Logistics News in July 2022

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Hello, it’s IINO.

Today, I would like to broadcast Logistics News in July 2022.

In this video, I will discuss near-shore strategies of large companies, trends in the European market and technology news.

So, let’s get started.

Daikin to Build New Plant in Mexico! Nearshore Strategies of Large Corporations

Daikin Industries will invest approximately $230 million to build a new plant in Mexico.

The new plant will be operational in 2024 with a total floor space of approximately 70,000 square meters employing approximately 2,000 people and will supply energy-efficient air conditioners and other products to the United States.

The models to be produced in Mexico are currently supplied to the U.S. from Asian bases such as Thailand.

Due to the recent sharp rise in transportation costs, the ratio of transportation costs to cost has reached over 20% for some models.

The company aims to ensure a stable supply at a low price by adopting a near-shore strategy of producing near the place of demand.

It also plans to build a system that is resistant to demand fluctuations by reducing delivery time to one-sixth of the current level.

MSC Subsidiary Invests, €700 Million in Port of Le Havre, France, for 24,000 TEU Type!

Next, I will continue with three pieces of news from the European market.

TiL, Terminal Investment Limited, MSC subsidiary engaged in terminal operations announced a total investment of 700 million euros in the French port of Le Havre.

The company plans to enhance its container handling capacity over the next six years by adding more gantry cranes and expanding the terminal.

In the future, it aims to evolve the terminal to be able to handle large 24,000 TEU class vessels.

European Port Congestion at Critical Levels! Congestion is high, even with reduced demand

According to intermodal operator Contargo, congestion has reached crisis levels at several Nordic hub ports with congestion spreading from terminals to inland areas.

In addition, driver shortages and inland rail and barge outages are further exacerbating bottlenecks despite declining import volumes and rapidly worsening economic conditions.

Wait times during the second week of July were 56 hours in Rotterdam, and 51 hours in Antwerp.

European rail freight also faced major disruptions throughout June with lines in Germany closed for construction, affecting train arrivals and departures and unbalancing the entire network.

CMA-CGM Reduces Container Freight Rates, to France by €750!

French shipping company, CMA-CGM, announced on July 22, that it will reduce freight rates by 750 euros per imported container for its customers in France.

The reduction will take effect on August 1st.

The target is all French customers including small and medium enterprises.

According to CMA-CGM, the price reduction of 750 euros is equivalent to a price cut of up to 25% for some customers.

In addition, the price will be reduced by 100 euros for export containerized cargo originating from France.

Currently, many parts of Europe are experiencing inflation due to rising energy prices caused by the situation in Russia and Ukraine.

This series of measures by CMA-CGM is said to be part of the measures to counter inflation at the behest of the French government.

Drone Delivery Expands Rapidly, in the U.S.! Delivered in as little as 15 minutes!

Finally, I have news on technology.

Food and drug delivery services using drones are rapidly expanding in the United States.

Retail giant, Wal-Mart, the largest Internet retailer, Amazon, and others are offering the service one after another.

The battle for the “last mile” market where products are delivered to consumers’ doorsteps is heating up.

Western research firms predict that the global market for drone delivery will expand at a CAGR of 49% to $8.23 billion in 2025, about seven times the size of the market in 2020.

Commentary Section

Here is the commentary section for July’s logistics news.

First, some near-shore news.

Daikin, which has had a production base in Thailand, will build a new plant in Mexico.

Daikin announced in early July that it will invest $300 million to build a plant for energy-saving heating equipment in Europe, Poland.

Spread of Near-Shore Strategy

Due to supply chain disruptions, the idea of near-shore production is spreading where production is not in China and Southeast Asia, but in Mexico and Latin America, which are closer to Europe and the United States.

In Mexico, automotive-related companies have been establishing bases since before Corona pandemic, so there is an environment in which materials can be procured locally.

Although Latin America is still lacking in technology, Mexico may attract even more companies in the future as the next production base.

Logistical disruptions such as the current one may occur in the future, and the trend to produce closer to the location of demand may become even greater in the future.

The market is always moving, so be sure to understand market trends so that you can take the best course of action.

Port Investments in France

I have brought you three pieces of news about the European market.

The first one is news on port investments in France.

TiL, Terminal Investment Limited, has invested a total of 700 million euros in the French port of Le Havre, doubling the number of gantry cranes in operation to 20, the current number.

Furthermore, new cargo handling equipment will be installed in all six berths, tripling the storage capacity in the terminal.

The company also expects to install electric cargo handling equipment and shoreside power supply facilities for vessels to help reduce environmental impact.

In the future, the terminal will be capable of handling 24,000 TEU container vessels, its current largest capacity.

These investments are expected to create 900 jobs for port workers and 200 jobs for maintenance workers over the next six years.

TiL’s CEO said “This major investment was made possible by an agreement with the local community to guarantee cargo volumes from MSC and to provide human resources to support the port’s growth and productivity.”

Worsen Congestion at European Ports

Next comes news of congestion at European ports.

According to Sea-Intelligence analysts, the main reason for terminal congestion is poor schedule reliability.

In May, on-time reliability between Asia and Northern Europe was 25.7%, meaning that only one in four vessels arrived within one day of schedule.

Furthermore, Nordic ports have seen a significant increase in call sizes this year increasing the volume of vessels, arriving at the ports, which is placing a significant strain, on terminal throughput.

Call size means the amount of containers that get on and off a vessel at one port call.

Shipping companies have taken action by adjusting flights and imposing congestion surcharges, on import and export truck movements.

However, these measures seem to do little to alleviate congestion at hub ports, while the European recession gains momentum as soaring energy and food prices cause inflation and a crisis in livelihoods hurting the European economy.

Various factors are causing congestion at the ports and further disruption is expected for the upcoming Christmas shopping season.

We will need to continue to monitor, developments in Europe closely.

Inflation in Europe

CMA-CGM has announced significant fare reductions for all of its French customers.

The consumer price index for June in the Euro zone is up 8.6% year over year, and inflation in France, Spain, and Italy is at an all-time high.

CMA-CGM measure is said to be in response to the French government’s intention to combat this inflation.

CMA-CGM is cutting this year’s profit by reducing its own ocean freight rates which have been said to be high.

As a profit structure, CMA-CGM is selling data by releasing API which may be a different way to fight than other shipping companies.

CMA-CGM’s moves will be watched more closely.

Expansion of Drone Delivery

Finally, there is news of the expansion of drone delivery.

DroneUp, in partnership with Walmart, delivers groceries, medicine and other items from the store to the consumer’s doorstep in an average of 22 minutes from the time the order is placed online.

For a one-time delivery fee of $3.99, consumers can shop from tens of thousands of items up to a total weight of about 4.5 kilograms.

The company’s drones are currently manned by operators who are responsible for safety monitoring and manual control in case of emergencies.

However, it is believed that “unmanned operation is possible within five years.”

If drone delivery becomes widespread, it is expected to improve the chronic labor shortage faced by the logistics industry and reduce CO2 emissions making it a technology to watch in the future.

Summary

How was this news?

While labor negotiations are underway in North America, congestion is occurring at European ports and logistics bottlenecks are becoming more serious.

Amidst this logistical disruption, near-shore strategies are expanding as well as technologies that can cover staffing shortages.

It is important to take in a wide range of information and be able to respond to a fast-moving market.

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

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