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India; sourcing opportunity

May 16, 2024 | , , , , , ,

For years India has been looked to as the next global manufacturing powerhouse and it now appears to be finally becoming the manufacturing power and sourcing alternative to China that it has long promised to be.

India’s Prime Minister Narendra Modi inherited an economy that was teetering on an economic precipice a decade ago.

Immediately after his victory in 2014, the prime minister launched an ambitious ‘Make In India’ campaign to turn India into the world’s factory.

Foxconn – which makes iPhones for Apple – are moving their supply chain to India and other major global giants like Tesla, Micron and Samsung have also been enthused to invest in manufacturing.

And while investment in manufacturing has not reached the highest expectations, India’s growth is outpacing other major economies, overtaking the UK as the fifth largest economy and it’s on track to leapfrog Japan and Germany and hit the third spot by 2027.

India has been heralded as the next global manufacturing powerhouse, only to be outshone in trade diversification initiatives by Vietnam, and more recently by Mexico, but over the last decade, US imports from India have doubled, to the 1 million TEU range, with East Coast ports reaping the largest gains.

Retailers and fashion brands have been shifting their focus to India for many years, in a bid to speed up supply chains, keep costs down and spread out sourcing to other countries.

Carrier commitment
Container shipping lines are expanding services and local presence, with ONE launching a service to the US East Coast and HMM securing slots on the new loop.

In December, MSC acquired a 49% stake in a container terminal, near Chennai, while CMA CGM and Hapag-Lloyd are also targeting Indian port opportunities.

Last year, Hapag-Lloyd invested in local ports and logistics and Maersk also has a significant footprint inland, with marine terminal operations at Nhava Sheva and Pipavav.

OOCL and APL have invested in rail services and container freight stations for nearly two decades.

The current supply chain
Despite the investment and presence of the shipping lines, Indian exporters are turning to air freight as ‘Red Sea’ vessel diversions around southern Africa have choked off capacity, by omitting Indian subcontinent port calls, making air cargo and sea/air the viable alternatives.

In a further complication fashion products are moving in trucks from Bangladesh into India, which is adding further demand for air freight.

Another significant contributing factor to elevated export air cargo rates is the shortage of capacity as big Chinese eCommerce marketplaces buy up as much space as they can find at premium rates.

With high rates on offer, capacity has moved from the Indian subcontinent to the Chinese market and as capacity dwindles rates out of India, Pakistan and Bangladesh go up even faster.

Overall, rates to Europe from South Asia are up 120% from the same time last year, with India to Europe spot rates up 174%.

There is also strong underlying economic growth in India, with HSBC reporting that the economy’s rate of expansion the strongest since July 2023, led by the strongest manufacturing output in nearly three and a half years, with export orders showing improved robustness.

India’s next decade could resemble China’s hyper growth, analysts from Morgan Stanley wrote and other trends like digitalisation, clean energy and growth in global offshoring will propel future growth, say experts.

For over 40 years Metro has helped customers open up new export markets and diversify sourcing across Asia and India.

Integrated on our MVT supply chain platform, our commercial and operations teams work closely with our partners across India and surrounding regions, processing air, ocean and sea/air shipments.

If you have any questions, rate requests or would like any further information on our capability in India, please EMAIL our Chief Commercial Officer, Andy Smith.

HKG truck

Ocean demand outweighs supply

May 1, 2024 | , , ,

The ongoing impact of vessel diversions as a result of the Red Sea conflict continues to absorb available capacity at a time when demand is rapidly increasing. Container volumes are already higher than many predicted and there is a possibility that we have already entered a peak season market environment.

Container shipping lines are deploying maximum numbers of their fleets and new vessel deliveries and sailing them faster to offset the longer transits around southern Africa, but there is a finite limit on how much space they can throw at the market.

The additional two weeks it takes for ships to sail around the Cape of Good Hope effectively reduces available vessel capacity, with an average of 11 weekly scheduled voyages from Asia to Northern Europe in the coming weeks. Compared to the typical average of 17 voyages through the Suez Canal.

With spot rates rising as capacity tightens, it is clear that unwary shippers’ cargo will not get shipped, as capacity hits an increase in demand, extending the booking window to a minimum of 21 days ahead of cargo ready date.

The situation is further complicated by blanked sailings, smaller capacity vessels being used to fill schedule gaps and carriers restructuring their networks to support new sailing schedules.

The overall impact means that in recent weeks there has been anything up to a 50%-80% capacity cut on certain lanes, with carriers implementing additional blank sailings around this week’s Bank Holidays in China.

The intelligence that we are receiving from our network and carrier partners is that May and June could be tough in terms of equipment and space across the whole of Asia for all the major container shipping lines and this is in what would usually be the quieter period ahead of the peak season.

European imports from the Far East are up 12% year on year and US imports up 24%, which means strong Westbound and transPacific peak seasons are assured. However, demand into other markets is even more pronounced, with Asia to Middle East/India and Asia to Oceania’s both up nearly a third.

The demand explosion means more equipment is going to these regions than forecast, with some lines imposing priority surcharges, rolling cargo and others restricting equipment for contracted clients.

China’s factory activity has been growing for six straight months, suggesting that the rebound in the world’s second-biggest economy can be sustained, with export orders surging and a significant peak period looking certain.

We urge you to provide us with forecasts ahead of time, ensure shippers book 21 days ahead of cargo ready date and to communicate with us if you have any urgent/high priority orders.

We negotiate long-term and protected contracts with shipping lines across the alliances to secure space and rates, so that we can provide the best alternatives and options, whatever the situation.

To learn how we can support your Far East, transPacific or transAtlantic trade, or to learn more about our ocean capability and solutions, please EMAIL our Chief Commercial Officer, Andy Smith. 

BAR Tech

Environment matters

May 1, 2024 | ,

Managed well, supply chains reduce costs and enhance profitability, but the impact of climate change has highlighted the importance of sustainability and the need to improve supply chains to protect our ecosystem and preserve natural resources for future generations.  

The supply chain plays a critical role in supporting environmental protection, by reducing its carbon footprint, with transportation alone a significant factor because it is a major user of energy and producer of pollution.

Sea freight carbon emissions increased by 63% in Q1 2024 compared to Q4 2023 largely due to containers being shipped from the Far East diverting away form the Suez Canal and around the the Cape of Good Hope, sailing an additional 5,800 nautical miles.

According to the United Nations, maritime shipping accounts for nearly 3% of global greenhouse gas emissions and the need to reduce emissions and move away from traditional fossil fuels is inspiring some amazing innovations.

Robot ships
Autonomy, robotics remote operation and artificial intelligence is already transforming shipping, with an an 80m (262ft) electric container ship running back and forth between a fertiliser plant and local port in Norway, while in Belgium and Japan there are ferries autonomously navigating between destinations and in China big autonomous container ships shuttle between coastal cities.

Ocean Infinity, a US/UK company, is building a fleet of 23 robot vessels which are prepared for green ammonia as a fuel with fuel cell and battery technology designed for an ultra-low carbon footprint.

Their fleet will survey the seabed for offshore wind farm operators and check underwater infrastructure for the oil and gas industry, with a 78m (255ft) vessel crewed by just 16, when a traditional ship carrying out the same kind of work would need a crew of 40 or 50.

The International Maritime Organisation (IMO) is currently considering the issues surrounding autonomy at sea and will introduce voluntary codes defining best practice by 2028.

The UK government has already taken a view on this topic and desires to incorporate the idea of remote masters into legislation.

Sail-power
Fitted with giant, rigid British-designed sails (or wings), the cargo ship Pyxis Ocean has been conducting sea trials for six months, with 11.2 tonnes of C02 emissions saved for each day the sails were up.

BAR Technologies, the UK firm which designed the wings, is seeking other ships to fit and the option to retrofit to an existing fleet could be appealing, but it will take decades to deliver the new ships needed for decarbonisation, with shipyards globally full and lead times averaging 3.5 years.

Certified carbon neutral for three years, Metro also supports the West Midlands Net Zero Business Pledge and the drive to make the West Midlands a net zero carbon economy by 2041. 

Metro is leading the way, by taking positive action on proactive carbon reduction initiatives and offsetting projects, with ISO 14001 accreditation and membership of the Air France KLM Martinair Cargo Sustainable Aviation Fuel Partnership.

Metro is measuring and monitoring the emissions of every shipment, by every mode, for all of our customers, with offsetting alternatives, so they can work towards carbon neutrality in their global supply chain. 

MVT Eco uses reporting methodology that is in conformance with the Global Logistics Emissions Council (GLEC) and incorporates 30 pre-built charts and downloadable statements, to simplify Scope 3 reporting compliance for customers in the EU and UK.

The MVT ECO module is available free-of-charge to customers on their MVT dashboard. To request a demo or discuss your requirements, please EMAIL Ian Powell.

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Red Sea crisis expanding and growing

Apr 17, 2024 | , , , , , , , , ,

After the longest period of attack-free shipping in the Red Sea since December, the situation in the region is escalating, with an increase in Houthi attacks, fears that the ‘danger area’ may be expanding into the Arabian Sea and Indian Ocean and an Iranian vessel hijack off the Gulf of Oman.

At virtually the same time the US special envoy for Yemen indicated that the US might consider a path to revoking the terrorist designation on the Houthis if attacks on vessels are halted. The Yemeni group resumed attacks after an eight day pause and claimed to have attacked a number of warships and commercial vessels in the Arabian Sea and the Indian Ocean. 

The Houthi claims have not been corroborated and it remains uncertain if they have the capability to acquire targets that far out to sea. However, if they have been successful it may have implications for shipping, possibly forcing it to head further east and making access to the Gulf harder.

Iran hijack
In a further, unexpected development, the 15,000 teu MSC Aries was boarded and seized by Iranian Revolutionary Guard troops in international waters off the Gulf of Oman in the Straits of Hormuz on Saturday 13th April.

The Aries was managed by Zodiac Maritime, a firm controlled by the Israel-born shipping magnate Eyal Ofer, but the vessel is currently chartered to MSC and its current links to Zodiac is unclear. 

Iran’s action means the ‘maritime danger zone’ has expanded significantly and the ramifications of this illegal vessel seizure could be massive, potentially providing a catalyst for freight rates to rise in the short-term.

Insurance check
We would recommend double-checking your cargo insurance, to clarify what it covers, but also to ensure its validity should your cargo suddenly be in a war-zone, even if the planned route was not intended to transit a war-zone.

Anticipate increased risk premiums for insurance and freight to and from the Persian Gulf area, and also the Gulf of Oman, and not necessarily labelled as a risk premium but another acronym.

Scenarios
We do not anticipate a full closure of the Strait of Hormuz, it is more likely to resemble the southern Red Sea where some shipping lines will still operate and some will not. However, a partial closure could backfill, escalating port congestion problems at origins including Sri Lanka, Singapore, Port Klang and Indian ports.

Finally, it is clear that threats against shipping made by Iran, and their proxies have not been idle and it might be prudent to recollect the threat made by an Iranian Revolutionary Guards commander to target shipping in the Mediterranean. 

Groups in Algeria have received attack drones from Iran, which have the potential to impact shipping in the Eastern Mediterranean.

If you have any questions or concerns about the impact of the Red Sea crisis on your Asia supply chain, or would like to discuss its wider implications, please EMAIL our Chief Commercial Officer, Andy Smith.

For questions about airfreight, sea/air and our suite of time-sensitive solutions EMAIL Elliot Carlile, Operations Director, for insights, prices and advice.

For insurance related questions or concerns please EMAIL our Chief Financial Officer, Laurence Burford.

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