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Supply Chain Updates

Supply Chain Update – August 25

By August 25th, 2023No Comments10 min read

Positive Trends Signal Recovery in the Container Market

A recent survey with responses from more than 2,500 supply chain experts revealed optimistic views regarding the rebound of the container market. The data collected in July showed an increase in the Container Price Sentiment Index (xCPSI), reflecting growth from the previous month. Additionally, container prices remained consistent in July, pointing towards a positive change in the market. This is significant as it comes at a time when the industry is entering a crucial period known as the peak season.

The latest survey findings suggest a promising landscape for those involved in container trading or leasing, especially within Southeast Asia. The stable nature of container prices over the last 30 days, with minor fluctuations, indicates a possible turning point towards recovery. Despite price dips over the past 90 days, the sentiment remains strong. Key factors like a resilient economy, steady consumer activity, and strategic investments are improving the outlook for the holiday season. The recent surge in trade within Asia, particularly between China and India, and expectations of a rebound in the United States further support this positive view. In contrast, the Eurozone faces challenges with high inflation affecting shipping costs but has still managed to avert a technical recession.


Climate Change Jeopardizes Europe’s Prime Trade Route via the Rhine River

Climate change is putting one of Europe’s most critical trade routes—the Rhine River—at serious risk. Decreasing water levels are becoming a significant issue. To cope with these, costly and cumbersome solutions, including diverting logistics to rail and trucks, are being implemented. Germany’s government is struggling to keep pace with the rapid changes, further underscoring the urgency of the situation.

This situation poses unique challenges to the global supply chain, particularly those sectors dependent on the Rhine for transporting goods. Lower water levels mean that ships can carry less, leading to increased shipping costs and logistical issues. Alternative routes and modes of transport are not only less efficient but also more expensive, affecting the overall cost of goods. Public utilities are storing extra fuel, while cargo operators are considering new fleets capable of navigating in shallow waters. Infrastructure plans to redesign the river and dredging operations are lagging behind, with no short-term solution in view. The trend suggests that today’s exceptions—lower carrying capacity, diversions to costly alternative routes—could become tomorrow’s norms, exacerbating existing bottlenecks in the supply chain.


Emerging Tropical System in the Gulf of Mexico – An Outlook

On August 21, 2023, the NWS National Hurricane Center reported the formation of Tropical Depression Nine in the central Gulf of Mexico. Positioned 480 miles east-southeast of Port Mansfield, Texas, this system is anticipated to strengthen into a tropical storm before making landfall on the Texas coast by Tuesday morning. Although not expected to escalate into a hurricane, the fast-approaching storm’s primary threat is excessive rainfall in parts of southern Texas. This development occurs during a particularly warm period in the Gulf of Mexico, marking a notably active hurricane season.

The newly formed tropical depression is of concern to various sectors involved in maritime activities. The presence of this storm system, along with the National Oceanic and Atmospheric Administration (NOAA) predicting an above-average hurricane season, highlights the importance of vigilance and preparedness. The Gulf of Mexico has reached record temperatures, and the mid-season outlook indicates a more active hurricane season. Such meteorological conditions may impact shipping routes, delay transportation, and influence decision-making for those engaged in trade within the affected regions.


Ship Traffic Resumes in Dardanelles Strait Following Fire Containment

On August 24, 2023, authorities in Turkey’s Dardanelles Strait reopened ship traffic in one direction after the containment of a significant fire in the northwest Canakkale region. The forestry minister announced the progress, acknowledging the efforts of helicopters, planes, and land vehicles in controlling the fire. Over 150 ships had been stopped to make way for firefighting efforts. The flames, fueled by high temperatures, dry air, and strong winds, resulted in injuries to 90 individuals and forced the evacuation of more than 1,200 people from 11 villages.

The Dardanelles Strait plays a vital role as a passage for major commodities like oil and grains. The halt in traffic impacted many ships at both ends of the strait, and its reopening in one direction signifies a return to normalcy. The shipping agency mentioned that northbound ships would be allowed after a specific time, marking the beginning of a gradual resumption. 


Northern China’s Major Port Faces Recovery Challenges After Severe Flooding: Insights and Implications

Northern China recently experienced substantial flooding which, among other negative effects, greatly affected operations at the Port of Tianjin. This significant disruption may lead to a recovery period extending from two to four weeks, as indicated by a Container XChange executive based in Hamburg. The storms have not only caused local challenges but have also highlighted the vulnerabilities of transportation, logistics, and infrastructure, particularly in Tianjin, where the impact has been the most pronounced.


U.S. Container Imports Surge, But Predicted to Decline

Containerized imports into the U.S. are forecasted to surpass 2 million TEU (Twenty-Foot Equivalent Units) this month, a notable increase since last October. The National Retail Federation and maritime consultancy Hackett Associates project this growth to be temporary, with volumes dipping below this threshold for the rest of the year.

Though these figures mark a decrease from last year’s levels, they show improvement over recent months. The fluctuating volumes are attributed to retailers working through existing inventory, and while current spending growth has slowed, experts predict a smooth shipping season ahead without disruption from congestion or labor disputes.



Shandong Port Group Aims to Enhance Global Connectivity through Expansion

Shandong Port Group (SPG), an entity uniting major ports in Shandong province, has publicized a robust plan to develop a world-class port cluster. The goal is to increase the container handling capacity to over 40 million TEU, with an expected cargo handling capacity of 2 billion tonnes. This action plan, released at the end of July, follows SPG’s report of handling more than 1.6 billion metric tonnes and over 37 million TEU in 2022.

The plan aims to optimize the operational dynamics and spatial layout of all ports in Shandong. This enhancement promises to boost the service capacity and global reach of these ports, with the total added economic value predicted to touch 1.3 trillion yuan ($180 billion) by 2025. The strategic development is seen as a fundamental move towards connecting Shandong’s ports, such as Qingdao, Yantai, and Rizhao, more efficiently to global trade routes.


Navigating Challenges: Panama Canal’s Struggle with Climate Change

The Panama Canal is facing difficulties due to a historic drought. As of August 2023, the drought has forced restrictions on ship weights and crossings to conserve water. These changes have affected shipping companies, preventing some vessels from carrying full loads. The situation is exacerbated by climate risks and rising sea temperatures, which are impacting 80% of the ocean shipping industry that manages global trade.

The restrictions at the canal are causing significant disruptions across various global trading markets. Ships have to choose between carrying less cargo, taking alternate routes that add thousands of miles to their journey, or dealing with long delays. The canal’s situation has already pushed shipping prices up by 36%. Goods, including commodities and everyday items from countries such as the United States, Chile, and Brazil, are affected. Additionally, the prospect of a drier period next year, along with potentially near-record low water levels by 2024, continues to pose challenges to the maritime industry.


U.K. Customs Adapts Export Declaration Process with Phased Approach

U.K. customs authorities are making a significant change in the transition to a new system for export customs declaration. Instead of an immediate change for all businesses to the Customs Declaration Service (CDS) by November 30, there will be a phased approach. Selected high-volume exporters are required to shift to the new system by the original deadline, while all other businesses have been granted an extension until March 30. This decision came after a consultation with industry stakeholders, including the British International Freight Association (BIFA), who found the previous timeline quite short notice.

This shift to a phased implementation serves to address the concerns of various market participants. High-volume exporters will move ahead with the transition as planned, while others now have additional time for the transition from the existing CHIEF system to CDS. The extended deadline should ease the process for these businesses, but the industry association and customs authorities urge everyone to continue to work towards transitioning. Additionally, ongoing engagement and educational resources are expected to support businesses during this significant transition, thereby reducing potential delays to shipments.


Enhancements and Growth at Lázaro Cárdenas Port: A Crucial Hub for Nearshoring Opportunities in 2023

The 12th Lázaro Cárdenas Port Community Business Meeting, held in Querétaro, showcased the remarkable achievements of the Port of Lázaro Cárdenas in the first half of 2023. As the largest seaport in Mexico and also one of the largest in the Pacific Ocean, the Lázaro Cárdenas port has an annual traffic capability of around 25 million tonnes and 2,200,000 TEU. During the first half of the year, the port recorded a year-on-year 40% increase in containerized cargo and a record movement of more than 13 million tons. These numbers underline its significance in connecting Mexico’s industrial core with North American and Asian markets and enhancing nearshoring activities.

Various strategic developments contributed to the port’s success, including the Isla de la Palma project, which is poised to receive new investments for logistics and production processes. The collaboration on the Logistics Corridor between Guanajuato and Querétaro was another focal point, with Admiral Cruz Ballado emphasizing the importance of partnerships with Guanajuato Puerto Interior and the Querétaro Intermodal Terminal. These initiatives create a synergistic platform for nearshoring, catering particularly to sectors like automotive and metal-mechanic, affirming the Port of Lázaro Cárdenas’s status as a vital hub in the region.