Shipping costs at 18-month high – threatening to impact UK inflation rate

An index that compares how expensive it is to move freight from Shanghai to Europe shows how the cost has risen again – with the ongoing crisis in the Red Sea to blame. Analysts are concerned it could cause the rate at which prices of goods on UK shelves go up to rise again.

The price of shipping has reached an 18-month high – threatening to impact the falling inflation rate.

It is now more expensive to ship a typical container on a key shipping route than when Houthi militants first started attacking boats in the Red Sea late last year to prevent ships docking in and exporting from Israel.

An index that measures the average cost of a 20ft container being shipped from Shanghai to Europe – and is the most widely used measure of freight cost – has reached $3,949 (£3,102).


The cost of container shipping remains below its recent record highs

The Shanghai Containerised Freight Index (SCFI) has risen sharply in the last month according to data given to Sky News by global logistics company, DSV.

Not since the early days of September 2022, when global supply chains were recovering from the blockage of the Suez Canal, has the cost been so high, at $4,252 (£3,341) a container.

Money latest: UK suffers biggest rise in unemployment of any OECD country

The Suez blockage by the Ever Given container ship which ran aground in 2021, kickstarted a steep rise in shipping costs as goods could not move freely along the vital shipping artery, causing chaos at ports and chocking supply lines.

Boats having to take alternative journeys and being diverted also brought shipping costs up.

Why it matters

It was this wave of supply chain woes that brought about part of the first shock to the economy that caused inflation, the rate of price rises, to go up.

The economy has recovered in large part from shocks – including the energy price hikes brought about Russia’s invasion of Ukraine – which resulted in inflation reaching a 41-year high of 11.1% in October 2022.

While inflation has dropped significantly – to 2.3% at the latest reading – expensive shipping could bring the rate up.

Most goods on UK shelves spend at least part of their lifetime at sea, so importers having to spend more to get goods to the UK could mean consumers pay more at the tills.

Why it’s happening – and prices could remain high

Last week, the world’s second-largest shipping container firm Maersk said it expects to have even higher profits than first thought on the back of demand and disruption.

The Red Sea “ongoing crisis” and the “ripple effects on global supply chains” are part of the market, it said.

Business will continue to benefit, it added.

Maersk said: “The ongoing threats to commercial vessels in the Red Sea and growing supply chain bottlenecks indicate that this situation won’t improve soon. More capacity than expected will be needed to resolve these issues and stabilise the global supply chain.”

The Floating Traffic Jam That Freaked Us All OutThe coronavirus pandemic schooled the world in the essential role of global supply chains. Have we learned anything from it?

By Peter S. Goodman
Peter Goodman is the author of the forthcoming book “How the World Ran Out of Everything: Inside the Global Supply Chain,” from which this article is adapted.

Published June 2, 2024
Updated June 3, 2024

Southern California appeared to be under siege from a blockade.

More than 50 enormous vessels bobbed in the frigid waters of the Pacific Ocean, marooned off the twin ports of Los Angeles and Long Beach, Calif. As days stretched into weeks, they waited their turn to pull up to the docks and disgorge their cargo. Rubberneckers flocked to the water’s edge with binoculars, trying to count the ships that stretched to the inky horizon.

This was no act of war. This was what it looked like when the global economy came shuddering to a halt.

It was October 2021, and the planet had been seized by the worst pandemic in a century. International commerce was rife with bewildering dysfunction. Basic geography itself seemed reconfigured, as if the oceans had stretched wider, adding to the distance separating the factories of China from the superstores of the United States. 

Given the scale of container ships — the largest were longer than four times the height of the Statue of Liberty — any single vessel held at anchor indicated that enormous volumes of orders were not reaching their intended destinations. The decks of the ships were stacked to the skies with containers loaded with the components of contemporary life — from clothing and electronics to drums full of chemicals used to concoct other products like paint and pharmaceuticals.

Among the ships held in the queue was the CSCL Spring, a Hong Kong-flagged vessel that was carrying a whopping 138 containers from Yihai Kerry International, a major Chinese agricultural conglomerate. Together, they held 7.3 million pounds of canola meal pellets — enough animal feed to sustain 20,000 cows for a week. Their delay was exacerbating shortages of feed afflicting livestock producers in the United States.

Five ships in this waylaid flotilla were collectively hauling 13 million pounds of Fiji bottled water. More than 17 million pounds of Heineken beer was held up. The Singaporean-flagged Wan Hai 625 was carrying almost three million pounds of polyethylene terephthalate resin, a key element for manufacturing synthetic fabrics and plastic bottles used to package soft drinks — another commodity in short supply. The same ship held 5.2 million pounds of solar panels and 1.6 million pounds of material for chain-link fencing.

By one estimate, the ships waiting off Southern California’s two largest ports were collectively loaded with more than $25 billion worth of goods. And this was a fraction of the wares stranded by a global breakdown that had reached staggering proportions. Nearly 13 percent of the world’s container shipping fleet was floating off ports from China to North America to Europe. Upward of $1 trillion worth of product was caught in the congestion.

All of this stuff was supposed to be somewhere else.

But the docks were overwhelmed by an influx of containers as Americans stuck in quarantine outfitted themselves for the apocalypse, filling their basements with exercise bikes, their bedrooms with office furniture and their kitchens with baking equipment. Most of these goods were manufactured in Asia. The trucking industry complained that it could not hire enough drivers to move this tsunami of product. Warehouses were stuffed to the rafters and short of workers. The railroads — hollowed out by years of corporate cost cutting — were buckling in the face of a surge of demand.

For decades, the world had seemed compressed, the continents bridged by container ships, internet links and exuberant faith in globalization. Now, the earth again felt vast.


In the center of the pileup off Long Beach lay the Maersk Emden, a Danish-flagged container ship that stretched 1,200 feet long and 158 feet wide. Freshly arrived from the Chinese port of Ningbo, it was carrying roughly 12,000 containers.

Hagan Walker had only one box on board the Maersk Emden — a 40-foot container logged in the shipping manifest as MSMU8771295. But it held the most important order in the brief history of his start-up.

Mr. Walker’s company, Glo, was based in a small town in Mississippi. It made plastic novelty cubes that lit up when plunked in water. He had recently secured a breakthrough deal — a contract to make bath toys for Sesame Street, including a figurine version of the iconic Elmo. He had planned to debut them during the pivotal holiday season, now only two months away.

Hagan Walker during a creative meeting for Glo Pals.Credit…Whitten Sabbatini

Image Source :

Like millions of companies, Mr. Walker’s operation depended on two crucial elements: factories in China to make its products and gigantic container ships to carry them to American shores. For decades, this had proved a cheap and reliable way to do business, the means by which major brands and niche players alike had kept the world’s largest economy stocked with everything from oven cleaner to aircraft parts.

But that equation was unraveling, and Mr. Walker found himself confronting the mother of all traffic jams off the coast of Southern California.

As the calendar continued its relentless march toward the holiday season, his Elmo dolls were floating out on the water, castaways during the Great Supply Chain Disruption.

By the time the Maersk Emden joined the floating queue off Long Beach bearing Mr. Walker’s shipment, people from Europe to Africa to North and South America had endured a terrifying scarcity of personal protective gear like face masks and medical gowns. This had forced frontline medical workers to attend to patients with Covid-19 absent adequate protection.

Society had experienced the disappearance of toilet paper from store shelves amid panicked hoarding. Women’s sanitary products had become difficult to find, along with medicines like antibiotics and even aspirin. Meat display cases at supermarkets sat empty. For a time, Grape-Nuts, the popular breakfast cereal, all but vanished, along with the tapioca beads used to make boba tea.

Factories in Asia that manufactured computer chips could not keep pace with a substantial increase in demand, an emergency in an age in which chips had become the brains for all manner of devices. Auto factories from Japan to the United States to Brazil halted production, citing a lack of chips. American car dealers typically held two to three times as many vehicles as they sold in a month. By the end of 2021, their inventory had plunged to a record low — less than half their volume of sales. And as new cars became scarce, the prices of used vehicles exploded.

Medical device manufacturers embarked on a largely futile campaign to shame chip companies into prioritizing their orders over those from smartphone companies like Apple and Google. Major electronics companies began covertly buying old toys and video gaming consoles, breaking apart ancient PlayStations and Barbie accessories to harvest the chips within.

For consumers who never previously had reason to contemplate the intricacies of the global supply chain, all of this was cosmically disconcerting. The shortages of goods conveyed a gut-level affirmation that contemporary life itself had gone haywire, exposing a dark and unsettling truth: No one was in control.

In wealthy countries, society had been steeped in the idea that the internet had transcended the traditional constraints of time and space. You could go online at any hour, on any day, no matter the weather, click here, and then wait for the truck to arrive with your order.

In a world full of grave uncertainty, here was a sure thing.

The supply chain was not just the circulatory system for goods, but also the source of a sense of authority over human circumstance, and a rare unifying aspect of modern existence. In a time of flagging faith in government, skepticism about news media and suspicion of corporate motives, everyone could at least believe in the unseen forces that brought the UPS guy to the door. The links connecting farms, factories and distribution centers to households and businesses had seemed inviolate.

As the supply chain began fraying, urban reality from Minneapolis to Milan was dominated by the ceaseless wailing of ambulances hauling those stricken with Covid-19 to hospitals, where people were dying on gurneys stashed in corridors, the rooms overflowing, the supply of ventilators exhausted. From San Francisco to Stockholm, people were taking their last breaths alone in nursing homes, without saying goodbye to their children and grandchildren. Every day brought grim reports of a rising tide of death that eventually took the lives of nearly seven million people worldwide.


Over recent decades, multinational companies from North America to Europe to Japan had placed their fate in a ruthless sort of efficiency. They had steadily entrusted production to factories around the globe, and especially to plants in China, chasing lower costs and fatter profits. 

And they had behaved as if this strategy was devoid of risk, as if China’s industrial parks might as well have been extensions of Ohio and Bavaria. They either did not know or did not care that the shipping industry was basically a cartel, operating largely beyond the oversight of any government watchdog.

Once their products reached American shores, companies relied on transportation networks that depended on millions of workers who submitted to dangerous and lonely jobs, even as their pay and working conditions were downgraded. In constructing a supply chain governed by the relentless pursuit of efficiency, trucking and railroad businesses treated their workers as if their own time was both limitless and without value, deserving of no compensation for hours stuck waiting for the next load.

From the railroads to trucking firms to warehouses, major companies in the supply chain had long treated their workers as costs to be contained rather than human beings with families, medical challenges and other demands. Employers assumed that they did not have to worry about running out of laborers, even as they engaged in wanton exploitation. At the same time, decades of zealous reverence for deregulation as the solution to nearly every problem served to cede economic fate to a handful of companies that dominated key industries.

In Washington, both major political parties had long placed faith in the fantastical notion that gigantic companies left to seize commanding holds over their markets would yield greater efficiency.

The pandemic laid bare the consequences of relying on faraway factories and container ships to keep humanity supplied with goods.

It exposed as reckless the world’s heavy dependence on a single country — China — for critical products like protective gear and medicine, especially as Washington and Beijing were locked in a trade war.

It revealed the risks of leaning on transportation systems staffed by people whose wages and working conditions had been decimated by cost cutting.

Unregulated behemoths left to dominate markets in the name of efficiency turned out to yield results that were efficient only on Wall Street.

And then broad chaos in the global supply chain helped deliver another economic affliction: inflation.

By early 2022, in the name of snuffing out price increases, central banks around the world would begin lifting interest rates. This would foist higher borrowing costs on homeowners and credit card holders. It would threaten ordinary workers with joblessness while depressing stock prices. Though economists debated the causes of inflation, part of the blame clearly fell on the reality that astonishing quantities of goods were stuck floating off ports.


By early 2023, the worst disruptions of the pandemic years had subsided. The floating traffic jams had all but disappeared, shipping rates had plunged and product shortages had eased. Yet the same foundational perils remained, awaiting an inevitable future disturbance.

The global economy has entered a new era of enduring volatility. As climate change alters the natural realm, the global supply chain will be subject to new rules and a constant reassessment of risks. Russia’s assault on Ukraine has enhanced the prospect of the world’s splintering into rival camps, complicating the geography of international trade. China and the United States appear locked in a cold war whose consequences are playing out around the globe, reshaping alliances, trade pacts and fundamental understandings about the nature of international engagement.

To meet the challenge of the next disturbance, which we can be certain is coming, we need to grapple with how we got here. We need to understand how the supply chain became so complex, extended and centered on a single country. And we must reconfigure the supply chain to safeguard society through greater resilience.

The globalization to which we have become accustomed was propelled by an especially intoxicating form of efficiency, a concept known as Just in Time, or lean manufacturing.

But the shortages of the pandemic have prompted some companies to recalibrate, building up inventories as they pivot from Just in Time to Just in Case.

As the United States and China treat each other like rival powers, multinational companies have shifted some factory production to other countries like Vietnam. American businesses are setting up factories in Mexico and Central America to retain low-cost manufacturing without having to contend with the vagaries of the Pacific Ocean. And some companies are embracing so-called reshoring, bringing factory production back to the United States.

At the end of the harrowing journey of the past four years lies one singular truth: Humanity has come to depend on a disorganized and rickety global supply chain for access to the products of our age, from lifesaving drugs and computer chips to toys and games. The system relies on myriad forms of labor exploitation, which has made it perpetually vulnerable to breakdown. And it has been constructed as a means of rewarding the investor class, often at the expense of reliability.The Great Supply Chain Disruption is not some curious piece of recent history. It is a preview of the dysfunction that surely lies ahead if we fail to get the machine in order.

A woman and her grandson outside the container yard at the Port of Los Angeles.Credit…Mark Abramson for The New York Times

Image Source :

Article Source :

What happens when the Houthis stop shooting

Andrew Craig-Bennett gives his take on shipping and the Middle East.

Well, isn’t life just wonderful! We have, for most practical purposes, one of our forebears’ favourite things, a Suez Canal closure! Just when the freight markets ought to be heading downwards, we are having a splendid time, because this closure has now gone on for long enough for our very favourite thing, port congestion, to kick in along with lots of out-of-position boxes, for those of us in the box business, nicely in time for our industry’s favourite party, Posidonia.

It’s time to rain on the parade.

We must all remember that, officially at least, this party can be stopped faster than most. President Biden took a shot at stopping it three days ago. He might succeed. If the Houthi crime family (that is what they are, a crime family, not “rebels”) run out of excuses for shooting randomly at ships (and it is random) the party is over. If Israel and Hamas stop shooting at one another, the Houthis run out of excuses. It will take a few weeks to get ships and cargoes back into their usual positions, but the party will be over.

Once this happens – and it could happen at any moment now – we go back to normal. Too many ships on order, the Great Fuel Muddle and a nagging feeling that world trade might not keep growing in the way that we are all used to, in terms of ton-miles by sea, because nation is, shall we say, less inclined to speak peace unto nation.

We don’t know what the fuel of the future is, but we know what the fuel of the next 10 years is; it’s dual fuel. Which helps nobody to plan anything, much. Dual fuel can mean a ship which actually can close and open a few valves and change fuel, or it can mean the footings for the tanks for the other fuel have been included in the block sections. In our business, we generally mean the latter, and we hope that nobody asks exactly what we do mean.

World trade might not keep growing in the way that we are all used to

The shipping industry hasn’t made much fuss about the Houthis firing assortments of missiles at ships because, let’s face it, this suits everyone who isn’t actually getting shot at, and that’s an awful lot more people than are getting shot at.

The Houthis have shown themselves so ignorant of, and so careless about, who owns what ship and which ship is carrying what to where, that when (and as noted it could be any day now) their excuse for firing missiles at completely innocent seafarers is taken away from them, nobody is going to trust them anyway.

We know what this crime family really want. They want to imitate the old Barbary pirates and charge a toll for innocent passage through “their” waters and perhaps they fancy a little extra piracy on the side, into the bargain, kidnapping crews and holding them to ransom. They are enjoying themselves at the moment; they have quite literally got away with murder, and who is going to tell them to stop?

I have no trouble believing the Islamic Republic of Iran when their Revolutionary Guards tell us that they cannot control the Houthis. That’s obvious. The Iranians can supply them with arms, but they cannot make them stop until those arms run out. The Iranians can stop the supplies, but that will take weeks and months, and we all know that the arms trade finds unexpected paths to deliver killing implements anyway.

This gives the regular merchant shipping industry a dilemma. Do we really (really?) want the Houthis to stop? Our distant ancestors were pretty relaxed about paying off the Barbary Corsairs until the brand new American republic came along and had no money to buy them off with, so they fought them.

The same probably applies here. The Houthis will probably be around until they really annoy someone, and get invaded.

Development Work On Bali’s Massive Toll Road Project Restarts This Month

In June 2024, further land acquisition processes will be allowed to be continued after nearly two years of delays and postponements. While land acquisition work gets underway, government officials have voiced their hopes that construction will be underway once again in September of this year.

Wayan Koster, who was Governor of Bali until the elections in February this year, has spoken to reporters about developments on the project.

Koster told the media, “The clearance process has started, and construction is expected to start in September. This is all the central governments. At the time, as governor, I only issued a determination of the location, the route, and the roads to be followed according to the results of the study from the ministry.”

The Gilimanuk-Medewi Toll Road will connect three regencies, namely Badung, Tabanan, and Jembrana. The mission is to connect the center of the island to the far west, thus improving connection from Denpasar through to East Java and beyond.

As plans show, the Gilimanuk-Medewi Toll Road will run for 96.84km and run through 50 Balinese villages. Communities and land owners are already in talks with developers about who and how people will be affected by the land acquisition for the mega-development project.

It has long been the position of Minister Basuki Hadimuljono, Indonesia’s Minister for Public Works and Public Housing, that the Gilimanuk-Mengwi toll road is a national strategic project (PSN) that must be urgently implemented.

The tender process has now been brought to a close, with the government now accessing applications and bids for the project work.

Local reports show that the work will be completed as part of the PPP scheme with a value of IDR 22.839 trillion along a 96.84 km road and a concession period of 50 years.

Minister Hadimuljono told reporters in Bali, “We took over. [the tender process] And now our auction has been solicited and initiated by the government. It is being auctioned by the government to get new investors who have nothing to do with the previous ones.”

“That is the condition. Hopefully, the PPJT (Toll Road Concession Agreement) will be signed at the auction in September. Once the PPJT has been signed, then construction will proceed.”

The tender and bid process had to be opened up again after previous investors failed to come up with the capital needed to keep the project moving

The Gilimanuk-Medewi Toll Road is not the only sizeable development project in Bali to be put back on the cards in recent weeks. Conversations about the development of North Bali International Airport have once again become a hot topic on the island.

With the incoming President Prabowo Subianto making some serious promises during his election campaign reading the development of North Bali Airport, investors and the company behind the project have started to talk publicly again about how the airport would bring benefit to the northern regions of the island.

The North Bali International Airport, which is set to be built on reclaimed off-shore land in Buleleng Regency, is set to be home to the airport itself, an aerocity, an aerotropolis, a power plant, and much more.

The next five years in Bali are certainly going to be interesting from a development perspective, and only time will tell how this will impact local communities and tourists.

As the Gilimanuk-Medewi Toll Road makes progress, North Bali Airport is back up for discussion; small but significant progress has also been made on the Bali Rail Network Project, where top Ministers have confirmed tax breaks and legislative support to keep the project moving.

CEO of Hapag-Lloyd, one of world’s top ocean shippers, says the outlook has changed for the global economy

Rolf Habben Jansen, CEO of Hapag-Lloyd, the world’s fifth-largest ocean carrier, tells CNBC he has an improved view on trade for the rest of 2024. Conversations with clients and other logistics companies have led the shipping CEO to a more optimistic view on demand in the second half of the year than projected in previous forecasts.

“We also see that inventories are depleted in many cases and so far we’ve seen a good recovery after Chinese New Year,” Jansen said. “So we’ve been fairly happy with that.”


The company reported a steep drop in its 2023 net profit this week and slashed its dividend, which led to a stock decline. It was the third-best group profit in company history, albeit significantly lower than 2022, which was fueled by container congestion and high freight rates.

“The last quarter of 23 was difficult because rates were at unsustainable levels,” Jansen said. “I think everybody noticed that. We saw them coming up a bit towards the end of the quarter, and then of course, the Red Sea crisis … which again changed the market.”

Added climate costs from Red Sea diversions

While the Red Sea issues have resulted in a shipping container rate spike, Hapag-Lloyd is forecasting a decrease in its earnings this year as costs increase related to the trade diversions from the Red Sea.

According to SONAR, the price of 40-foot containers started its run-up in the U.S. on Jan 3, ranging from $3,063-$3,763 to a peaked on Feb. 9 from $5,353-$7,329. While rates have now declined, U.S. companies are paying more, with rates from Asia to West Coast ports up 155% year-to-date; Asia to East Coast up 129% year-to-date; and Asia to the Gulf Coast up 71.2% year-to-date.

Attacks by the Houthis on commercial shipping interests in the Red Sea continue, with a tanker attacked in the Red Sea Friday while underway northbound in the Red Sea, though the tanker was empty at the time and continued on its journey, with no crew injuries reported. The day prior, the tanker was assessed to have been the subject of a near miss 47 miles southeast of Aden, Yemen.


“It’s a concerning situation and I think the [Red Sea] outlook is very difficult,” Jansen said. “We hope that it will be over in a couple of months. But I’m very well aware that despite all the efforts that many countries are undertaking, some also believe that it might last quite a bit longer. In the end, we will do whatever we can to keep our people safe, even if that means that transit times are going to be a little bit longer.”

The route around the Horn of Africa is longer and more fuel is being burned by container vessels. In addition to the added costs, according to Sea-Intelligence, the Red Sea diversions could increase carbon dioxide emissions by 260%–354%. 

As a result, ocean carriers with Europe-bound vessels will be paying higher emissions liabilities under the EU Emissions Trading System. According to maritime technology firm OceanScore’s calculations, with the diversions increasing fuel consumption and sailing speed from 16-20 knots to make up some time, the emissions trading system imposes a 50% liability for voyages either originating from the EU or traveling to it, and 100% liability for ships docked at an EU port or completing transits from one EU bloc port to another.

The longer voyages are creating a challenging and costly environment for Hapag Lloyd which has a goal of being net-zero carbon by 2045.

“That is definitely a big problem,” Hansen said. “Today we have to sail faster and we have to sail more. So that does not help us to achieve those sustainability goals. I would hope, however, that this is a temporary situation and that within some months, we can go back to the Suez and then of course, we can go back to the original trajectory.”

The ocean carrier industry has added approximately 5% vessel capacity to offset delays and container usage. Hansen says by sailing faster than normal it has increased capacity more in the range of an additional 8%-10% capacity.

New ocean alliance with Maersk

The reduction in global freight and schedule reliability are headwinds ocean carriers have been facing for months. One way to mitigate these challenges is by reducing operational costs and increasing customer satisfaction through the use of ocean alliances.

In January, Maersk and Hapag-Lloyd announced the Gemini alliance, which will take effect early next year. Both carriers say they will achieve a schedule of reliability of greater than 90% once the new network is fully rolled out, which would be a huge improvement, with Sea-Intelligence calculating global reliability at around 51.6%.

The Gemini alliance will have both Maersk and Hapag-Lloyd jointly allocating around 290 ships. It will be run by using a spoke and hub system similar in other transportation systems.

“We believe in the hub and spoke system because it essentially is a system that works also in many other transportation modes,” Jansen said. “When you look at the express industry or when you look at air freight, it’s a very common and known system. The network is much more resilient than a traditional network where everything goes end to end.”

“You need more than one bus to run a bus rotation, and it’s essentially the same for ships,” said Lars Østergaard Nielsen, Maersk’s vice president of operations for the Americas. “We need to make sure that they go to the right ports at the right time and in the right sequence all over the world.”

Maersk and MSC, the world’s largest carrier, announced they would be discontinuing the 2M alliance in 2025, with Maersk saying reliability as a focus was key in choosing a new partner.

“With our new partner, Hapag, we have a very clear focus on making sure we deliver a new level of reliability to our customers,” Nielsen said. “For many years, it has been hard to get the reliability much above 50%. So essentially every other shipment would have been delayed.”

Delayed shipments slow down the turning of containers which are used to move the freight the ocean carriers get paid to move. More efficiency in theory would mean greater container utilization.

Peak shipping season outlook

In addition to the ongoing Red Sea diversions and Panama Canal drought restrictions, Hansen said U.S. shippers, including most notably retailers, are planning ahead this year for peak shipping season ahead of potential East Coast and Gulf ports strikes, in line with what logistics decision makers told CNBC at one of the world’s largest maritime/logistics conferences TPM, held in California last week.

“I would also expect that peak season is going to start a little bit early,” Hansen said. “I also expect that there’ll be quite a number of people who tried to bring in their goods somewhere between June and August.”

Why is the Panama Canal drying up and what does it mean for global shipping?

image Source :

There’s a backlog of vessels waiting to cross one of the world’s crucial maritime passageways which saves ships from travelling thousands of kilometres.

Low water levels in the Panama Canal prompted capacity cuts earlier this year and carriers are still facing months of navigating restrictions.

Here’s why the canal is drying up and what it could mean for the world’s maritime commerce.

Why is the Panama Canal important?

The canal is a 65km-passage which about 6 per cent of all global shipping trade passes through.

It connects the Atlantic and Pacific Oceans and its construction significantly reduced the journey for ships travelling between the oceans.

The Panama Canal cuts through Central America

Image Source :

More than 14,000 ships crossed the canal in 2022.

Container ships are the most common users of the Panama Canal and transport more than 40 per cent of consumer goods traded between north-east Asia and the US east coast.

What has caused low water levels in the Panama Canal?

Panama is one of the world’s wettest countries but an El Niño pattern is contributing to a prolonged drought.

Rainfall is about 30 to 50 per cent below normal and the area around the canal is experiencing one of the two driest years in the country’s 143 years of keeping records, according to data from the Smithsonian Tropical Research Institute (STRI).

The Gatun Lake is the principal reservoir that floats ships through the canal.

Water levels in the rainfall-fed lake have remained below normal despite the current “wet season”.

STRI’s Steven Paton said a potential early start to Panama’s dry season and hotter-than-average temperatures, typical of major El Niño events, could increase evaporation from Gatun Lake and result in near-record low water levels by March or April 2024.

What impact is the drought having on shipping?

Carriers have been forced to offload cargo or consider alternative routes to comply with restrictions imposed by the Panama Canal Authority.

The government agency has reduced maximum ship weights and daily ship crossings in a bid to conserve the canal’s water.

“Each time a ship goes through there, it uses up about 80 Olympic-sized swimming pools of water and that all comes out of the lake,” maritime logistics expert from Deakin University Peter Van Duijn told ABC News.

He said the drought means that water isn’t being replaced at the moment.

Ship owners have the options of carrying less cargo, adding thousands of kilometres to their trips or grappling with queues that earlier this month backed up 160 vessels and delayed some ships by as much as 21 days.

Panama Canal Authority recently opened two more passage slots per day for ships that don’t have have priority to pass, as container ship do, and this week the backlog had decreased since to 115 ships.

How long will restrictions last?

The Panama Canal expects to maintain restrictions for at least another 10 months.

The extension of the restrictions would give the canal room for preserving water before the next rainy season arrives, but could create a larger bottleneck of ships if they do not reserve ahead of passage.

“We are currently seeing an increase in arrivals,” the canal’s deputy administrator Ilya Espino said on Thursday.

“It is peak season as December is approaching, so merchandise for Christmas is moving quickly.”

The frequency of major El Niño drying patterns has risen significantly during the last 25 years of the canal’s 109-year history.

Mr Paton said that if that continues, it will be increasingly difficult for the canal to guarantee that the largest ships are going to be able to get through.

Article Source :

Shippers look for alternatives as Panama Canal delays lengthen

Image Source:

Shippers are now actively rearranging Asian shipments, moving back from the US east coast to the west coast, as the full ramifications of the Panama Canal’s prolonged reduced operational capacity hits home.

Facing what it has described as an “unprecedented” drought, the Panama Canal Authority has shaved a couple of metres off its maximum draft for its neopanamax locks whereby ships transiting can only go through the waterway with a 13.41 m depth and the number of daily transits has been slashed by 20% to 32 a day – measures that are expected to be in place into the new year as the El Niño weather phenomenon is likely to bring more dry weather.

Aware of the limitations climate change is bringing to bare on this crucial waterway, the canal’s administrators are looking at alternative ways to get shipments across the country.

“The Canal’s focus on the future is not only limited to addressing current challenges but also includes proactive environmental initiatives. Efforts are being made to safeguard the water basin, preserve forest cover, and explore the possibility of developing a logistics corridor to diversify cargo handling options within the country,” the canal’s administrators stated in a release yesterday.

“We have to find solutions so that we can continue to be a relevant route for international trade. If we don’t adapt, we will die,” canal administrator Ricaurte Vasquez said at a recent press conference.

Cruisegoers were left reeling yesterday with the news that Royal Caribbean’s Rhapsody of the Seas has suddenly decided to axe all its Panama Canal crossings for the 2023 – 2024 winter season, with holidaymakers now forced to book alternative flights. While the cruiseline failed to provide reasons for the sudden cancellation of this popular transit, the growing queues at the canal are thought to have played a part in the decision.

Waiting times for merchant ships have been growing this month, starting out at 15 days on August 1 and have now topped 20 days with a growing backlog of ships waiting at either end of the canal (see map below).

Special auctions are in place for cancelled slots, with very high fees demanded. Liners have reacted by implementing canal transit surcharges of up to $500 per teu.

Data from Denmark’s eeSea shows the average number of boxship transits over the past eight weeks has been 58 per week. Last week it slipped to 55.

“Obviously, if the drought continues, and we only handle, say 55 vessels like last week, the problem will accumulate,” warned eeSea’s founder Simon Sundboell.

Peter Sand, chief analyst at freight rate platform Xeneta, said shippers must now consider their options as Panama congestion is on the rise.

“Playing the spot market too tight may not be the best option right now, as sentiments push transport costs up again every month,” Sand advised.

Andy Lane from Singapore container advisory CTI Consultancy told Splash that backhaul container services can go 2,000 nautical miles further through the Suez Canal or 5,000 nautical miles further around Africa. Some headhaul services can likely be switched also to Suez routings, he suggested.

“It just takes a few weeks of lead-time to be able make such network changes. The backlog is going to take months to clear it would seem, so it would be good for the container carriers to start planning now,” Lane urged.

Image Source :

Article Source :


Choosing the Right Shipping Service Partner for Your Requirements

At Rim Cargo, we prioritize our customers above all else. With our extensive experience, we have successfully delivered freight on schedule and without damage. Moreover, we offer competitive pricing to meet all your shipping needs.

We specialize in international shipping services from Bali to all countries and major cities worldwide, including Australia, Singapore, China, Malaysia, USA, Europe, UK and Fiji. Whether you prefer air or ocean freight, we guarantee prompt and cost-effective delivery of your valuable cargo to its destination.

With over 25 years of expertise in international cargo shipping from Bali, Rim Cargo is your trusted partner. Our focus lies in providing door-to-door shipping services worldwide, along with tracking, pickup, excellent customer service, flexibility, and smooth communication.

Our comprehensive range of services includes:

  • International freight forwarding
  • Air cargo, sea cargo, and inland trucking
  • Bali warehouse, moving, and logistic cargo
  • Domestic cargo and courier services
  • Cargo insurance
  • Packing, handling, warehousing, and export documentation
  • Customs clearance for import and export shipments
  • Bali/ Indonesia export-import services
  • Indonesia cargo services worldwide

We collaborate with a reliable global network of forwarding agents to ensure a convenient shipping process. Regardless of whether your freight is palletized, crated, or boxed, we handle it with utmost speed and efficiency. From full container loads to less than a container or consolidation shipments, we manage every aspect with care and efficiency. Our warehouse facilities cover a total area of 1000 sqm and are equipped to handle thousands of tons of cargo daily through our well-managed and integrated systems.

Efficient customs clearance is vital for smooth international trade, and our brokerage service perfectly complements our transportation expertise. We provide a one-stop solution for all your logistics requirements, from origin to destination. Additionally, our team of professionals can take care of document legalization, a necessary step in the export process for most countries worldwide.

Rest assured that we handle your freight professionally at every stage of the shipping process. Say goodbye to hassle, hidden fees, and logistical problems.


The shipping rivals plotting divergent courses on global trade

Mediterranean Shipping Company and AP Møller-Maersk were always unlikely bedfellows. Yet in 2015, the world’s two biggest container shipping companies set aside their rivalry and shrugged off opposition from regulators to form a capacity-sharing alliance. Maersk containers could be carried on MSC vessels and vice versa, cutting both groups’ operating costs without reducing the number of ports they could serve. The pact helped reshape container shipping, an industry whose profits had traditionally been tied to the ebbs and flows of the global economy. Within two years, other big players such as France’s CMA CGM, China’s Cosco and German liner Hapag-Lloyd had struck similar deals. But now MSC, based in Switzerland but controlled by an Italian family, and Maersk, the venerable Danish conglomerate, are divorcing. This year they confirmed that the so-called 2M alliance will end in 2025. Eight years after the agreement began, the dynamics of the container shipping business are starting to change dramatically — in ways that have important implications for the future pattern of globalisation. The context is the boom the two companies enjoyed during the Covid-19 pandemic. After years of highly cyclical and often weak earnings, shipping lines enjoyed record profits as ships queued up at ports to unload and customers raced to get goods on to a

diminishing number of available vessels. The average cost of shipping a 40ft container from eastern China to the US west coast at short notice rose from less than $2,000 to a peak of $9,699, according to data provider Xeneta. In the three years from 2020 to 2022, the industry generated as much profit as it had during the previous six decades combined, according to the shipping consultancy Drewry. Maersk’s annual pre-tax income soared from $967mn in 2019 to $30.2bn in 2022 — more than investment bank Goldman Sachs or Facebook-owner Meta. “[Shipping lines] went into the pandemic barely breaking even,” says John McCown, founder of the shipping consultancy Blue Alpha Capital. But after Covid-19 hit and they immediately took vessels off the water and helped create the strongest “supply and demand dynamic ever”. Bumper profits have given Maersk and MSC the freedom to sever ties and to invest heavily, but the two companies are taking strikingly different approaches to the future of their industry. MSC has ordered a significant number of new ships and last year overtook Maersk in terms of tonnage — an apparent bet on the continued growth in global trade. Maersk, on the other hand, is investing in broader logistics facilities, such as new warehouses, trucks and planes, in an effort to appeal to customers worried about future supply chain disruptions. About 90 per cent of global trade is transported by sea and between them, MSC and Maersk control as much as a third of the international container business. As trade disruptions during the pandemic showed, the decisions these companies make can have an outsized impact on international supply chains and the global economy. As the two lines plot their very different courses, industry observers are uncertain which, if either, strategy will pay off. Large box carriers have more money “than they can use”, says Lars Jensen, chief executive of the shipping consultancy Vespucci Maritime. With trade now slowing after the dislocations of the pandemic, they have a rare opportunity to make that cash count.

Image Source:

Container ships anchored off the Californian coast wait to offload in 2021. Trade disruptions during the pandemic showed how shipping companies can have an outsized impact on the global economy © Mario Tama/Getty Images But the years of abnormal profits have also drawn regulatory and public scrutiny, while owners of heavily polluting ships are under pressure to invest in curbing emissions. The industry that helped oil the wheels of globalisation must now weather its aftermath: reshoring and increased economic nationalism. “The dice have been rolled,” says one shipping executive on MSC and Maersk’s diverging strategies. “It’s going to be a more exciting time to be in this industry.” A long rivalry Geneva, in landlocked Switzerland, is an unlikely location for the headquarters of the world’s leading container shipping group. But from its low-tax base, the former ferry captain Gianluigi Aponte has quietly built the MSC empire from a single cargo ship in 1970 to a worldwide fleet of more than 700 owned and leased vessels. Along the way, his family-owned business has acquired a reputation for being aggressive and nimble. As chair and president respectively, the secretive Italian and his son, Diego, retain tight control over the group, which does not disclose its profits and declined to put executives forward for interview. Industry insiders described Maersk as a very different business, even before its recent expansion into warehousing. Founded in 1904, it has cultivated a reputation as one of the most reliable container shippers. Although the descendants of its founder, Arnold Peter Møller, still run its holding company, the shipper is now one of Denmark’s largest publicly traded groups, its quarterly earnings reports scrutinised globally as a barometer for international trade. Their alliance was always a “marriage of convenience”, says Jensen. “You couldn’t find two carriers that were more different.” People who have worked closely with both companies characterise the Danish group as a more unwieldy, bureaucratic machine than its competitor. “They are kind of opposites,” says a senior employee at one shipbroker. “Maersk is more corporate. MSC . . . has fewer people making more reactionary decisions. [When leasing a ship to MSC], we get a very quick reaction. Maersk decisions can take longer.” That agility and the buoyant market conditions have enabled MSC to close the gap with its older rival, according to data compiled by the analysis firm MDS Transmodal. In 2019, Maersk was the market leader by capacity in 38 countries out of 153 served by container shipping lines, 10 more than MSC. But by the first quarter of this year, Maersk led in 30 countries, while MSC was the dominant carrier in 36, overtaking its rival in key markets such as the US and India. “I have no doubt that MSC was more profitable than Maersk during these boom years,” says one person who knows the Aponte family well. “They maxed out and charged whatever they could for every container.” MSC declined to comment on its profitability but says it “invests in assets, equipment and people to continue to provide a good service to clients and play an essential role as a facilitator of global trade”. The rivalry also took on a personal twist. In November 2019, Maersk abruptly announced the departure of its chief operating officer, Soren Toft, who had been tipped by some for the top job in the future. Instead, he joined MSC’s container shipping business as chief executive a year later, the first person from outside the Aponte family to take on a leadership role. Toft has been “a great catch” for MSC, says the shipbroker’s employee. “He has all that experience from Maersk. [Maybe MSC] wanted to know what is going on inside Maersk. Maybe they needed that.” Maersk’s chief executive, Vincent Clerc, stresses that his company can also flourish outside the alliance. The group “needed to regain control”, he says during an interview at its Copenhagen headquarters. “It was just very difficult for us to do what we think is right [while] having to share so much,” he says, adding that Maersk and MSC had “very different views” on “cost versus quality trade-offs”. “This is not about: only one strategy can win . . . we’re going in a certain way. We think that there is a market of customers for whom what we do makes it right to ship with us.” Setting new courses This is not the first time that Maersk has attempted to tilt its business beyond sea freight. Jensen, a former Maersk researcher, points out that the group tried to break into logistics about two decades ago, before the financial crisis of 2008 scuppered investment plans across the industry. Now, Clerc has set an ambitious target for logistics earnings to overtake those of the shipping operation within a decade. Its logistics and supply chain services unit generated a fifth of the group’s overall sales and less than 5 per cent of profits in 2022. Vincent Clerc, chief executive of Maersk. His strategy for an expansion into logistics is pinned on the idea that it will make the company more resilient during economic downturns © Liselotte Sabroe/Ritzau Scanpix/AFP via Getty Images Since 2019, the group has used its bumper earnings to acquire at least 11 companies, among them the $3.6bn takeover of LF Logistics last year. The Hong Kong group’s 198 warehouses helped Maersk double the number of sheds it owned that year. Clerc’s hope is that a premium, end-to-end supply chain service will appeal to the big retailers whom it has focused on building relationships with. “In the Covid years, [supply chain] vulnerability was really laid bare,” he says. “The idea was [that] you create solutions for these large customers that, today, have to contend with very, very volatile supply chains.” Maersk had been allocating more shipping capacity to customers most likely to buy into these solutions, and Clerc argues that Maersk’s expansion into logistics will make it more resilient during economic downturns. But he risks antagonising the freight forwarders who handle cargo for smaller retailers and group it together to help fill containers. Its move inland is turning these businesses from customers into competitors. Jensen says that “quite a few” have told him over the past year that they are reducing business with Maersk because of its new strategy and a perception that the carrier has not recently offered them sufficient capacity. The challenge for Maersk is growing its logistics business at scale, he says, since freight forwarders control as much as half of the world’s container cargo. If MSC can grow its fleet fast enough, it could offer a cheaper alternative to these disgruntled customers. But along with other shipping groups who have invested heavily in new vessels, MSC is running the age-old risk: overcapacity. Prior to the pandemic, shipping lines suffered “10 years of piss-poor markets”, says Niels Rasmussen, chief shipping analyst at the industry group Bimco. “But that to a certain extent was self-inflicted. Because just like now, they had ordered a lot of ships” during an economic boom. That meant the supply of shipping capacity significantly outstripped demand when global trade took a turn for the worse. The Swiss group is awaiting the delivery of 122 ships, while Maersk has ordered just 28, according to the data provider Alphaliner. Driven in large part by MSC’s bulging order book, Bimco expects the total supply of container space across the industry to increase 12 per cent in the two years to 2024 — up to double the anticipated growth in demand.

Imagae Source:

The person close to the Apontes says the family still calls the shots at the Swiss-based group. “MSC has made a big bet on ordering new vessels and that is all [Gianluigi] . . . [He] has had this urge, this quest inside him to overtake Maersk. And he has pursued it year after year.” As MSC and its peers wait for more vessels to roll down the slipways, profits have already nosedived. During Covid lockdowns, a boom in spending on gadgets, home gyms and hot tubs helped drive up the cost of shipping. Now demand has moderated, freight rates have crashed back down. Maersk forecasts its underlying earnings will fall by as much as 94 per cent this year. Rasmussen expects box carriers will scrap older vessels at a faster rate in the years ahead, partly offsetting the new supply. He adds that they are already taking steps to limit supply, including skipping port stops and reducing vessel speeds. Challenges ahoy Even if the industry can mitigate its boom-to-bust tendencies, it faces the prospect of a stricter regulatory regime in the years ahead. This month, a judge at the US Federal Maritime Commission ordered a Maersk subsidiary to pay a Florida-based furniture importer $9.8mn in damages for lost profits and unlawful retaliation, after the firm alleged Maersk had withheld capacity and then unilaterally cancelled its contract, leaving it exposed to soaring spot rates. The same judge also made a $1mn ruling against MSC, which is set to appeal. Soren Toft, chief executive of MSC’s container shipping business. Before his departure from Maersk in 2019, he had been tipped as a future contender for the top job © Oliver O’Hanlon/MSC The widely reported cases have drawn attention to what some say is the excessive market power wielded by a handful of large shipping groups, whose decision to take scores of vessels out of action immediately after the Covid outbreak contributed to the capacity shortages and elevated freight rates in the ensuing months. In 2022, President Joe Biden promised to “crack down on ocean carriers whose price hikes have hurt American families”, calling out the “nine foreign-owned carriers” who control most of the market. In June that year, Congress passed legislation that increased the FMC’s powers to stop these groups refusing or overcharging for cargo. Scrutiny has also intensified in France, where lawmakers called last year for a 25 per cent tax on the “superprofits” accumulated by Marseille-based CMA CGM, the world’s third-biggest carrier. Clerc pushes back at suggestions that shipping groups have become too powerful, arguing “every shipping container was used” during the pandemic. “I do understand the frustration. But this is similar to saying [during recent energy shortages] that these energy companies have too much power. If you have a limited supply of something, not everybody can get it.” MSC said it had “invested considerably” and “deployed all available shipping capacity” to meet unprecedented surges in demand, softening the impact of lockdowns for consumers globally. The industry is also bracing itself for new laws under which it will pay more for the greenhouse gas emissions from so-called “bunker fuel”, the heavy diesel oil used to power large ships. The UN’s International Maritime Organisation previously mandated a target for shipping to halve annual greenhouse gas emissions between 2008 and 2050, short of the net zero ambitions set for other industries. But it has committed to strengthening that goal next month and, more recently, French officials have been rallying support for a global tax on the industry’s greenhouse gas emissions. Maersk has ordered up to 19 green methanol-powered ships as it targets net zero emissions by 2040. But these are “dual-fuel” vessels, reflecting concerns that they may still rely on fossil fuels if the limited supplies of sustainable alternatives are not expanded in time. For all these accumulating pressures, the industry’s closest watchers say that MSC and Maersk’s hold on the global supply chain is unlikely to loosen soon, even as they chart divergent courses. “[Customers] are aware that carriers have more strength than they had in the past,” says McCown, of Blue Alpha Capital. “What came away from [the pandemic] is a renewed awareness among carriers that they can command their own destiny.” Copyright The Financial Times Limited 2023. All rights reserved. Reuse this content(opens in new window)CommentsJump to comments section Latest on European companies

Article Source:


Bali’s IDR10 trillion LRT project on track, will link airport with Kuta

Source Image:

Bali is getting its own light rail transit (LRT) system, officials said, which will whisk passengers from the Ngurah Rai International Airport to the bustling tourist hub of Kuta.

The LRT project has been in the works for years, but it has now received the official nod from the central government for an expected 2027 completion date.

Bali Governor Wayan Koster announced on Tuesday that the Ministry of Transportation and the National Development Planning Agency (Bappenas) have agreed to fund and support the LRT project, which Transportation Agency Head IGW Samsi Gunarta previously said will cost a whopping IDR10 trillion (US$671 million).

The LRT project is a collaboration between the Bali provincial government and the South Korean government, which will provide technical assistance and funding through a soft loan scheme.

Following a feasibility study launched in 2021, officials said the LRT route will cover 9.46 kilometers, with four stops along the way: the airport, Central Parkir Kuta, Discovery Mall, and Seminyak. The LRT will run on a track that is partly underground and partly elevated.

The LRT project is part of Bali’s long-term plan to develop an integrated public transportation system.The plan aims to reduce Bali’s dependence on private vehicles and motorcycles, which have contributed to air pollution and road accidents on the island.

In 2020, a 4.78 kilometer LRT line connecting Ngurah Rai and a planned satellite terminal in Kuta was seemingly underway. Before the project evolved to its current iteration, officials said then that the LRT would cost IDR5 trillion (US$335 million) and be up and running by 2022.

Article Source: