Ports, global trade on the front lines of climate change

Dive Brief:

  • Officials at the COP24 global climate summit in Poland are sounding the alarm about the susceptibility of coastal ports to climate change, according to World Maritime News.
  • The United Nations Conference on Trade and Development (UNCTAD) chief of policy and legislation Regina Asariotis said during the summit that since coastlines could be some of the most affected areas, global trade is likely to be greatly affected as it relies so heavily on ports.
  • UNCTAD put the burden of responding to climate change on all countries and actors who rely on ocean shipping for trade, especially calling out developing nations whose economies are more vulnerable. Asariotis said policymakers are not currently moving fast enough to address the problem.

Dive Insight:

The COP24 meeting is driving a renewed focus on actions both private and public sector actors can take. Adding to the urgency is a recent International Energy Agency report stating that countries with advanced economies (North America, the European Union and parts of Asia) have actually increased their carbon emissions in 2018 after five years of decline.

With rising tides and more volatile weather a certainty according to the global scientific community, ports are likely to be some of the first supply chain infrastructures to feel the effects of climate change. Last month’s U.S. National Climate Assessment warned that ports can expect “land sinking” as tides rise by one to four feet by 2100. Rising tides could also lead to clearance issues.

Asariotis made a point that is becoming more common as the threat of climate change comes into focus: Industry cannot wait for regulation to force it away from the status quo. Asariotis put the responsibility on all players involved in ocean shipping to prepare for and prevent what climate change effects can be mitigated.

Though all ocean carriers are already required by the International Maritime Organization (IMO) to cut their sulfur emissions by 2020, there are no such restrictions around carbon. A.P. Moller – Maersk is the first carrier to pledge to attempt carbon neutrality by 2050, though it emphasized in its announcement last week the vessel technology needed to meet that goal does not yet exist.

12 December 2018 | Emma Cosgrove | Supply Chain Dive

How to Become a Shipper of Choice

As shippers, carriers, and logistics service providers prepare for a busy Q4 2018, here are some ideas for easing the capacity crunch, controlling costs, and becoming a “shipper of choice.”

Carriers in the driver’s seat. When the freight market shifted, so did the balance between shippers and carriers. In today’s market, carriers can afford to be selective about the shippers they choose to work with. So what makes a shipper, and its freight, undesirable to carriers? And how can shippers avoid these costly hits to their reputation?

The largest factor boils down to Hours of Service (HoS). When the ELD mandate enforcement period began in April 2018, carriers’ available time—as measured by HoS—instantly became more valuable. It turns out time is money, after all. Any delays that waste time are to be avoided, and repeat offenders risk becoming persona non grata to carriers.

Hands down, the primary culprit for unanticipated and unwelcome delays is excessive loading and unloading time at shipper facilities.

Typical detention charges kick in only after a two-hour grace period, and typically amount to only about $50-$100 per hour. Because those charges don’t begin to cover lost potential revenue, many carriers bake the cost of their lost time into the rates they offer to problem shippers.

You can make the case that loading and unloading delays at shipper facilities are partly to blame for the current capacity shortage. Eliminating shipper delays could increase available capacity by a whopping 30 percent, says Bob Costello, chief economist at the American Trucking Associations.

No time to wait. The most effective approach to addressing excessive wait times is to eliminate them altogether, through the use of drop trailer programs.

Drop trailer programs can be challenging for shippers to design, implement, and manage, which is why many turn to 3PLs for assistance. Shippers can take advantage of a 3PL’s access to capacity to identify carriers that are willing and able to participate in drop trailer programs.

Once the 3PL identifies appropriate carriers, it can manage the drop trailer program on the shipper’s behalf, eliminating excessive wait times while relieving shippers from managing the program.

But drop trailer is not always an option, due to insufficient yard space or other factors. In these cases, 3PLs can assist shippers by analyzing the root cause of shipping dock delays. Identifying peak loading hours, then planning pickups and deliveries accordingly, can be effective when drop trailer programs are not feasible.

Be hospitable to drivers. Ensure that dock staff are courteous, and that drivers can use restroom facilities and easily park their trucks in convenient locations. People tend to do business with people they like. Carriers look dimly upon shippers who chased low rates at the bottom of the market instead of building mutually beneficial relationships.

And in the current market, there is plenty of freight to go around, and not nearly enough trucks to haul it all.

13 November 2018 | Rachel Snider | Inbound Logistics

Why billions of dollars of goods are stuck at sea

OVER the past few weeks, many American retailers have worried that Christmas, their most profitable selling season, will be ruined. In late August, Hanjin Shipping, South Korea’s biggest container line and the world’s seventh-largest, filed for receivership. Some 66 of its ships, loaded with $14.5 billion of goods, including quantities of electronics heading for America, were left stranded at sea. Ports around the world did not want to let Hanjin’s vessels dock because the bankrupt line had no money to pay unloading fees. Neither did they want creditors impounding Hanjin’s vessels in their facilities, leaving valuable moorings occupied for months. Although the stricken firm’s parent, Hanjin Group, promised $90m to allow some of the ships to finally make it to port, this is short of the $270m needed, and as a result most are still stuck at sea.

Companies that need to move their goods around the world by sea are worried that other container lines will soon follow Hanjin into bankruptcy, throwing their supply chains into chaos. On revenues of around $170 billion, the container-shipping business is set to lose as much as $10 billion this year, according to Drewry, a consultancy. Of the biggest 12 container lines that have published results for the past quarter, 11 have revealed huge losses. Maersk, a Danish firm that is the world’s largest container carrier, is also in the red, and announced on September 22nd that is will break itself up to compete. Several weaker outfits are teetering on the edge of bankruptcy. Another South Korean carrier, Hyundai Merchant Marine, was bailed out earlier this year, with creditors, including the Korean taxpayer, taking a big hit. And in Japan three firms, Mitsui OSK Lines, NYK Line and Kawasaki Kisen Kaisha, look especially vulnerable. Activist investors are now pressing for them to merge to avoid the same fate as Hanjin.

Hanjin’s bankruptcy—and the abysmal performance of so many lines—is the result of overcapacity in the shipping industry. Since the financial crisis, too many vessels have been built and not enough scrapped, while the growth in global trade has decelerated. An earnings index compiled by Clarksons, a research firm, covering the main types of vessel—bulk carriers, container ships, tankers and gas transporters—reached a 25-year low in mid-August. The average for the first half of 2016 was 30% down, year on year, and 80% below the peak of December 2007. Rates for container lines have been hit particularly hard over the past two years, as export volumes from China and South Korea contracted. Sending a container from Shanghai to Europe costs half what it did in 2014, according to figures from the Chinese city’s shipping exchange. In 2015, for the first time since containers were invented in the 1950s, global GDP grew faster than worldwide box traffic (apart from the 2009 recession).

There is an easy way out of the crisis in shipping. If enough lines scrapped their ships, the amount of spare capacity in the industry would fall, and freight rates would rise to a point where firms in it would break even. But they are loth to do this. For stronger players such as Maersk, building more big ships means that freight rates fall faster, pushing weaker competitors out of business. And many smaller lines cannot afford to scrap their ships. Low steel prices mean that they would need to declare big losses on their balance sheets if they scrapped them. Although a restructuring plan mooted for Hanjin would result in an 85% reduction in its fleet, almost all the ships it would get rid of will continue operations under the flags of other carriers. Until some serious scrapping takes place, do not be surprised if more shipping lines declare bankruptcy.

21 September 2016 | C.R. | The Economist