Service updates - Keeping business running
Disruptions across global supply chains continue to have a negative impact on our shipping services network. We have seen various forms of disruption, including production delays due to microchip and other parts shortages, which are now easing, as are labour shortages related to the high number of COVID infections. Trucking capacity particularly in Europe continues to be problematic as a result of the Ukraine-Russia war, leading to bottlenecks.
One development that is having an impact is the shift in global sourcing of vehicles with China becoming a net exporter, and the largest exporter of cars. Supply chain optimization has also seen increased concentration on US West Coast ports as a gateway into the region, stretching inland capacities and ultimately leading to prolonged waiting times for vessels.
In addition, biosecurity is back on the agenda in Australia, but this time it is seed contamination rather than stink bugs. All ocean carriers have been experiencing significant delays since the beginning of the year because of high ‘seed contaminated’ import volumes which are subsequently quarantine held at ports. With limited to no off-wharf treatment capacity, and an inability to move such large numbers of cars off-wharf due to the lack of enclosed truck trailers in the market, ports are experiencing extreme congestion. The on-port treatment capacity is not sufficient to allow for a smooth flow of volumes out of the port, in turn creating an unprecedented situation in Australia with significant operational inefficiencies and extremely long waiting times.
The global picture
The current global trade capacity constraints are caused by three main factors:
1. Demand for RoRo ocean transport outweighing supply - The demand for RoRo capacity continues to outweigh supply. This is particularly true for High and Heavy where we are seeing strong Agricultural, Mining and Truck segments. Whilst global LV/car sales have not yet returned to pre-COVID levels, ocean capacity constraints are also prevalent in this segment due to the lost capacity that is driven by port congestion, and changes in global sourcing of finished vehicles, such as China recently becoming a net exporter of cars, and more, the world’s largest exporter of cars.
2. Port Congestion - Waiting times and delays in ports continue to have a materially negative impact on capacity. As waiting times in ports increase or remain consistently high, capacity shrinks. The underlying reasons for the congestion are changing, ranging from pent-up post COVID demand to COVID related labor shortages, the impact of the Russia-Ukraine conflict, stretched inland capabilities unable to absorb new/increased flows of inbound cargoes, and new biosecurity risks. The constant that remains is that port congestion and vessel delays are continuing to impact our industry and will keep doing so in the foreseeable future. Solving and/or reducing port congestion will help to better balance global supply and demand and currently remains one of the key challenges for the RoRo industry.
3. Environmental regulations and newbuilding programs - new carbon intensity measures introduced by the IMO will further challenge overall capacity, as existing RoRo vessels may be impacted. Action is needed to ensure that vessels that don’t meet the set standards are compliant, which will either be met by using biofuels (additional premium over HFO/VLSFO) and/or reduction in speed (impact on capacity). The current orderbook for new vessels is at 27 percent of the existing global fleet. New vessels which are due for delivery in late 2024 and into 2025 will meet the new environmental regulation, but for the market to see their full impact, port congestion will need to return to sustainable levels.
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