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

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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

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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 : https://www.abc.net.au/

Shippers look for alternatives as Panama Canal delays lengthen

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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.

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Choosing the Right Shipping Service Partner for Your Requirements

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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.

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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.

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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.

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The shipping rivals plotting divergent courses on global trade

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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.

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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.

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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

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

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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.

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Reality of ocean container volume far cry from China reopening hype

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As the global trade recession began to materialize in 2022, there was a great deal of hype over the potential boost to ocean container demand once the Chinese government ended its COVID restrictions and lockdown measures. But now that hype has faded and what was once hoped to be a great reopening and much-needed boost to volumes is looking more and more like a great flop.

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In the chart above, the Inbound Ocean TEU Volume Index from China to the U.S. provides a seasonality view that compares 2023 volumes thus far (white line) with volumes over the past four years. It was late March/early April of 2022 (green line) when the Chinese government announced another round of COVID restrictions and lockdowns. This new round of lockdowns at first appeared as if they would make the transportation of goods to and from major manufacturing hubs nearly impossible. That caused some to automatically (and haphazardly) assume the following scenario: The lockdowns would cause a backlog of goods and pent-up demand that would eventually cause another container surge similar to what occurred after the first round of lockdowns in 2020. But we were able to see a different story playing out in real time through our bookings data.

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Those who were expecting an impending freight surge hadn’t realized that, even though access to the Port of Shanghai was largely blocked due to landside restrictions (i.e., road closures), shippers were able to reroute volumes through the closest alternate major port in nearby Ningbo. As the chart above clearly displays, the resulting decline in Shanghai bookings and container volumes was more than offset by a surge of volumes through Ningbo during that time (from the rerouted Shanghai bookings).

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As the year progressed into the second half, global container volumes began plummeting, and there were still no signs of a surge in volumes coming out of China. As the hopes of a potential freight wave eventually began to fade, it was still widely believed that China’s reopening would (at least) be a major factor in helping boost volumes and possibly create a “soft landing” for the global ocean container market. Unfortunately, that boost in volumes never appeared. Instead, volumes continued to soften out of China during a largely nonexistent peak season. The weakening volumes were then met by emerging headwinds such as the inventory glut, weakening consumer demand and increasingly negative economic landscape.

 
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Bali Airport Off to Strong Start in 2023

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The Class I Immigration Office at Bali’s Ngurah Rai Airport reports that Australian nationals represented the largest number of foreigners entering Bal in January 2023. For January, 99,075 Australians were processed through the immigration desks at Bali’s airport. Australians were followed by Russians (22,703) and Indians (22,116).

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Arial View of Bali Airport

Handy Heryudhitiawan, general manager of Bali’s Airport, told Beritabali.com that domestic traffic at Bali’s Ngurah Rai Airport continued to grow as the 2023 New Year dawned. In January, 757,863 passengers arrived and departed from Bali, representing an increase of 27% compared to passengers handled in January 2022.

Most domestic arrivals in Bali emanate from Jakarta’s Soekarno-Hatta International Airport, from which 328,939 passengers flew to Bali. Meanwhile, Surabaya’s Juanda Airport had 85,433 passenger departures for Bali, and Ujung Pandang embarked 42,717 passengers for the Island.

Handy is optimistic that passenger traffic will grow in 2023 at higher levels than in 2022. His optimism is buoyed by the steadily increasing number of international flights and plans by Emirates Airline to operate a Jumbo Airbus A380 aircraft beginning in June.

Most basically, Handy says Indonesia’s proven ability to control the COVID-19 outbreak and the return of international flights are the most likely factors to contribute to growing arrivals numbers for the remainder of 2023.

Bali’s Airport handles a daily average of 45,811 international and domestic passengers.

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Global liners enter familiar price war territory

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Liner shipping has entered a price war, a race to the bottom that has characterised almost every cycle of this shipping sector for the last 50 years.

Analysts at Sea-Intelligence have suggested that the decision by the big global container carriers to not reduce capacity in line with the dropping demand registered over the past six months can only be explained by the fact the market participants have entered into a price war.

“A choice to allow overcapacity to persist is also a choice to allow rates to continue to drop. Such a choice has a description: A price war,” Sea-Intelligence experts wrote in their latest weekly report.

“It has been obvious for a number of months that carriers have reverted to type – the instinct to preserve volumes and price lower to secure short-term bookings has taken over,” commented Simon Heaney, senior manager of container research for UK-based Drewry. “The idea that the extreme profits had changed mindsets has been proven to be totally false.”

Heaney predicted that today’s price cutting will mean freight rates land more closely to pre-pandemic levels, as will profits. Drewry estimates liner shipping made record combined operational profits of $290bn last year, something that will slide to just $15bn in 2023.

“The carriers do not have a choice as a price war is bound to happen whether they want it or not,” argued Hua Joo Tan, the founder of Asia-based consultancy Linerlytica, in conversation with Splash today. “What we have is a perfect storm with excess supply coinciding with the collapse in demand with none of the main carriers willing or able to make an exit from the market,” Tan said.

Commenting on how the market dynamics might play out, Lars Jensen, CEO of Danish consultancy Vespucci Maritime, told Splash that today’s price war will likely be a temporary one, whereupon more capacity will be pulled to stabilise the market.

“But it should be noted that the market is at the same time entering a cyclical downturn which in itself adds negative pressure,” Jensen cautioned.

Korean flagship liner HMM issued record annual profits today of $7.88bn, but became the latest carrier to warn that 2023 will be a challenging year.

“Unfavorable market conditions are expected to continue due to widespread inflation and weak economic growth, putting pressure on demand,” the Seoul-based carrier stated.

“Container freight rates have fallen materially over the past six months and are hovering at 2020 lows across several routes,” Jefferies noted in a recent note to clients, calling for a “major supply response” to right-size the market.

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Indonesia Tourist Entry Visas Clarified

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The Indonesian Ministry of Foreign Affairs has issued a circular memorandum (SE/005/PK.04/2022/64) on 28 April 2022, addressed to all foreign legations of the Republic worldwide, detailing visa entry requirements.

Image from https://balidiscovery.com

The salient points of the memo follow.

Citizens of the following nine ASEAN member countries are traveling for “leisure purposes” are allowed to travel visa-free:

  1. Brunei Darussalam
  2. Philippines
  3. Cambodia
  4. Laos
  5. Malaysia
  6. Myanmar
  7. Singapore
  8. Thailand
  9. Vietnam

Citizens of the following 60 countries and administrative regions are entitled to receive a “Visa on Arrival for Leisure Purposes” after paying a visa fee of Rp. 500,000 (US$35):

  1. South Africa
  2. United States of America
  3. Saudi Arabia
  4. Argentina
  5. Australia
  6. Austria
  7. Netherlands
  8. Belgium
  9. Brazil
  10. Brunei Darussalam
  11. Bulgaria
  12. Czech Republic
  13. Denmark
  14. Estonia
  15. Philippines
  16. Finland
  17. Hong Kong
  18. Hungary
  19. India
  20. United Kingdom
  21. Ireland
  22. Italy
  23. Japan
  24. Germany
  25. Cambodia
  26. Canada
  27. Republic of Korea
  28. Croatia
  29. Laos
  30. Latvia
  31. Lithuania
  32. Luxembourg
  33. Malaysia
  34. Malta
  35. Mexico
  36. Myanmar
  37. Norway
  38. France
  39. Poland
  40. Portugal
  41. Qatar
  42. Romania
  43. New Zealand
  44. Seychelles
  45. Singapore
  46. Cyprus
  47. Slovakia
  48. Slovenia
  49. Spain
  50. Sweden
  51. Switzerland
  52. Chinese Taipei
  53. Thailand
  54. Timor-Leste
  55. People’s Republic of China
  56. Tunisia
  57. Turkey
  58. United Arab Emirates
  59. Vietnam
  60. Greece

Visit Visa Exemptions or Visa on Arrival for Leisure Purposes are granted for foreign nationals are available at the following Immigration Checkpoints:

  1. AIRPORTS:
  2. Soekarno Hatta, Banten/Jakarta
  3. Ngurah Rai, Bali
  4. Kualanamu, North Sumatra
  5. Juanda, Surabaya, East Java
  6. Sultan Hasanuddin, Makassar, South Sulawesi
  7. Sam Ratulangi, Manado, North Sulawesi
  8. Yogyakarta, Special Administrative District of Yogyakarta
  9. Hang Nadim, Riau Islands
  10. Zainuddin Abdul Majid, Lombok, West Nusa Tenggara
  11. SEAPORTS
  12. Nongsa Terminal Bahari, Riau Islands
  13. Batam Center, Riau Islands
  14. Sekupang, Riau Islands
  15. Citra Tri Tunas, Riau Islands
  16. Marina Teluk Senimba, Riau Islands
  17. Bandar Bentan Telani Lagoi, Riau Islands
  18. Bandar Seri Utama Lobam, Riau Islands
  19. Sri Bintan Pura, Riau Islands
  20. Tanjung Balai Karimun, Riau Islands

CROSS-BORDER POSTS:

  1. Aruk, West Kalimantan
  2. Entikong, West Kalimantan
  3. Mota’ain, East Nusa Tenggara
  4. Turon Taka, North Kalimantan

VISA REQUIREMENTS

Visit Visa Exemptions or Visa on Arrival for Leisure Purposes can be issued following the following requirements;

A diplomatic/official/ordinary passport valid for at least 6 months.
A return ticket or passing ticket for continuing travel to another country.
Proof of payment for Visa on Arrival of Rp. 500,000 when applying for a Visa on Arrival for Leisure Purpose
Proof of insurance coverage from an insurance company incorporated as a legal entity in Indonesia that covers health costs during the traveler’s stay in Indonesia.

ENTRY STAMP

The entry stamp given to foreign travelers when entering Indonesia utilizing a Visit Visa Exemption or Visa on Arrival for Leisure Purposes will serve as a Visit Stay Permit that is valid for:

Visit Visa Exemption: Valid for a maximum of 30 days and non-extendible.
Visa on Arrival: Valid for a maximum of 30 days and extendable for an additional 30 days at the Immigration Office in the area where the foreign national resides.
Visit Visa Exemption or Visa on Arrival for Leisure Purposes can also be granted to foreign nationals on an official visit or governmental duties to attend international events. This exemption requires presenting an invitation letter issued by the Indonesian government to attend an international conference/trial/meeting.

The facilitation of a Visit Visa Exemption or Visa on Arrivals for Leisure Purpose stipulated above applies to holders of diplomatic passports, service passports, service passports, or ordinary/regular passports.

Image from https://balidiscovery.com

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The sleeping giant awakens: Indonesia reopens to the world

by with No Comment Uncategorized

After experimenting with localized trials in Bali, Bintan and Batam, Indonesia effectively reopened its borders to tourists by reinstating visa exemptions for ASEAN nationals and scrapping on-arrival COVID-19 tests for vaccinated travelers on April 6. Citizens of 33 other countries including the United States, United Kingdom, China, Japan and multiple European Union nations are also eligible for visas-on-arrival. The reopening will provide a further boost to Southeast Asia’s largest economy, which has been on a gradual recovery after gross domestic product (GDP) contracted 2.1 percent in 2020 following a nationwide outbreak of COVID-19’s deadly delta variant. Businesses in the retail, transport, and hospitality sectors in particular will rejoice at a likely surge in visitor arrivals as travelers return in force – Indonesia saw 16.1 million visitors pre-pandemic (2019), but only 4 million in 2020 and 1.6 million in 2021. These encouraging prospects were undoubtedly on the minds of investors participating in the initial public offering ( IPO) of Indonesian tech juggernaut GoTo, whose shares jumped 13 percent on the first day of trading.

Nonetheless, to focus solely on pandemic-hit sectors like hospitality would also miss the larger picture of Indonesia’s growth trajectory. At a time of heavily disrupted supply chains and rising commodity prices, Indonesia’s abundance of natural resources – from coal to iron to palm oil – places the country in an enviable position of strength. Russia’s invasion of Ukraine and the subsequent spate of sanctions placed against the former has only accentuated the strain on commodities. Significant attention has already been paid to Russia’s supplies of oil and gas as well as wheat, but it would be remiss to neglect other resources like nickel (used for producing steel and car batteries, among others), of which 10 percent of the world’s supply originates from Russia. Incidentally, Indonesia has the world’s largest nickel reserves at 21 million metric tons. However, companies hoping to rely on Indonesia as an easy source of raw materials should temper their expectations. In 2021, President Joko “Jokowi” Widodo announced the urgency for the country to upgrade from its status as a commodity-based economy to encompassing more downstream components of the value chain. He made these statements at a groundbreaking ceremony of an electric vehicle battery plant in Karawang, West Java – described as Southeast Asia’s first – a non-too-subtle signal highlighting Indonesia’s “downstreaming” manufacturing push from nickel extraction to electric vehicle (EV) battery production. The country has aggressively courted investments in battery manufacturing in recent years, with Chinese and South Korean firms among the first to respond to the call.

The idea itself is nothing new. President Susilo Bambang Yudhoyono’s administration passed the Law on Mineral and Coal Mining 2009 as well as the Energy and Mineral Resources Ministerial Regulation (Permen ESDM) No. 1/2014, which forces mineral extraction companies to convert a minimum amount of raw material (ore) into semi-processed products. However, this was never strictly enforced, and exports continued until the current administration issued Permen ESDM No. 25/2018 which imposes a gradual ban on ore exports – including nickel, cobalt, iron, bauxite, copper, gold, and tin – with only processed or semi-processed materials allowed for export. This has led to hundreds of new smelters being established across the country, with the largest operated by Virtue Dragon (owned by Chinese firm Jiangsu Delong Nickel Industry) in Central Sulawesi.

The Indonesian government has similarly targeted exports of coal, which supplies more than 60 percent of Indonesia’s energy needs: in 2021, it increased the Domestic Market Obligation (DMO) for national coal producers from 10 percent to 25 percent, meaning that each holder of coal mining concession rights must sell 25 percent of all production at a discounted price to domestic market. In February 2022, the government also banned coal producers who failed to fulfil their DMO from exporting coal. In a nod to the downstreaming agenda, state-owned coal producer PT Bukit Asam is aiming to increase the gasification of coal into dimethyl ether (a substitute for LNG) as one way to add value to Indonesian-sourced coal. Indonesia’s downstreaming agenda has taken a long time to come into fruition, and – as with many of its other government policies – time will tell if this recent push bears success. That said, the odds have never looked better for a meteoric resurgence by Southeast Asia’s sleeping giant.

Source Article: The sleeping giant awakens: Indonesia reopens to the world – The Jakarta Post