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Hello, it’s IINO.
This time, I would like to bring you Logistics News in January, 2023.
I will send you a selection of news that will give you a better understanding of the current shipping market.
So, let’s get started!
2M Alliance, to Dissolve Alliance in 2025! Industry Reorganization?
On January 25, MSC, the world’s largest container shipping company, and Maersk, the second largest, announced that they have agreed to terminate 2M Alliance at the end of January 2025.
The two companies will transition to independent operations in February 2025.
MSC and Maersk clearly have different strategies.
Maersk aims to become an integrated logistics integrator and has repeatedly engaged in merger and acquisition of logistics companies.
On the other hand, MSC is promoting fleet expansion including the purchase of more than 100 used vessels during the Corona pandemic.
For this reason, there has been a strong belief recently that 2M would eventually dissolve the alliance.
And now, the announcement has actually been made that the alliance will be done it in 2025.
The fact that the strong alliance of the top two container shipping companies will come to an end in 10 years may lead to a reorganization of the industry.
Container Freight Rates Finally Bottoming Out? Shipping Companies Reduce Tonnage
Container freight rates, from Asia to Europe and the U.S., have slowed down from their previous softening trend and there are signs that freight rates have bottomed out.
According to the January 20, freight rate trend for major routes compiled by the Shanghai Exchange of Shipping & Exchange, SEE, rates to the East Coast of North America continued to soften to $2,783/40′, albeit only slightly lower than the previous week.
Freight rates to North Europe and the Mediterranean Sea to $1,014/20′, and $1,816/20′, respectively, remained flat from the end of last year.
Since the end of last year, shipping companies on major routes have been cutting back on vessels and other measures in response to falling demand.
On European routes, some loops have been shifted to return service via the Cape of Good Hope.
These shipping capacity reduction measures are expected to contribute to a bottoming out of spot freight rates.
Container Vessels, and Docked Inactive Vessels Increased
With the softening of freight rates for containerships, the number of inactive vessels such as those in drydock is increasing.
According to maritime research firm, Alphaliner, the number of inactive container vessels as of January 2023 was 257 vessels, with approximately 1.42 million TEU.
It is 2.6 times larger than the same period last year on a loading capacity basis.
Since the end of last year, large container vessels have been delivered and the number of inactive vessels is expected to further expand due to adjustments in the timing of docking.
North American Digital Forwarder, Flexport, Lays off 20% of its Workforce!
Flexport, an American freight forwarder, has announced that it is restructuring its operations to address declining transportation demand, and provide more supply chain services to its digitally-focused business.
To do so, the company will cut approximately 20% of its worldwide workforce or more than 600 employees.
Management told us that “our business is in good shape overall, but we are not immune from the macroeconomic downturn that is affecting businesses around the world.”
Nevertheless, Flexport will continue to hire in certain areas including adding about 350-400 software engineers.
PowerX Raises, Additional 21 Million USD for Business Expansion
PowerX, a startup company working to realize the world’s first electric carrier and other projects, announced on January 10 that it has raised an additional 21 million USD in total for the construction of a storage battery factory and business expansion.
The funds raised will be used to manufacture and develop storage battery products and to accelerate preparations for the realization of electric carriers including the completion of the first ship scheduled for 2025.
Currently, PowerX is working in partnership with several companies in the maritime industry, including Imabari Shipbuilding and NYK Line, to develop the Power Ark, an electric carrier, capable of carrying large container-type storage batteries.
And now, for this month’s commentary section.
Industry Reorganization due to Dissolution of 2M Alliance
First, I brought you the news of the dissolution of the 2M Alliance partnership.
When MSC and Maersk announced the formation of 2M in 2014 the containership industry was suffering from market conditions, and excessive competition following the Lehman Shock.
Under such circumstances, the existence of a strong alliance of the top two companies was strongly warned that it would lead the industry restructuring with overwhelming cost competitiveness.
In fact, after the inauguration of 2M, industry reorganization accelerated at a rapid pace with the acquisition of NOL by CMA-CGM, the merger of two Chinese state-owned shipping companies and the bankruptcy of Hanjin Shipping Co.
By 2017, the industry was consolidated into a three-party alliance structure of 2M Alliance, The Alliance, and Ocean Alliance, which also led to the launch of ONE with the consolidation of the container shipping businesses of three Japanese shipping companies.
I believe that the timing is right for the industry to change from the booming shipping industry in the Corona Pandemic.
We need to think about strategies to keep up with the times, and information will still be important for this purpose.
Falling Freight Rates & Slumping Cargo
Next, I sent two pieces of news on container freight rate trends.
As of January 20, container freight rates from Shanghai to the West Coast of North America have been at $1,300-1,400/40′ since late December last year.
Although the recent decline in freight rates tends to have bottomed out, cargo movements to Europe, as well as North American routes, have been sluggish and cargo collection appears to be struggling.
Market softness continues with no rush demand before the Chinese New Year.
Freight rates are currently a little higher than before Corona pandemic, and if this is the bottom, freight rates levels may rise a little more with economic recovery in the U.S. and Europe.
So, when will the economy recover?
Some say by the end of this year and I will continue to follow the information.
Increase in Number of Inactive Mega Container Vessels
Also, due to softening container freight rates, the number of inactive vessels, is increasing.
During the same period last year, only 4 mega container vessels of 12,500 TEU and larger were inactive at the dock, but this year, the number has increased to 36 vessels.
In the class from 7,500 to 12,500 TEU as well, the number of inactive vessels has increased from 13 to 33, which is characterized by an increase in the number of large vessels, compared to the same period last year.
Shipping lines are taking steps to alleviate supply through vessels cancellations and slow steaming in terms of operations.
On European routes, some carriers are choosing routes via the Cape of Good Hope in South Africa, instead of via the Suez Canal for some return voyages to Asia.
It appears that they are intentionally controlling supply by not moving vessels, and we will keep a close eye, on supply trends in the future.
Flexport To Undergo a Turnaround
Finally, I brought you two pieces of technology news.
The first is news of Flexport’s change in direction.
In an interview before the layoffs were announced Co-CEO Dave Clark announced plans to add trucking, shipping, and other services to the business which has focused on international transportation.
He stated, “We are transitioning from being a Freight Forwarder that sells the transportation of our customers’ cargo to a provider of solutions to our customers’ overall supply chain challenges.”
The company is looking to restructure its business in light of the possibility of a downturn in the shipping industry in the future due to the economic downturn and oversupply of shipping capacity in North America.
PowerX with Japanese Technology
The second news item is about PowerX, a startup company, working on electric carriers and other products.
PowerX is developing a ship that carries electricity and also, makes storage batteries at its factory.
The company has come up with the idea of transporting electricity offshore, whereas conventional offshore wind power has had to deal with the problem of how to transmit the power produced offshore to the inland areas.
Japan is a small country, but there are areas where strong winds are always blowing at sea.
With the focus on renewable energy procurement and other areas for decarbonization, I personally have high expectations that Japanese technology can lead the world in these areas.
How was this news?
The year 2023 has just begun, but there continues to be major news, that will move market conditions.
It is important to stay updated with information.
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That’s all for this time. Thank you very much!
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