Logistics News in October 2022
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Logistics News in October 2022!

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Hello, it’s IINO.

Today, I bring you Logistics News for October 2022.

I would like to talk about trends in the shipping market after 2023, North American railroad labor negotiations and new services from forwarders, Sankyu and Seino Schenker.

So let’s get started!

World Cargo Volume Slows in 2023, WTO Revises Projections Downward!

The World Trade Organization, WTO, announced last week that it expects global trade in goods to slow in 2023 to a 1% increase over the previous year.

The global economy lost momentum in the second half of 2022 and will remain sluggish in 2023 according to a sharp downward revision of 1% from the 3.4% growth forecast in April of this year.

Due to the strong uncertainty, there is also the prospect of a decline to negative growth if downside risks materialize.

Conversely, there is a possibility that growth could be higher than expected.

Container Shipping Supply Tonnage Down 15% from 2023 to 2024!

Following the decline in cargo volume, here is news of a decrease in the supply of container vessels.

Container shipping supply tonnage could decrease by up to 15% between 2023 and 2024 due to environmental regulations, and slow steaming according to an analysis by Container Shipping Analysts.

A 10% reduction to global supply tonnage will occur with the start of EEXI, fuel efficiency performance regulations, for existing ships by IMO, International Maritime Organization, in January 2023.

Furthermore, a 5% reduction is expected from the scrapping of older vessels.

Old vessels were forcibly used during the past two years when container freight rates soared due to the turmoil caused by the Corona pandemic because of high demand for shipping capacity.

U.S. Railroad Labor-Management Negotiations, Reject Tentative Agreement Raising Concerns of Strike

Of the 12 labor unions comprised of U.S. railroad workers, the Railroad Signalmen’s Union, BRS, comprised of signalmen rejected a proposed tentative labor-management bargaining agreement in a union vote, on April 26.

With the rejection of the tentative agreement by the BMWED, International Truck Drivers Union Road Maintenance Workers Division, followed by the BRS fears of a strike in the United States are growing.

In response, the National Conference of Carriers, NCCC, which negotiates with the unions issued a statement saying that it was “disappointed that a negotiated resolution has been delayed.”

Sankyu Opens Human Resources Training Facility for Logistics in Malaysia

Sankyu, a Japanese-affiliated forwarder, has opened its first overseas human resource development center, SANKYU TECHNICAL ACADEMY, in Johor, Malaysia.

Sankyu aims to develop a global technology and skills group that can play an active role in the world, by securing and training personnel with advanced technology and skills for the future and by upgrading its own technology and skills.

Sankyu President Nakamura commented, “We hope that the employees in Southeast Asia who grow up here will be active in the global field, and help create happiness for people not only in Malaysia but around the world.”

Seino Schenker Differentiates Itself with LCL! Japan-Germany Now Offers DirectDirect Flights to/from Nagoya

Seino Schenker is strengthening its ocean freight consolidation service, LCL.

In August of this year, Seino Schenker added a service to Nagoya to their direct LCL service from Hamburg, Germany to Japan.

By the end of this year, it will also start direct LCL service from Nagoya to Hamburg establishing an import/export LCL transportation network connecting major ports in Japan and Germany.

In addition, it is promoting in-house LCL services to/from Japan by utilizing the Group’s hubs.

Furthermore, it plans to launch a new LCL service to Germany through Sea & Rail, which combines ocean transport and China-Europe rail transport.

Commentary Section

Let’s begin News Commentary Section.

First, I brought you the news of WTO’s announcement of a decrease in cargo volume after 2023.

According to WTO, import demand is expected to soften as economic growth in major countries slows for different reasons.

Slows Eonomic Growth in Major Countries

In Europe, soaring energy prices due to the Russia-Ukraine war have put pressure on households and increased manufacturing costs.

In the U.S., monetary tightening has affected spending on housing, automobiles, and fixed asset investment.

The Fed, ECB, and Bank of England are all raising interest rates to combat inflation, and in China, the zero-corona policy and production disruptions are being compounded by weak external demand.

This August, WTO has stated that this may be indicative of a decline in global demand as product delivery times have been shortened and inventories of finished goods have increased.

It will be interesting to see what happens with Service Contract with shipping companies, in the coming year.

Regulations by EEXI and Scrapping of Older Vessels

Next up is news of a decline in the supply of containerships.

As reported earlier, cargo demand is expected to slow down after 2023 partly due to a lull in stay-at-home demand caused by the Corona pandemic and partly due to the global economic slowdown.

In addition, regulations by EEXI and others and the scrapping of older vessels are expected to result in a decline in the supply of vessels.

EEXI is a technical approach adopted as a short-term measure for the IMO’s 2030 CO2 emission reduction target.

And it quantifies and regulates CO2 emissions per ton-mile for ships.

If the vessel’s EEXI score does not meet the regulation value, measures such as limiting engine power and introducing energy-saving technologies will be required.

Countermeasures include converting to multi-fuel engines, changing fuels, and incorporating scrubbers for exhaust gas cleaning systems.

However, the trend is toward scrapping older vessels, if they require more investment.

Due to excess demand, we expect to see an increase in the scrapping of older vessels which we have not been able to accommodate in the past two years due to lack of space on the vessels.

Strike Alert Heightened

I then brought you news of the U.S. Railroad labor negotiations.

U.S. railroad labor-management negotiations began in January 2020.

Although it has been difficult to reach an agreement and has been protracted, negotiations have resumed after the U.S. government stepped in to arbitrate.

By September 15, a tentative agreement had been reached with 12 unions and there were signs of an averted strike.

However, two unions rejected the tentative agreement during the union’s internal approval process, revealing the strength of discontent among union members and raising the specter of a strike.

Japanese Technology to the World

Next, I brought you two pieces of news about new initiatives by forwarders.

Sankyu has established a human resource development center in Malaysia in response to the urgent need to respond to advanced technologies and skills and to upgrade existing service levels, as its overseas operations expand.

Thirty-four courses are planned for employees of Sankyu’s overseas subsidiaries, including maintenance training and machine maintenance training aimed at upgrading their skills.

A total of approximately 3,000 trainees are scheduled to be accepted annually and competitions in welding, finishing, forklift trucks, etc. are also planned.

Unfortunately, manufacturing in Japan has been declining.

The opening of the Sankyu facility is an attempt to convey Japanese technology to people in Southeast Asia and encourage them to become active in the world.

I think this kind of initiative is wonderful, for maintaining and enhancing Japan’s presence in the future.

Forwarders Focus on Consolidation

With the launch of service between the three major metropolitan areas of Tokyo, Nagoya, and Osaka and Germany, Seino Schenker has announced that it intends to leverage its strengths as one of the few forwarders offering direct LCL service.

In developing the market in the Nagoya area, the company plans to cooperate with Seino Transport which is based in the Chubu region.

The company will also collaborate with the department in charge of Japanese customers in Düsseldorf, Germany, to provide tailor-made services by combining the logistics network that DB Schenker has in place in Europe.

With shipping companies coming onshore and starting to offer services like forwarders, major forwarders are focusing on consolidation and trying to gain a position.

I believe that logistics companies will consolidate in the future, so I personally think that this kind of tag-team with foreign companies is a good move in the right direction.

We will keep an eye on future trends.

How was this issue of Logistics News?

After 2023, the volume of cargo and the supply of container vessels is expected to decrease.

One could assume that this will lead to an increase in supply space, but the reality is that we will not know until we lift the lid.

In addition, forwarders such as Sankyu and Seino Schenker, are working on new services.

The shipping market is cooling as warnings of a global recession spread. We continue to focus on market trends.

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That’s all for this issue. Thank you very much!

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