Logistics News in July 2021

Hello, it’s IINO.

Today, I would like to present you with the logistics news for July 2021 and introduce “the newest logistics”. I will explain for both, who has already watched the last month’s video and who has not yet.

So, let’s get started.

Expand of Container Transport Disruptions to North America, Inland Rail Facilities Nearly Punctured

Container traffic from Asia to North America, continues to be disrupted. In addition to disruptions at North American West Coast ports, it is worsening disruptions inland, especially in the Midwest.

The inland transit facilities in Chicago, are unable to take on any more cargo.
According to shipping company officials, if they stop inland bound cargo, it will cause over capacity at the West Coast ports of North America.
Therefore the inland situation is worsening.

On 19th July, Union Pacific (UP), a western U.S. railroad, stopped accepting cargos from West Coast ports to Chicago for one week.

The route to Chicago is served by two U.S. railroads, UP and BNSF.
If the situation to remain unchanged and prolonged, it is expected to have a negative impact on various areas.

Container Freight Rates Continue to Rise

Container freight rate hikes show no signs of stopping.

According to the report by the Shanghai Shipping Exchange on 16th July, Shanghai export container freight rates for 40-foot containers, to the West Coast of North America were $5,334, and those to the East Coast of North America were $9,655, which are up more than $300 from the previous week.

In addition, the freight rates for 20-footers to Northern Europe were $7,023, and to the Mediterranean were $6,893, which are up around $200 from the previous week.
The rate to Northern Europe surpassed the $7,000 mark for the first time.

Since the congestion at ports and the failure of inland transportation, at North America, there is a rush of shipments to the East Coast, and freight rates rose.
Other than to Europe and the U.S., 20-footers bound for Australia surpassed the $3,000 mark, but the rest of the market has remained almost flat.

Mitsui O.S.K. Lines to Invest in Methanex Subsidiary, Largest Methanol Producer

On 16th July, Mitsui O.S.K. Lines announced that they are discussing the acquisition of shares in Waterfront Shipping (WFS), which is a shipping subsidiary of Methanex (Canada), the largest methanol producer.

Compared to conventional fuels, methanol fuel for ships can reduce SOX (sulfur oxide) emissions by up to 99% and can also reduce other emissions such as PM, NOX (nitrogen oxide), and CO2 (carbon dioxide).

Furthermore, methanol produced from renewable sources, can reduce CO2 emissions by up to 95%, so methanol-fueled ships can contribute to achieve the CO2 reduction targets set by IMO without additional capital investment.

Methanex’s CEO said about the agreement, that we are confident that this new strategic partnership, will contribute significantly to the expansion of the methanol market, as a low environmental impact marine fuel.

Maersk Orders First Methanol-fueled Container Ship

Maersk, one of the largest shipping companies, has announced that, it has signed with Hyundai Mipo Shipbuilding, which is a member of the Hyundai Heavy Industries Group in South Korea, an order contract for a methanol-fueled feeder container ship.

This is the first container ship in the world to use methanol, and Maersk commented that they will provide a proving ground for future container shipping, and also carbon neutral services to its customers.

The feeder container ship ordered by Maersk will be put into feeder service between the Nordic states and the northern Baltic Sea and will be a dual engine capable of using conventional low-sulfur fuel in addition to methanol.

Hapag-Lloyd acquires Nile Dutch for Expansion to West Africa Business

German shipping company Hapag-Lloyd announced on 8th July, that it has completed the acquisition of container shipping company Nile Dutch.

Nile Dutch has a strong presence in African routes and provide container and multi-purpose shipping services. It seems that Hapag-Lloyd will continue to integrate its major businesses and expand its business in West Africa.

Kuehne+Nagel acquired Norwegian company to strengthen logistics network for fresh products

Kuehne+Nagel, a major international logistics company, has announced that, they will acquire Salmosped, a major seafood forwarding company in Norway.

It is said that they strengthen the logistics network for perishable goods, and the export business for air cargo from Norway.

Salmosped is headquartered in Oslo, and specializes in the logistics of salmon and other marine products.
The sales were about 14.2 billion yen, and cargo volume was about 60,000 tons last year.
Even in the Corona disaster, fish exports in Norway have been strong and are expected to continue to grow.

Kuehne+Nagel continues to strengthen logistics of fresh product, with Ecuador (2018), Canada (2019), and now Norway.

Commentary Section

Let’s move on to the commentary section of this Logistics News.

In the news, we have selected the recent three major topics : 1) surge in ocean freight rates, 2) methanol as a decarbonized fuel, and 3) corporate acquisitions.
I personally think that these three contents are the current focus of the logistics industry.

Ocean freight rates have been rising for the past few months, so many people in the industry are wondering when it will stop.

Judging from the current situation, it will be difficult to stop within this year. International transportation for Christmas sales to North America, usually starts in August, but due to the shortage of container space, it has been moved up to July.

In addition, since 1st to 7th October is National Day of China holidays, shipments from China to USA will be even more concentrated in September before it.
So there is possibility that another stagnation causes for logistics in North America.

As I reported in the news, there is currently also a stagnation of inland railroads not only on the West Coast of North America.

Because it is not something that can be resolved immediately if once logistic congestion occurs, considering the situation, I think it will not be recovered within this year.

What we must not forget is that, the collective bargaining agreement for unions on the U.S. West Coast will expire on 1st July, 2022.
This might be going to reduce the functionality of ports, such as Los Angeles and Long Beach, and also lead to container backlogs.

Shippers will probably change their shipping routes, to the East Coast of North America in order to avoid it.
When it comes so, it is expected that soar of ocean freight rates, and space shortages on both the West and East Coasts of North America.

And then there is methanol as a marine fuel.
Until now, LNG, hydrogen, and ammonia have been the focus as decarbonizing fuels, but I had no idea about methanol.

I think that methanol is the expected fuel which reduces not only CO2, but also SOX and NOX.
The first company which use this fuel in container ships was Maersk the largest company in the industry.
I felt that it is the interesting aspect of logistics industry

Lastly, regarding corporate acquisitions, I feel that recently there have been many acquisitions of related companies by major logistics companies.

In the international logistics industry, the company which can take the scale of the cargo volume, it will be stronger in the market. Large companies repeatedly make acquisitions to become even larger and further strengthen their own. Kuehne+Nagel which I introduced this time is a good example.

In the logistics industry, there are some companies that have greatly increased their profits due to Corona and some that have not.
I personally expect that the acquisitions of company in logistics industry will become even more active.

Summary

How was Logistics News this time?
I thought it would be better to focus on a few key points rather than introduce all the news to give you a more detailed picture of the industry, so that’s what I did this time.

It would be very helpful if you could give us some feedback via comments, so that we can make improvements in the future!

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

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