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A ROUNDUP OF RECENT MERGERS AND ACQUISITIONS THAT ARE SHAPING AND DEFINING THE CARRIER INDUSTRY

carrier global trade LCC

A ROUNDUP OF RECENT MERGERS AND ACQUISITIONS THAT ARE SHAPING AND DEFINING THE CARRIER INDUSTRY

There is no denying that the past 18 months have been a tumultuous period for the global maritime industry. 

According to the United Nations Conference on Trade and Development (UNCTAD), sea-based trade plunged by 4.1% in 2020 due to the unprecedented disruption caused by COVID-19. 

The pandemic has sent shockwaves through supply chains, shipping networks and ports, leading to plummeting cargo volumes and foiling growth prospects, not helped by the enormous uncertainty that accompanies the world’s efforts to emerge out of the pandemic. 

Despite the gloom, UNCTAD expects maritime trade growth to return to positive territory and expand by 4.8% in 2021, assuming world economic output recovers. However, the organization highlights the need for the maritime transport industry to brace for change and be well prepared for a transformed post-COVID-19 world.

Looking at the commercial and strategic activities of major shipping lines is often a good sign of the health of the industry more widely. 

As we progress through 2021, mergers and acquisitions are giving mixed signals, and clearly paint a picture of fluctuating fortunes. 

Damco and Diamond S Shipping dissolve 

In September 2020, industry leaders Maersk announced that it would be integrating Damco’s air and ocean less-than-container-load shipping into its wider business, thus dissolving the brand it merged with Maersk Line at the beginning of 2019. 

The move was part of series of strategic plays by CEO Soren Skou that are geared toward a central goal of becoming an integrated logistics company that provides end-to-end solutions for its customers. 

Shipping commentators regard the Damco internalization as a blurring of the lines between forwarders and carriers. 

For forwarders, alarm bells could start ringing as Maersk now provides direct competition to these companies. DB Schenker reacted quickly to the announcement, offering a so-called stability package to Damco customers that matched the previous terms they were operating under. 

It has created a fascinating dynamic, as many forwarders rely on Maersk as a supplier of carrier services. 

And Damco has not been the only casualty of the Danish company’s reshuffling. Maersk has also spun off lines that include its once-formidable oil drilling business, instead focusing its efforts on acquiring businesses that fit into its core purpose. This includes those specializing in customs and warehousing, as well as numerous digital tools. 

Another well-known brand that has fallen away is America’s Diamond S Shipping, which in March announced it was merging with New York-based International Seaways, the latter keeping its brand as part of the all-stock transaction deal. 

Post-merger, International Seaways will own a fleet of 100 tankers that between them have a capacity of 11.3 million deadweight tons, assets which give it an implied market capitalization of around $1 billion. The fleet split will be approximately 70-30 between crude tankers and product tankers respectively.

Diamond S Shipping went public after it merged with Capital Product Partners in early 2019, this after failing with an IPO attempt five years earlier.

Speaking at the time of the latest merger announcement, Nadim Qureshi, chairman of the Board of Directors of Diamond S Shipping, commented: “We are pleased to enter into a transaction that will both create near-term value for our shareholders and create a superior, scale vehicle that enables investors to gain exposure in both the crude and product tanker markets with strong fundamentals. Importantly, since the focus of the management teams of both Diamond S and INSW are similar, we see further value from synergies in the combined company.”

The combined company will be home to 2,200 employees and carry a market value of around $2 billion. 

K-Alliance and Hapag-Lloyd show brighter prospects 

In South Korea, a huge code-sharing agreement in the form of the K-Alliance looks set to strengthen a series of shipping firms’ competitiveness in Southeast Asia. 

The move sees several enterprises joining forces–HMM, SM Line, Pan Ocean and the recently merged Sinokor Merchant Marine and Heung-A Line–with the intention of reducing operating costs and increasing quality of services.

It is thought that the alliance represents around 40% of South Korea’s container volumes in the region, which stands at approximately 480,000 TEUs. It is hoped that this consortium will help to stave off international competition that is threatening to take a greater market share. 

K-Alliance is the brainchild of South Korea’s Ministry of Oceans and Fisheries, which oversaw the signing of the agreement via video conferencing toward the end of 2020. As an extra incentive, it is offering alliance members preferential interest rates for new vessel orders. 

On announcing the move, the ministry hinted that more activity could be in store. 

“It’s the first attempt to form a service alliance consisting of only South Korean carriers to reap economies of scale,” read the announcement. “Other operators are welcome to join in at any time, in consultation with existing member companies.”

Korea’s shipping industry, having hit rock bottom, is starting to show signs of a rebound, the K-Alliance being another indication that the sector is on its way to a substantive recovery. 

The activity of German firm Hapag-Lloyd also sheds some light on the general direction of travel for the global shipping industry. In announcing the acquisition of NileDutch in March 2021, it has signaled its intent to expand its operations in the booming African market. 

With over 40 years of expertise, NileDutch is one the most prominent providers of container services from and to West Africa. The company is present in 85 locations across the world and has 16 offices spread across the Netherlands, Belgium, France, Singapore, China, Angola, Congo and Cameroon. 

With 10 liner services, around 35,000 TEUs of transport capacity and a container fleet of around 80,000 TEU, the company connects Europe, Asia and Latin America with West and South Africa. 

Rolf Habben Jansen, CEO of Hapag-Lloyd, outlined the firm’s faith in the African market when news broke of the NileDutch transaction.

“Africa is an important strategic growth market for Hapag-Lloyd,” Jansen said. “The acquisition of NileDutch strengthens our position in West Africa and will be an excellent addition to our existing activities on the continent. Our combined customer base will benefit from a denser network from and to Africa as well as from a much higher frequency of sailings.”

Indeed, as the world begins to emerge from its cocoon and vaccination programs extend their reach, it will be with great interest to observe where the dust settles in relation to the makeup of the global ocean carrier industry. 

Some big names have disappeared while others have strengthened–a new status quo that has revealed key trends which could shape the sector moving forward.

Whether it is the move by giants such as Maersk to combine forwarding and carrier services, or the clear vote of confidence shown by Hapag-Lloyd in the African market, the dice are starting to be rolled after the standstill period brought about by COVID-19. 

christmas

MERRY CHRISTMAS IN JULY, FROM SEKO LOGISTICS

SEKO Logistics, which began in 1976 as a single-office operation in Chicago and now has a global reputation for innovation and first-class logistics services, has a special season’s greetings for the supply-chain industry: Get your shipments in order now for the peak Christmas holiday shopping season.

The Grinch causing this disruption: COVID-19, whose “lingering effects . . . meant that the Port of Los Angeles and Long Beach were hugely congested earlier this year by the surge of importing, and it’s only going to get worse before it gets better,” according to a SEKO release. 

Compared to previous years, shipments need to be booked up to eight weeks earlier than usual, according to Akhil Nair, SEKO’s VP Global Carrier Management & Ocean Strategy APAC. “The current global ocean freight supply chain is facing huge issues, none of which seem to be going away any time soon, and definitely not before Christmas,” Nair maintains.

“Based on what we are seeing, the current port-to-port lead times are being impacted by two major factors. One, origin–shippers are unable to get equipment or space to get their cargo out in time. And two, destination–the port congestion is having a severe impact on schedule reliability. This is resulting in further delays–up to 20 days on major export trades from Asia.” 

Bah, humbug!

port of beaumont

PORT OF BEAUMONT ACHIEVED ANOTHER RECORD YEAR DESPITE THE GLOBAL YOU-KNOW-WHAT. HERE’S HOW.

What does it take for a port to remain competitive and progressive, regardless of the market disruptions at hand? Port of Beaumont Director of Trade Development Ernest Bezdek shares the answer to that question and more secrets to the Texas facility’s success in an exclusive interview with Global Trade Magazine.

Known for leading cargo handling for the petrochemical industry, the Port of Beaumont reported robust numbers in 2019-2020 and continues to soar during a historical year of disruptions. According to the latest reports, the port’s liquid bulk terminal handled 4.2 million tons of crude and refined products, and the dry bulk terminal moved more than 2 million tons of aggregate in ’19-’20. 

“While aggregate isn’t directly tied to the petrochemical industry, the majority of the product coming through the Port of Beaumont is used for industrial expansions along the Sabine-Neches Waterway,” Bezdek explains. “The port’s Orange County Liquid Bulk facility, which began handling crude and refined products in 2012, has realized a 5,000 percent increase in cargo volume since the first year of operation.”

The Orange County Liquid Bulk facility is a public-private partnership between the Port of Beaumont and Jefferson Energy Companies, he adds. 

“The liquid bulk facility was responsible for the first shipment of refined products to Mexico upon deregulation in 2017 and continues to ship crude and refined products to international markets, playing a significant role in sustaining the Sabine-Neches Waterway’s spot as one of the top three crude refining complexes in the United States,” Bezdek says.

Another significant statistic the port boasts about is maintaining the position as the fourth largest in tonnage. This title, the port’s record success and forward-thinking approach to operations contribute to all levels of development growth, from local, state and federal initiatives. 

“Locally, the port approves tax abatements for companies looking to open or expand along the waterway,” Bezdek says. “On the state level, the port serves on the board for the Port Authority Advisory Committee and works with state legislators to ensure Texas ports are always top-of-mind. And federally, we work with congressional leaders and industry trade organizations to ensure legislation . . . supports the needs of the maritime industry well into the future.”

One example of such legislation he cites is the Water Resources Development Act (WRDA) of 2020.

“Additionally, the port supports and encourages private investment,” Bezdek adds, “and it has leveraged public dollars five to one with the public-private-partnerships currently in place.”

ANOTHER LAYER OF FOCUS

Sustainability and infrastructure also top the port’s list for legislative initiatives. Outdated facilities and limited capacities have no place in the modern maritime arena if you want to remain competitive and continue record-setting trends. The Port of Beaumont takes sustainable resiliency seriously, eliminating chances of limiting future growth opportunities. Among the initiatives put in place to ensure the latest and greatest infrastructure is in place, Bezdek highlights the following:

Composite Fenders: “The port replaced deteriorating timber fenders with new eco-friendly composite fenders on our most heavily used dock. Products like Axion’s Struxure boards are estimated to have five times the service life of hardwood, which offers better performance while reducing our maintenance costs.”

Buford Rail Interchange Track: “We are in the process of constructing a second rail interchange track. The additional rail interchange track on our property will allow a higher percentage of outbound surface cargo to be loaded on rail cars as opposed to trucks. Currently, approximately 15 percent of forest cargo and 15 percent of project cargo leaves the Port of Beaumont by truck. It was determined that this percentage could be reduced, resulting in significant benefits in safety, highway maintenance costs, decongestion and environmental impacts if an additional rail line was constructed.”  

Main Street Terminal 1: “We will be constructing a general cargo dock to replace docks 2, 3 and 4, which are no longer in use. It is assumed that without the reconstruction of the wharves, 15 percent of the increased project tonnage would come to the Beaumont area by truck. Reconstruction of the wharves will result in reduced congestion on all major highways between Corpus Christi and Houston and Beaumont, but especially on the I-10 corridor between Houston and Beaumont. The new dock will be supported by concrete piles to provide a c foundation with prolonged design life and resiliency. The final concrete topping slab will use synthetic concrete reinforcing fibers as opposed to traditional welded steel wire mesh, which will also provide a corrosion-proof wearing surface with prolonged design life and resiliency.”

BRINGING IT ALL TOGETHER

Unlike other logistics-focused industries impacted by the pandemic, the Port of Beaumont successfully navigated disruptions without much of a slowdown and without compromising the continued development of its employees. Bezdek explained that a developed, educated workforce, carefully executed social distancing measures and a strong mix of diversified cargo have ultimately paved the way to success throughout 2020. 

“The port focuses on diversification to minimize disruption and we took an early and aggressive stance on COVID-19 by maintaining strict protocols, social distancing and screening measures since early March [2020],” he says. “We have 45 employees with more than 500 years of combined experience working at the Port of Beaumont as well as thousands of contractors and partners working at port facilities regularly. The key to breaking records is exceptional teamwork and clearly communicating goals and expectations of the organization, while focusing on employee growth. The more we invest in our employees, the more records we see broken. Of our 45 employees, 40 have participated in some type of training or continuing education in the past 30 days.

“The port’s competitive advantage is much more closely tied to infrastructure and proximity to key assets, such as I-10, three Class I rail carriers and an extensive pipeline network. The newest technology used at the Port of Beaumont that has created the greatest benefit is ArcGIS, a mapping and analytics software that has many uses in a port setting, including asset management, space allocation, utility management, property and lease management, environmental management, emergency response and management, and it also has functions useful for marketing, among other things.

While the pandemic has caused economic decline in many areas industry-wide, the Port of Beaumont’s cargo volumes remained strong with a 7.6 percent increase, year-over-year, when Bezdek was interviewed.  

“The pandemic has not had a significant impact on the Port of Beaumont, but we understand this could result in a slow-down in the future,” he concludes. “We remain optimistic that project and breakbulk cargos will bounce back as economic recovery efforts continue.”

ever given

Lessons from the Ever Given for an Increasingly Turbulent Global Supply Chain

The Ever Given’s blockage of the Suez Canal, which accommodates 30% of the word’s daily container freight shipments, has been yet another reminder of how unforeseeable and remote events can dramatically disrupt one’s business. Although the canal’s blockage lasted only a few days, its effect on supply chains was global. The traffic jam it caused worsened Asia’s shipping container shortage, further delaying the export of consumer goods; spoiled countless goods sitting in transit; and temporarily exacerbated a global semiconductor shortage affecting countless manufacturing industries. Unsurprisingly, because the Suez Canal is a critical route between Europe and Asia, the hardest-hit businesses were those whose supply chains terminate in or pass through Europe.

Coming off the heels of a global pandemic, this latest disruption has many wondering how to shore up their supply chains to protect against the next unexpected event. Doing so, however, is an exhausting prospect—particularly as industries globalize, supply chains become more far-flung, and markets become more interconnected. Counterintuitively, the best way to bolster against unforeseen exterior events is not to plan for every event, but instead to take stock of what your business needs to survive. In the end, those plans that reflect and harmonize with a business’s needs are those most likely to offer protection during uncertain times.

I. Spend energy creating stability rather than predicting catastrophe.

Globalization-induced regional production specialization (for example, raw materials for semiconductors coming from Japan and Mexico and chips being made in the US and China) has increased the number of links in businesses’ supply chains, thereby increasing the likelihood of a weak link. It is easy to imagine any number of events that may cripple one’s supply chain, and recent history is filled with novel examples: a low yield potato crop creates a potato shortage, a clothing strike decreases the availability of certain clotheslines, a power grid failure halts the production of semiconductors, and a culinary demand for a local grain makes the grain unsuitable for livestock feed, just to name a few.

In one sense, recognizing the risk of the unforeseeable has had its benefits. For example, businesses have begun to hold the ostensibly pro forma provisions found in their contracts—like force majeure provisions in sales contracts and virus exclusions in insurance policies—in greater regard.  Unfortunately, however, as we have become more fearful of novel risks, these risks tend to dominate risk management deliberations more than they perhaps should. As the Suez Canal incident, COVID-19, and any number of freak incidents have taught us, the events that cause the most disruptions are ultimately those that are hardest to predict (and therefore prepare for). Thus, while companies must always prepare for the worst, management should not overly focus on what might go wrong at the expense of ensuring what must occur to survive.

II. Know yourself; know your tools.

An “I’ll have what she’s having” approach to protecting your supply chain is a recipe for failure. It ignores differences that create competitive advantages and it offers little protection in times of industry-wide disruption, in which industry norms are per se insufficient. The best risk management programs are born from a profound understanding of one’s business, including the central pillars of its operations and its competitive success. When it comes to supply chains, profiling risk requires more than merely asking where your widgets come from, although it certainly includes that. A prudent risk profile should conceive of all critical ingredients necessary to ensure your business’s continued success. For example, in the context of a dine-in restaurant chain, one should consider all that is needed to provide the desired customer experience, like air conditioning for those restaurants in warm climates.

There are any number of tools available to protect one’s business against risk. Staples include prophylactic due diligence, contract terms and conditions, insurance, and, where necessary, litigation. These tools are quite versatile, but it is important to avoid putting the cart in front of the horse. They are a means to an end and should be evaluated in light of your business’s specific and tangible needs rather than as a blanket of hypothetical protection.

A. Due diligence

As Ben Franklin famously observed, “an ounce of prevention is worth a pound of cure.” In that regard, due diligence is the keystone of any risk management plan. Due diligence is not so much a solution to risk, but rather a diagnostic tool to help determine the best risk mitigation strategy. For example, due diligence gives one the insight needed to restructure one’s supply lines to avoid chokepoints, tailor one’s insurance coverage to target serious risks or decide whether a risk is best left unmitigated (which it sometimes is). When performing due diligence analysis, not only should a business’s specific needs direct the investigation, they should also dictate the solution.

Take, for example, a car manufacturer’s need for airbags. One could attempt to mitigate the risk of a supply shortage by keeping a stash of extra airbags on hand. But as increasingly common “just-in-time” auto manufacturing practices suggest, doing so brings with it increased overhead costs from procuring and managing excess inventory. One may instead consider insuring one’s airbag supply (a practice discussed below) but at the cost of a premium. Likewise, one may consider diversifying suppliers to ensure any one supplier’s failure will not stop production, understanding that this would do nothing to protect against an industry-wide shortage. The correct solution for any given auto manufacturer depends upon countless variables, some of which are common among manufacturers, and some of which are unique to each specific manufacture’s needs and goals. All variables, however, flow from a first principle—one needs airbags to make cars. In that sense, due diligence can be described as the final step in understanding how your business works.

B. Insurance—Contingent business interruption

Among the armamentarium of insurance products available to protect one’s business, in the supply chain context, contingent business interruption insurance (CBII) is king. Whereas traditional business interruption coverage only covers interruptions due to physical losses occurring on the insured’s premises, CBII policies protect supply chains, often covering disruptions caused by distant natural disasters, industrial accidents, labor disputes, public health emergencies, damage to infrastructure, and sometimes even disruptions cases by upstream production errors or supplier insolvency.

When disruptions occur, CBII policies typically provide coverage for lost income, extra expenses (costs to end the interruption), and additional funds expended to mitigate the risk of further losses. CBII policies, however, are not a silver bullet against supply chain losses. CBII policies frequently limit the extent and duration of coverage—for example, only covering losses incurred after 72 hours of interruption, only covering 6 months of losses, or limiting coverage for losses in any given month to 25% of the policy’s aggregate limits. They also often require an exhaustive list of those suppliers to which the insurance will apply—the composition of which the insured should give the utmost thought.

When securing coverage for your business, it is important to have done the homework required to ensure your policy’s terms accurately reflect the type, source, and duration of the disruptions your business may endure. Carriers frequently dispute whether interruptions in fact took place. For example, a burger chain that could not make French fries due to a potato shortage would reasonably argue that without its quintessential side item, it is essentially unable to conduct business. A carrier, on the other hand, would argue that the loss of one menu item does not constitute a business interruption. Therefore, it would behoove the burger chain to obtain CBII coverage that specifically covers the loss of key menu items. Carriers also frequently argue over the propriety of replacement products (or cover) obtained to resume operations. Businesses should therefore consider the availability of certain types of cover when procuring CBII coverage to ensure whatever replacement the business is forced to buy falls under extra expense coverage.

Despite the comfort of having an insurance product specifically designed to prevent supply chain disruptions, it is also important not to think of insurance as easy money. Securing insurance and making claims are ordeals unto themselves. The first hurdle to securing coverage following a loss is to properly document one’s loss.  In anticipation of filing a proof of claim, it is imperative that insureds document any delays in the arrival or departure of goods, fluctuations in the purchase price or availability of essential goods, and/or fluctuations in sales prices and volume. Keeping such records is important due to the aforementioned time limits common within CBII coverage.  Should coverage litigation arise, these contemporaneous records will also prove to be invaluable evidence at trial.  In particularly complex cases, or where coverage is not entirely clear, it may also be worthwhile for insureds with sizeable losses to retain coverage counsel to assess the scope of available coverage and pursue their claim.

C. Contact terms—The specific and the general

Regardless of what provisions the parties may ordain to include, given the intricacies of modern supply chains, all supply contracts should carefully contemplate responsibility for distant supply chain disruptions. There are two ways to achieve this: drafting specific provisions in hopes of better elucidating the contract’s purposes and including general provisions to serve as a safety net.

Drafting targeted provisions to address disruptions ultimately benefits all parties by making the implicit explicit. For example, there has been significant litigation in the past year regarding whether the COVID-19 pandemic constitutes a “force majeure” under supply contracts. For the uninitiated, force majeure provisions are meaningless boilerplate. But too frequently they are invoked during unforeseen events in an attempt to excuse performance. The solution to their misuse is simple: don’t assume the strength of your covenants. If you desire an unqualified promise to deliver goods, your contract should say just that. Doing so ensures the parties are on the same page from the beginning. It also has the added benefit of encouraging greater due diligence, decreasing the likelihood of disruption.

In addition to including targeted provisions that make the obligations under your contracts clear, one should consider safety net provisions to increase your contract’s resiliency. One of the most common safety nets found in contracts are indemnities protecting against losses stemming from breaches. Indemnities, however, are far from infallible. For example, they do nothing to protect against an indemnitor’s insolvency. For that reason, it may be wise also to include a covenant to procure and maintain specific levels of insurance coverage—including contractual liability coverage—under policies expressly designating your company as an “insured” and likewise identifying specific contracts subject to the policies’ coverage.

Conclusion

If the Suez Canal incident has taught us anything, it is that anything can happen to disrupt a supply chain. The greatest source of strength for a business is its understanding of its unique requirements. As a business owner or risk manager, the responsibility falls on you to learn your business’s needs and to take nothing for granted. Only once you have attained a nuanced understanding of what your business needs to succeed can you make the best decisions about how to bolster your supply chains against risks, foreseeable and otherwise, using the tools available to you.

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Andrew Van Osselaer, associate in the Austin office of Haynes and Boone, LLP, focuses his practice on the resolution of complex commercial disputes and regulatory investigations arising from clients’ commercial and industrial operations.

Wes Dutton is an associate in the Litigation Practice Group in the Dallas office of Haynes and Boone, LLP.

UK container

UK Ports Suffering Post-Brexit Container Logjams

Post-Brexit trade disruption and ongoing congestion are causing critical build-ups of containers at UK ports, according to the latest data from Container xChange.

The UK’s leading container terminals struggled to cope with the pandemic-driven surge of imports last year resulting in lengthy delays for haulers and vessels and an excess of containers building up in ports. 

Since the UK departed the European Union on January 1 and started trading under a post-Brexit customs and regulatory regime, the latest data from Container xChange, the world’s leading online platform for buying, selling, and leasing shipping containers, indicates the situation has worsened.

Under Container xChange’s Container Availability Index (CAx), an index reading of 0.5 describes a balanced market. Below 0.5 means there is a shortage of containers. Above 0.5 means there is an excess of containers.

At the port of Felixstowe, the average reading of the CAx so far in 2021 for a 40 ft container is 0.95, up from 0.79 in 2020. The CAx for a 20 ft box has increased from an average of 0.78 in 2020 to 0.90 this year.

A similar picture is apparent at the port of Southampton where the CAx reading for a 40 ft container is 0.86 in 2021, up from an average of 0.71 last year. For a 20 ft container, the CAx reading is 0.85, up from an average of 0.72 in 2020.

“The UK’s leading gateway terminals for container traffic suffered congestion for much of 2020 prompting carriers to cut some calls and ship cargo in from European hubs via the Channel Tunnel, ferry services, and feeder services instead,” said Dr. Johannes Schlingmeier, CEO of Container xChange.  

“Based on the build-up of containers at ports in 2021, it seems the situation has further deteriorated. We are now seeing critical levels of boxes building up at Southampton and Felixstowe. Post-Brexit cross-Channel shipments are more complicated under dual Customs regimes and this could be a factor in logistics bottlenecks.”

Efforts by container lines to avoid Brexit disruption and delays at southern terminals by launching new services into the port of Liverpool are also now coming unstuck, with the port struggling to handle increased volumes. This is reflected in an accelerating excess of containers at the port.

In 2020 the average CAx reading at the port of Liverpool for a 40 ft container was 0.59. In 2021 this has climbed to 0.75. For a 20 ft container, the CAx reading in 2021 is 0.82, up from an average of 0.68 last year.

European gateway ports have also suffered disruptions and delays due to pandemic-driven container traffic surges. However, container availability at leading hubs is currently better balanced than in the UK.

At the port of Rotterdam, the CAx average reading for a 40 ft container this year is 0.51, compared to an average of 0.40 in 2020. At Antwerp, shortages have been a problem, with an average reading for a 40 ft container of 0.21 in 2020 improving to a more balanced 0.41 this year. 

Similarly, in Hamburg, the average CAx reading for a 40 ft container in 2020 was 0.27 suggesting critical shortages. This year the average reading has improved to 0.49.

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About Container xChange: Container xChange operates the leading online platform for the leasing and trading of shipping containers. More than 600 shipping companies including Kuehne+Nagel, Seaco and Sarjak rely on its platform to increase flexibility and simplify the operational handling of SOC Containers. http://container-xchange.com/

ports

South Carolina Ports Shares Optimistic Outlook for 2021

Pandemic or no pandemic, South Carolina Ports Authority (SCPA) continues to keep things moving throughout the supply chain. In February, the Inland Port Greer finished the month off with record numbers while Inland Port Dillon reported a 7.4 percent year-over-year increase in rail moves. These and other robust metrics released this week further confirm SCPA’s resilience and efficiencies in operations.

“As retail imports continue to boom during the pandemic, the ability to quickly move goods from ships to the hinterland via rail is paramount,” SC Ports CEO Jim Newsome said. “Cargo owners benefit from SC Ports’ fast-import transit to population centers — with intermodal imports arriving at the railheads within 24 hours — and overnight rail service to Inland Port Greer and Inland Port Dillon.”

An increase in the automotive sector has also contributed to the Port’s success for FY2021. In February, the Columbus Street Terminal completed the handling of 17,555 vehicles, contributing to the year-to-date total of 165,528 vehicles. This number represents an increase of 11 percent compared to the same period last year. So far, SCPA reported an impressive 1.61 million TEUs handled in fiscal year 2021, of which more than 180,00 handled at the Port of Charleston’s Wando Welch and North Charleston container terminals in February alone.

“By investing more than $2 billion in terminal infrastructure, we are able to deliver unmatched vessel and cargo fluidity to our customers,” Newsome said. “We remain focused on providing congestion-free terminals and available berths to keep the supply chain fluid.”

air

How Will Ocean and Air Market Conditions Affect Your Shipping Decisions?

Global transportation—like many industries—has faced unparalleled disruptions over the past year. Now, as we head into 2021, there are new and different challenges added to the mix.

Many of our global shipping customers are up against the clock with Chinese New Year (CNY) approaching, while also navigating potential changes from a new U.S. administration. Of course, fast-changing consumer behaviors, port congestion, and continued uncertainty around the impact of COVID-19 continue to bring changes to the market as well.

Today I’m going to focus on how the ocean and air shipping markets have been affected and steps you can take to successfully account for these and other events.

Greater market demand overall

The global logistics market is forecasted to grow over 17% in 2021. And only a month into the year, that growth seems to be on track due to heightened demand across major global trade lanes. Volumes between China and the United States have increased by 30% compared to this time last year. It is likely the demand will continue past CNY, which falls on February 12, this year.

We historically see a spike in demand before CNY, but this year looks different from past years. Many companies are stockpiling and replenishing stock rooms in the wake of COVID-19 disruptions. And with a continued need for PPE and the dramatic uptick in ecommerce shopping, it’s no wonder there’s greater amounts of freight being moved right now.

Demand and disruption in ocean shipping

Ocean shipping capacity and port congestion

You’re most likely to see the most congestion and capacity constraints when shipping via ocean service in early 2021.

Significant increase in demand and equipment shortages in Asia have led to longer dwell times for vessels, which inevitably delays export shipments. In the United States, carriers continue to reduce the amount of exports in order to reposition empties back to Asia. Additionally, the uptick in vessel accidents due to inclement weather has added to the delays. Companies whose freight went overboard are not the only ones impacted, in fact the recent incident with ONE APUS resulted in all remaining freight being unloaded in Japan for further inspection. Inspections and transloading are likely to add considerable delays to a container’s journey.

Historically, ocean carriers announce the percentage of capacity that will be removed from the market during CNY. However, with the continued high demand and equipment shortages likely to continue through March, carriers have announced they will only remove 2-4%. This is down from the average 15-20% that we’ve seen removed in previous years.

Demand and disruption in air shipping

COVID-19 vaccine distribution

Air passenger travel is still down, and capacity for air cargo remains tight. Today, COVID-19 vaccine distribution has had minimal impact on capacity, but we’re closely monitoring the situation as it could and likely will change rapidly.

The majority of COVID-19 vaccines will not require inter-continental airlift, however, when doses do need to be transported via air, many airlines are already prepared to reposition capacity. When this happens, expect heavy demand from both Europe and India. And if/when this capacity is pulled from today’s already tight air market, your global supply chain may need to pivot in response.

With new COVID-19 strains and outbreaks, many countries are now requiring pilots and airline crews to quarantine or limit overnight deliveries. These changes will likely add to the inconsistencies and put pressure on air freight costs.

Successfully overcome shipping challenges

Monitor global events

Shipping across borders inevitably means customs and global compliance will play a vital role in your supply chain. It’s important to keep abreast of the changing global trade climate so your company can remain compliant and avoid customs delays. This is especially true with a new U.S. administration in place and Brexit in full swing.

While President Biden has indicated he does not plan to focus on trade and tariff changes immediately, he has already expressed his intention to approach trade differently than the previous administration.

Additionally, shippers both in and out of the UK will need to stay up to date on changing regulations as Brexit continues to progress, and any change may directly impact many supply chains.

Establish a plan for disruptions

Despite the challenges, it is possible to mitigate delays due to congestion and equipment shortages. We’ve been able to help multiple customers avoid 10+ day delays by routing shipments through a different port or shifting freight across modes.

Instead of trying to keep up to date about market changes from several news sources, you can trust a single information source to help you see how market trends will impact capacity and pricing. C.H. Robinson’s Global Forwarding Insights webpage provides a clear picture of rapid shifts in ocean and air capacity by aggregating current market information, like I shared above, in one easy to view place. With trade lane level detail, these market insights provided by industry experts are presented with an easy to understand summary of past and present market conditions so you can maintain flexibility, adapt to potential disruptions, and prepare for the most complex shipping challenges.

To dig deeper, connect with your logistics provider to develop a disruption action plan which is key to creating an agile, flexible, and well-rounded supply chain.

affreightment

Contract Of Affreightment: How to Know Your Obligations

Shipowners and charterers must make themselves aware of the contract of affreightment. This post details what a contract of affreightment is and the obligations this contract mandates. 

What is a Contract of Affreightment? 

A Contract of Affreightment is a legal agreement between the shipowner and the charterer. The shipowner agrees to transport a specific amount of cargo for a specific period for the charterer. In this agreement, the charterer is responsible to make payments whether the goods are ready to be moved or not.   

A Contract of affreightment is important when considering ship chartering. The terms of the contract express the liabilities, rights, and obligations agreed between the charterer and shipowner. Some obligations include: 

-When the agent of the charterer should be given notice by the master 

-When the vessel can be loaded and discharged from the port 

-When the bills of lading will be issued 

-How to pay the demurrage 

-Who will be held responsible for potential negligence by the stevedores and crew?  

Apart from these, there are other obligations in a contract:   

The Seaworthiness of the ship 

Every contract that is signed between the shipowner and charterer comes with an understanding that the ship must be seaworthy. The ship must be able to withstand the dangers that it will face during the sea journey. There are also certain other terms detailed in the contract. These would include the sufficiency of fuel, efficiency of the crew, and others that are vital for transporting goods. The ship should meet the charter requirements sufficiently to serve the purpose for which it has been agreed.  In every aspect, the ship should be ready to complete the service delivery.  

Staying on the agreed route – no deviation 

The shipowner commits to sticking to the route ( and not to deviate) agreed in the contract of the carriage. Deviation from the agreed route is not considered to be a reasonable switch from the pre-decided route mentioned in the contract. Deviation in the route can only be highlighted out by a party reviewing the contract. If no particular route is mentioned in the contract then the direct route between the port of loading and unloading is considered to be the proper route. However, the ship can choose to deviate to another path if the agreed path exposes it to some danger to the ship or its cargo. It may be acceptable if it is necessary to prevent damage to the ship, crew, or cargo.     

No shipping dangerous goods 

It is dangerous to ship certain goods without notifying the carrier. The shipper should not do it unilaterally. Some commodities may not only be dangerous during the beginning of the transport but later in the form of leaks or fumes. If the shipper fails to notify the carrier about the dangerous commodities or hides them for some reason, the shipper will be responsible for any accidents or damages that occur to the ship or cargo. 

The obligation of reasonable dispatch 

The shipowner or the carrier must be capable to perform the dispatch duties effectively. If the terms in the contract do not mention a specific time frame the dispatch should be done within a reasonable period. This would be based on the shipowner’s expectations. If the carrier violates this obligation the charterer may claim damages. The charterer will not be able to claim any damage if the delay is caused due to natural factors like storms, rain, or something else beyond their control.  

Nominating a safer port 

If the charterer (voyage or time) can nominate the port of their choice, it should be a safe one. It is the responsibility of the charterer to nominate a port that is safe for the charter service and to ensure that it remains safe for the period of the contract. The safe period will include the time the ship reaches the port till the time of its departure. The ship must be able to leave the port safely once the loading or unloading is completed.  

Frustration 

Frustration occurs when the contract cannot be completed without one party being at fault, for example, if the chartered ship is damaged or the charterer is lost. It reflects an incapability to perform the contract. Delay in transport also falls under frustration as it precludes achieving the objectives. The party alleging the delay must prove the frustration. They must satisfy the court and prove that the contract remains useless or stands as illegal due to its failure to perform.   

Summary 

When chartering a ship for a time or voyage charter, ensure that it is protected throughout the contract period. The charterer charters the ship from the shipowner by having an agreement in the form of a Contract of Affreightment. Such an agreement brings certain obligations which need to be aware of.      

freight forwarders

TOP 10 FREIGHT FORWARDERS OF 2020

By occupying six slots, including the top three, the Alpine Region of Central Europe dominates Global Trade’s list of the top 10 freight forwarders of 2020.

 1) Kuehne + Nagel

With more than a century specializing in the transportation space, Kuehne + Nagel serves multiple industries, including high tech, industrial products, perishables, pharmaceutical and healthcare industries. Services include: order management, warehousing and storage, supply chain consulting, project management, air, rail and sea cargo and expo and events. Kuehne + Nagel Management AG, Dorfstrasse 50 Schindellegi, 8834 Switzerland, Tel: 41 44 788-9511.

2) DHL

DHL Supply Chain and Global Forwarding Divisions provide freight forwarding services throughout Europe, Russia and the Middle East via rail, air and road. The company’s global reach extends from transportation and warehousing to industry-specific solutions designed to streamline worldwide logistics for its clients. Services include: dedicated freight management, warehousing, customs services, freight security, supply chain management and air, road and sea shipments. DHL Supply Chain and Global Forwarding, Deutsche Post AG Headquarters, Platz der Deutschen Post, 53113 Bonn, Germany, Tel: +49 228-1820.

3) DB Schenker

The logistics division of German rail operator Deutsche Bahn AG provides an array of logistical and supply chain consulting services for clients throughout the automobile, technology, consumer goods, special transport and trade fair logistic industries. Services include: e-commerce solutions, fulfillment logistics, lead logistics services and intermodal transportation. DB Schenker, Richard-Wagner Strausse, Essen, Germany, Tel: +49 (0) 201 8781-4990.

4) (tie) DSV Global

Headquartered just outside of Denmark’s capital of Copenhagen, DSV offers worldwide warehousing and transportation solutions for European and North American companies looking for supply chain solutions across the global stage. Services include: full or less-than-truckloads, warehousing, order fulfillment, intermodal, air, sea and rail shipments and “supply chain innovation.” DSV + Panalpina, Hovedgaden 630, 2640 Hedchusene, Denmark, Tel: +45 43 20 30 40.

4) (tie) Sinotrans Limited

With offices throughout Asia and the Pacific Rim, Sinotrans offers transportation solutions from warehousing to getting goods to their final destinations. Services include: warehouse management, distribution solutions, cross border freight hauling, intermodal transport, project lead and “innovative supply solutions.” SinoTrans Ltd., 6F Suite B Waiyun Building, Building 10 Yard 5 Anding Road, Beijing, China 100020, Tel: 86 10-5229-5600.

6) Expeditors

The Fortune 500 service-based logistics company believes because it does not own the aircraft, ships, or trucks they use every day on six continents, they can be highly flexible when it comes to supply chain management. Services include: supply chain design and optimization, order management, fulfillment, warehousing, customs brokerage and air, sea and ground transportation. Expeditors International, 14301 24th St E, Sumner, WA 98390, Tel: (253) 863-5502.

7) (tie) GEODIS

The French logistics company aims to be a growth partner with its clients through its proven expertise and emphasis on excellence. Services include: supply chain optimization, freight forwarding, contract logistics, distribution & express and ground transport. GEODIS, Espace Seine, 26 Quai Charles Pasqua, 92300 Levallois-Perret, France, Tel: +33 1 56 76 26 00.

7) (tie) Bolloré Logistics

A global leader in international transport & logistics, the French company is committed to delivering reliable, flexible, innovative and value-creating solutions that help clients grow. Services include: transport, trade compliance, contract logistics, global supply chain, e-commerce and customer care. Bolloré Logistics, Tour Bolloré, 31-32 quai de Dion Bouton, 92800 Puteaux, France, Tel: +33 (0)1 46 96 44 33.

9) Nippon Express

First established in 1937, the Japanese company operates in more than 40 countries, with clients throughout Asia, North America and Europe and overseas transit facilities in Thailand, Indonesia and Malaysia, among other locations. Services include: warehousing, distribution, cross border freight hauling, fine arts transport and moving services. Nippon Express, Higashi-shimbashi 1-9-3, Minato-ku, Tokyo, Tel: 81-3-6251-1111.

10) Hellmann Worldwide Logistics

Founded in 1871 by Carl Heinrich Hellmann, who as the lone employee used a horse-drawn cart to deliver parcels in and around the town of Osnabrück in northern Germany, Hellmann today has a worldwide network of 20,500 people in 489 branches in 173 countries. Services include: logistics, insurance, security, technology, e-commerce and road, air, rail, and marine transportation. Hellmann Worldwide Logistics GmbH & Co. KG, Elbestrasse 1, Osnabrück, 49090 Germany, Tel: 49-541-605-6450.

We created our list by considering three other lists that were released this year. In September, Armstrong & Associates, Inc. (A&A), an internationally recognized key information resource for 3PL market research and consulting, put out a list of 2020’s top 50 ocean freight forwarders that is based on 2019 TEUs, logistics gross revenue and air metric tons.

Actually, A&A updated an earlier list because two heavy hitters in the ocean freight industry, DSV and Panalpina, merged in 2019. Then came COVID-19 early in 2020, which necessitated an examination of responses to the global pandemic.

A “key trend we’re watching is the impact COVID-19 is having on various modes of transport,” A&A President Evan Armstrong explained to Logistics Management Executive Editor Patrick Burnson. “Ocean capacity may open up, but rates will escalate. In the meantime, the air cargo sector will become more reliant on expensive freighters, as passenger traffic remains in steep decline in the international marketplace.

Global Trade also considered 360 Research Reports’ Global Ocean Freight Forwarding Market Size, Status and Forecast 2020-2026 examination that focused on 25 companies and was released pre-pandemic, in January.

Thanks to the A&A and 360 Research reports, there were definitive answers about which companies would occupy most of Global Trade’s top slots. However, we also turned to a third report to settle any differences between the other two: a list of the top 10 3PLs in the world released In July by TradeGecko, which is part of Intuit QuickBooks, an accounting software company.

While freight forwarders on the Global Trade master list serve U.S. markets and have facilities in the States, our collection doesn’t exactly scream “American.” Fortunately, Armstrong also shared some wisdom with Burnson that may have Yanks ranking better in 2021. “We’ll see more shipping and sourcing in North America as shippers reevaluate their options overseas,” the A&A president says. “The ongoing trade tensions with China will also exacerbate this situation.”

The U.S. companies that did not make our top 10 but would have easily made our top 50 include: C.H. Robinson, XPO Logistics, United Parcel Service (UPS), Yusen Logistics, Mallory Alexander, Odyssey Logistics and Technology and Horizons Air Freight.

____________________________________________________________________

Armstrong & Associates, Inc.’s Top 50 Ocean Freight Forwarders of 2020: https://www.3plogistics.com/3pl-market-info-resources/3pl-market-information/aas-top-25-global-freight-forwarders-list/

360 Research Reports’ Global Ocean Freight Forwarding Market, Size, Status and Forecast 2020-2026: https://www.360researchreports.com/global-ocean-freight-forwarding-market-15076500

TradeGecko’s Top 10 3PLs in the World: https://www.tradegecko.com/blog/supply-chain-management/top-10-3pl-companies

container

TOP CONTAINER PORTS: LA & NY … AND THEN EVERYONE ELSE

The U.S. Army Corps of Engineers compiles annual lists of the top container ports by volume, with the figures for 2018 being the most recently released.

The list shows Los Angeles handled more than 1 million more containers than its neighbor Long Beach did, but Long Beach dealt with nearly a million more than third-place New York/New Jersey did.

That those three occupied the first three U.S. slots on the Army Corps’ list is not surprising to anyone who has followed container traffic in recent years. What may raise eyebrows is how many more containers those ports handle compared to everyone else in the country.

Los Angeles took in 19.5 percent of the nation’s containers in 2018, compared to 17.9 percent the year before. Indeed, Long Beach and New York/New Jersey saw year-to-year growth under the same metrics. Long Beach containers accounted for 16.7 percent of the nation’s total for 2018, up from 14.4 percent the year before. New York/New Jersey grabbed 14.8 percent in ’18, compared to 12.8 percent in ’17.

Combined, Los Angeles and Long Beach, whose ports essentially border one another, accounted for 36.2 percent of the containers handled in America in 2018, up from 32.3 percent the year prior. If you combine the Californians with New York/New Jersey, the three-port complexes handled more than half of the containers in the U.S. in 2018, at 51.1 percent. That’s up from 45.1 percent in 2017.

While Savannah handled more than 2 million fewer containers than New York/New Jersey to land at No. 4, the Georgia Ports Authority port had an impressive growth of 305,760 units from 2017 to ’18, which was better than top dog Los Angeles.

Others who beat LA’s 115k in that metric were (in order of impressiveness): Houston (240k); Jacksonville (237k); Charleston (138k); Seattle/Tacoma, which together form the Northwest Seaport Alliance (132k); and Oakland (125k).

Below is the U.S. Army Corps of Engineers’ list of the top 15 container ports in order, with their totals for 2018, 2017 and how many more containers that represented—because no one on the list handled fewer containers than they did the year before.

Because no 2018 data is indicated for some ports, but their 2017 totals are included, these facilities are indented about where they would fall if they pulled in similar numbers of containers in ’18. However, those ports are not counted among the top 15 as presented by Global Trade.

-Los Angeles
2018: 9,458,749
2017: 9,343,192
+115,557

-Long Beach
2018: 8,091,029
2017: 7,544,507
+546,522

-New York/New Jersey
2018: 7,179,792
2017: 6,710,817
+468,975

-Savannah
2018: 4,351,976
2017: 4,046,216
+305,760

-Seattle/Tacoma Alliance
2018: 3,797,627
2017: 3,665,329
+132,298

-Hampton Roads
2018: 2,855,914
2017: 2,841,016
+14,898

-Houston
2018: 2,699,850
2017: 2,459,107
+240,743

-Oakland
2018: 2,546,357
2017: 2,420,836
+125,521

-Charleston
2018: 2,316,255
2017: 2,177,550
+138,705

-San Juan (Puerto Rico)
2017: 1,319,572

-Jacksonville
2018: 1,270,480
2017: 1,033,070
+237,410

-Honolulu
2017: 1,204,568

-Everglades
2018: 1,108,465
2017: 1,076,893
+31,572

-Miami
2018: 1,084,000
2017: 1,024,338
+59,662

-Baltimore
2018: 1,023,161
2017: 962,484
+60.677

-Philadelphia
2018: 600,000
2017: 545,408
+54,592

-New Orleans
2018: 591,532
2017: 532,597
+58,935