and Hai Duong drew traditional industries such as textiles and shoe-making companies, many relocating from China.

About four to five years ago, a wave of companies – led by electronics manufacturers – moved operations from China to Vietnam to diversify supply chain risks amid the China-US trade war, clustering in the north around Hanoi.

As Vietnam has a long and narrow land mass, the north benefited from its proximity to China. Electronics manufacturers could send required parts and materials overland from China’s south-eastern coast.

Much of [Vietnam’s manufacturing] involves the assembly and packaging of what was “Made in China”, before the finished product is labelled “Made in Vietnam” to avoid tariffs, and exported to the US and Europe.

Smartphone giants such as South Korea’s Samsung and Apple’s supplier Foxconn continuously expanded in northern Vietnam; Taiwan’s Pegatron and Wistron, alongside other electronics giants, have also increased their investment. Recently, China’s Xiaomi confirmed that it would start making phones in Vietnam too. Vietnam has become a manufacturing hub for mobile phones and computer peripherals.

Chinese orders create headaches 

However, the pandemic laid bare the vulnerability of this cross-border chain.

Vietnam’s export-oriented, processing-focused manufacturing has a heavy upstream reliance on China. Much of it involves the assembly and packaging of what was “Made in China”, before the finished product is labelled “Made in Vietnam” to avoid tariffs, and exported to the US and Europe.

The problem comes when components fail to arrive from China, severely curtailing Vietnam’s ability to fulfil export orders.

At the start of 2020, pandemic-induced land transport curbs forced Samsung to fly smartphone parts from China to Vietnam to avoid a complete supply chain breakdown.

Taiwanese companies in Vietnam found it hard to be happy about the surfeit of orders, said Chien, as upstream supply disruptions in mainland China caused delays in order fulfilment. Raw material costs also rose with oil prices, eating into margins; businesses were in a difficult position whether they had orders or not.

Wong’s toy factory faced the same issue after Chinese New Year, and had to send components from China to Vietnam via sea or air. But as all manufacturers were turning to these alternatives, demand for such freight surged, affecting availability.

Supply bottlenecks drive localisation

Crises give rise to new ideas. Wong decided to overcome upstream bottlenecks by localising intermediate goods.

In the past, intermediate or semi-finished products arrived from the company’s plant in Dongguan for processing in Vietnam; now, the company plans to import material to be stored in Vietnam. Once orders are received, the whole production process – from manufacturing of parts to assembly – will be completed at the Vietnam factory.

Norman Lim, president of the Singapore Business Group in Ho Chi Minh City, is also the Asia Pacific CEO of a foreign-funded manufacturer of industrial blades. In an interview at an industrial park in Ho Chi Minh City, Lim said that his employer also experienced supply chain problems in China during the pandemic.

To spread the risk, it decided to source for raw materials from places such as Thailand, Taiwan and India. Lim said, “I believe many plants like ours will continue to search for replacement sources of raw material outside of China.”

No easy feat to usurp China’s position 

As more Vietnam-based manufacturers seek intermediate goods from outside China, and as the supply chains of more industries mature, will Vietnam be able to usurp China’s position as the world’s factory?

Business leaders interviewed were unanimous in their verdict: “Impossible.”

In the early days, Vietnam could attract only the pollutive parts of supply chains in traditional industries that were being phased out in China.

Lim noted that industries were not relocating exclusively to Vietnam, with other destinations including India and Southeast Asian countries such as Indonesia, Malaysia, Thailand, the Philippines and Laos. “You can replace China only by adding up many different countries together.”

Vietnam’s population of nearly 100 million is only a tenth of China’s, he added. The middle class is expanding rapidly, pushing wages up and nudging industries from developed areas into poorer ones. While China’s development moved from east to west, Vietnam does not have a comparable hinterland.

Chien observed that China has the advantage of comprehensive industrial chains, and its capacity for administrative organisation outstrips that of Vietnam. In the early days, Vietnam could attract only the pollutive parts of supply chains in traditional industries that were being phased out in China. Even the electronics activities that have recently moved from China are primarily in low-end manufacturing.

While China has higher labour costs, Chinese workers have better skills and expertise. And while Vietnamese workers are diligent, Chien had this observation to make: “If you say the Vietnamese are extremely hardworking, the Chinese work themselves to the ground.”

ISEAS-Yusof Ishak Institute senior fellow Jayant Menon observed that although China’s lockdowns have hastened the pre-pandemic shift to Vietnam, regional supply chains remain very much China-centric, and this is likely to continue for the foreseeable future. Menon added, “China remains a manufacturing giant and therefore you cannot contain or replace it easily.”