Oil platform

Bracing for continued fuel surcharge increases – if it moves it needs an engine

Mar 24, 2022 | , , , ,

Fuel prices were already on the way up before Russia decided to invade its neighbour and the additional volatility and uncertainty created by the conflict in Ukraine are significant enough to drive oil and fuel prices to levels not seen before. Or at least since the 1970’s relatively.

Average low-sulphur marine fuel prices had already risen to $726/mt prior to the Ukraine invasion, well above the 2021 high of $617/mt which has left us bracing for higher bunker/fuel surcharges, which will add to the already elevated rates for sea, road, and air freight movements.

Marine bunker prices and the price of diesel, which feeds directly into road and rail inland movements, has continued to climb, with jet fuel prices up double-digit percentages from mid-February.

The price of crude oil accounts for about half the price of diesel, but demand is a factor too and the intense freight demand and resulting supply chain disruption are likely to keep the price of diesel and petrol elevated even if they do moderate in the weeks ahead. This dynamic is also the case for aircraft and marine vessels.

The price of VLSFO, which powers approximately 70% of the global container ship fleet, reached close to $1,000/mt last week while high-sulphur fuel oil was trading at $623/mt.

Rising fuel prices, which have effectively doubled, represent a real worry for carriers and shippers are likely to feel the impact of these higher fuel costs via per kilo surcharges by airlines, Inland Energy Surcharges (for line haulage) as well as the traditional bunker adjustment factors (BAFs) that typically lag fuel price increases. Ultimately these are passed on to the consumer and that’s part of the explanation for global inflationary pressures currently.

Sea-Intelligence Maritime Analysis has estimated that if bunker fuel prices remain at their current level for the rest of the year, the container shipping industry will incur an additional annual cost of $7 billion, which would result in an average additional fuel cost of $39 per TEU.

As the global situation remains so uncertain, it is likely that we have not seen any peak yet, which could mean more bunker surcharges when lines issue their next rate adjustments on the 1st of April.

When freight costs are volatile, how often you ship and the way you ship becomes very important. Often speed is a determining factor, with many shippers choosing little and often, rather than consolidating bigger loads, that offer greater economies of scale.

Pragmatism now replaces expediency, as the sensible shipper will weigh the transit time benefits against the overall cost of the freight movement.

This affects all parts of the supply chain including first and final mile distribution. Many UK haulage firms are now reviewing their fuel surcharges on a weekly basis to ensure that they do not suffer losses through swings in the cost of daily changes in fuel procurement. We have distributed changes over recent weeks but the reality is that the cost to transport goods overland by any mode has increased sharply since February. We will continue to update and share the latest information and situation with you.

Despite the oil price spiking and increases anticipated, it is worth noting that nothing is certain in terms of fuel surcharge outcomes, which is why we share market intelligence and any changes that may occur, for transparency.

For the latest insights please contact Elliot Carlile or Simon Balfe, who will share market conditions and intelligence and explain how we are offering solutions that ensure that we stay ahead of the unravelling and volatile situation in global logistics. The reality is if fuel gets more expensive so will moving products – we will ensure that this is always shared, explained and passed through at cost – it is an unavoidable ingredient in transport.

PPE controls drive China air rates even higher

NEWSFLASH: China lockdowns and supply chain latest

Mar 15, 2022 | , ,

Earlier today authorities in Langfang, which borders Beijing and Dongguan in the southern province of Guangdong imposed immediate seven-day lockdowns, joining Shenzhen, which started a seven day lockdown on Sunday, while the entire province of Jilin has been placed in complete lockdown and Hong Kong restrictions are continuing, as China’s COVID cases jump.

COVID cases doubled in the past 24 hours across the nation with attention turning to Shanghai, where Shanghai Pudong (PVG) Airport has been closed to inbound passenger flights and 106 diverted to 13 other cities, which will continue for six weeks, in a bid to stop the spread of COVID cases.

Shenzhen announced new COVID restrictions on Sunday, with a lockdown for the next seven days and non-essential workers staying at home. Adults must undergo three PCR tests in the coming days, and buses and subway trains are being halted. 

Our network office in Shenzhen will be closed this week, with staff working from home.

Foxconn, which manufactures iPhones for Apple, stopped its operations in Shenzhen on Monday, saying the date of resumption would "be advised by the local government".

Toyota, shut its factory in in Jilin province, but did not give a timeline for when business would resume and Volkswagen shuttered operations in Changchun and hoped to reopen its factory on Thursday.

Local governments are making special measurements and arrangements, so that imports and exports are not inhibited. The airport is operating normally, though with reduced staffing levels and flights are being cancelled or redirected to other airports.

Customs and trucking services are operating normally although there are restrictions on where they can travel due to the movement of drivers, and while we have not yet been advised of any official limitations to Yantian Port, the offices of carriers in Yantian are closed and low operating efficiency is expected.

Until now, shipping lines in Hong Kong have largely been operating as usual, but the suspension of flights from Australia, Canada, France, India, Pakistan, the Philippines, Nepal, the USA and UK will be extended until the 20th April.

Hong Kong Air Cargo Terminal is operating under increased pressure, due to a reduced workforce of about 30%, while trucking services to Hong Kong via the Shenzhen border have been suspended and the alternative of using feeder vessels to Hong Kong incurring cost and transit time. 

China regional round-up

Guangdong - There are some backlogs and delays at the airport.

Nanjing - Nucleic acid test are required to enter. Otherwise situation is largely normal.

Ningbo - Normal operations for transport, offices and factories.

Qingdao - Air and ocean are operating as normal, but there is limited capacity at the port terminal, due to restricted worker numbers. 

Shanghai - High-risk areas are in lockdown, but there is no complete lockdown of the city. Air cargo and charter flights are operating, but the decisions to close Shanghai Pudong airport to inbound passenger flights will reduce capacity and put pressure on rates. Trucking services and ocean are operating.

Xiamen - Normal operations for transport, offices and factories

Some areas including Hangzhou, Wenzhou, Jiaxing have local measures in place, with factories and community closures based on local conditions.

Yantai, Weihai and Zibo have been locked down, which means trucking services cannot be provided to these cities and also means some drivers may not be happy to go to Qingdao.

Despite the challenging situation in many regions, we work closely with our network partners, carriers and own offices across China, to monitor the situation and find solutions for our customers, including time-sensitive shipments.

The situation continues to unravel daily and we will keep you advised as new announcements are made and market intel is received from our colleagues in China. It is expected further lockdowns will be applied and stay at home orders given to workers over coming days. We are monitoring closely and will advise if shipping lines, airlines or inland transport become affected and schedules are delayed.

We maintain long-term contracts with airlines, carriers and shipping lines that secure space and rates, to provide the best alternatives and options, whatever the situation.

Antonov AN 225

Air freight impact of Ukraine crisis

Mar 10, 2022 | ,

Capacity from Asia has shrunk by 22% in a week, as cargo planes that provided much needed capacity and capable of transporting heavy goods, are either sanctioned, grounded or destroyed, while airlines consider longer and more expensive cargo flights from Asia.

The European Union joined the United States and Canada in closing its airspace to aircraft from Russia last Wednesday, suspending air carriers based in Russia from operating cargo air services, including Aeroflot and all-cargo carrier Air Bridge Cargo Airlines, adding further pressure to an already tight air freight market.

Air Bridge Cargo parent company Volga-Dnepr Group has capability few other carriers can match, with its fleet of twelve AN-124s and five IL-76s, both of which have heavy transport capabilities, for the largest and bulkiest freight.

Heavy-lift aircraft capability was further strained shortly after the outbreak of the conflict, when forces from Russia reportedly destroyed Antonov Airline's AN-225 during an airfield invasion.

Originally designed to airlift rocket boosters and orbiters for the Soviet space program, the Antonov AN-225 Mriya, was the only aircraft of its class ever completed. It is the largest aircraft in the world and the only aircraft that features six turbofan engines. Able to transport up to 250 tonnes of cargo, including single pieces weighing up to 200 tonnes, it carries twice the payload of a Boeing 747 freighter.

The destruction and grounding of much of the Antonov fleet will make oversized project cargo shipping much more challenging and in the short-term may add costs and delays for many industries, most notably the energy sector.

Flight distance, times, fuel burnt and cost will rise as airlines reroute flights between Asia and Europe to avoid Russian air space. Average flight times on six key trade routes from Asia to Northern Europe increased by 3.4% within days of Russia’s invasion.

Freight costs are likely to increase further, as are fuel costs and many carriers are introducing War Risk Surcharges to compensate for the costs of adjusting operations. 

Some carriers may cancel their Asia-Europe services as they face longer and costlier routes and those carriers that do continue to fly, will pass on higher fuel costs, while the weight of the additional fuel could limit the amount of cargo carried.

Japan’s two largest airlines, JAL and ANA, cancelled flights to Europe last week, pending government guidance, because of worries about flying over Russia. Avoiding Russian airspace adds more than 1,000 nautical miles and 150 minutes to a flight between Europe and Tokyo.

Air freight has been struggling with climbing rates ever since the COVID-19 pandemic sparked a drop in air cargo capacity in 2020 but the brief window of recovery post-CNY, was slammed shut as the war in Ukraine presents a new layer of uncertainty.

With air freight capacity under severe pressure and prices rising again, driven by the Ukraine crisis and soaring fuel prices, our reliable sea-air solutions provide the cost-effective and dependable alternative.

Sea/air offers significant cost savings on air freight, with accelerated transit from Asia, of just 12 days via Singapore from initial vessel departure, and 20 days through our Dubai hub, with typical savings of 70%.

To explore our time-sensitive solutions and the viability of sea/air for your supply chain, please contact Elliot Carlile.

The Metro team talk Simon George

Leading by example

Mar 10, 2022 | , , ,

Effective planning for the receipt of inbound ocean cargo, requires accurate arrival dates, but with schedule reliability at all time lows, the effective management of imports has never been more challenging. Metro’s new ‘Vessel Tracking’ tool links directly with transceivers on board, to follow real-time progress and uses AI to detect changes and automatically correct expected arrival dates, so that plans can be updated. 

At Metro shipping, we move over 100,000 containers every year and it's becoming increasingly difficult to solely rely on the arrival data the carriers are providing, we require additional levels of visibility that go way beyond the standard.
According to our systems, less than 20% of container vessels are arriving on time and some trade lanes have reliability of less than 2% on-time schedule reliability. 

The ability of vessels to hit their port berthing window impacts shippers that have goods or equipment tied up on the ocean voyage, with ripple impacts from delays all along the extended supply chain.

The Metro Technical Solutions team have been working closely with Windward, the Predictive Intelligence company, that apply AI to global maritime trade, to integrate their Ocean Freight Visibility solution with the Metro supply chain platform, MVT.

Utilising AI to get predictive ETA data is an important development. To see the impact of vessel behaviour, weather, port congestion all being evaluated is quite exciting for us and Windward's data stacked up incredibly well, in terms of what we found in the predictive data.

The resulting MVT ‘Track Your Vessel’ module improves inbound planning efficiency, with automated data collection and analysis to provide real-time accurate ETA predictions, disruption risk predictions, reasons for delay, and location-based insights for inbound cargo. 

Effective planning for the receipt of inbound ocean cargo, is dependent on knowledge of the vessel’s actual arrival date and even with schedule reliability at all time lows, the automated updating of accurate vessel ETAs by the MVT ‘Track Your Vessel’ module supports the effective management of imports, customs processes and swift delivery to the importer.

In a forthcoming webinar, Metro’s technical solutions director, Simon George, will show how technology can turn transform import challenges into effective operations, that exceed customer expectations.

"We need to provide first-class digital solutions. This last year has been one of the worst in terms of predicting how your supply chain is going to perform. Anything that could’ve gone wrong, has gone wrong. As an example, not only is it costing up to 10x more to move freight, instead of 35 days shipments are taking 45 or 50 days. Technology can’t fix that. But it can help you make decisions within those constraints. You can make data-driven decisions."

Simon, together with former Maersk executive, Lars Jensen and members of the Windward team will discuss how to turn formidable challenges, including supply chain disruption, into promising opportunities. 

The Windward webinar takes place on Thursday 17th March @ 11am. Click HERE to register for this event.

The MVT ‘Track Your Vessel’ module automatically follows all ships carrying containers with our cargo on the water. The module instantly detects an ETA change or an arrival at POD and automatically updates the MVT platform.

Our technical solutions team are constantly innovating and evolving the MVT platforms to ensure that, whatever the challenge, our customers’ products are in the right place, at the right time. 

For further information on our MVT platform and to discuss how we can enhance your supply chains, please get in touch with Eilliot Carlile or Simon George.

Category: Supply Chain

China | Coronavirus | Sea | Supply Chain

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