Welcome to this week's logistics newsletter, where maritime developments and geopolitics are in the spotlight due to the escalating tensions in the Middle East. Interestingly, though, in the weeks following the brutal Hamas attack, Israeli ports have demonstrated remarkable resilience. Meanwhile, Maersk is expanding with a new facility near LAX, California is advancing climate transparency through new legislation, and there are noticeable shifts in maritime import volumes and company earnings. Let’s dive in.
Israeli Ports Show Resilience Amidst War Risks
Israeli ports play a crucial role in maintaining trade, even as they confront disruptions following the brutal and unprecedented terror attack by Hamas. Yet, against the odds, there are signs of resilience.
Shipping and Air Cargo Rates in Israel
Ocean shipping rates for goods from Asia and Western Europe to Israel dipped last week, as did global rates, according to Judah Levine, head of research at Freightos. However, as insurance costs rise, carriers like Haifa-based Zim Integrated Shipping Services might introduce war risk premiums, potentially affecting rates. At the same time, air freight costs from Frankfurt to Tel Aviv have risen: as of October 16, 2023, it was $2.26/kg, up from $2.12 on October 6. The reverse direction saw a 37% rate hike, from $1.76 to $2.41.
Operational Updates from Global Carriers
Several global carriers shared updates on their Israel operations. MSC cites longer waits at Ashdod and freight restrictions. Maersk's ocean, rail, and road services remain active but with limited air services. Major couriers, FedEx, UPS, and DHL Express have modified operations for safety. Yet, despite the challenges, the resilience of the shipping and maritime industry is evident. As noted by Container xChange, the industry can adapt and continue operations, albeit with heightened caution.
Maersk Expands Air Cargo Reach with LAX Facility
On October 3, 2023, Maersk strengthened its North American air cargo network, launching a new 130,000-square-foot freight hub near LAX.
A Game Changer in Cargo Handling
Maersk's new facility will triple its West Coast handling capacity and strategically position it a stone's throw from an airport that managed 2,754,579 tons of cargo in 2022. Moreover, located just nine miles from the Port of Long Beach, this gateway offers direct planeside recovery and swift unit load device transfers. Certified by U.S. Customs and the U.S. Transportation Security Administration, it ensures timely and secure freight handling. By 2024, it will also become a Free Trade Zone, providing benefits such as reduced duties, fees, and expedited volume movement.
Maersk's Expanding Air Cargo Ambitions
Maersk's new facility is part of a broader North American expansion strategy that soldiers on despite a dip in air freight demand. Since launching Maersk Air Cargo in 2022, they've expanded their freight network connecting Asia-Pacific, Europe, and the U.S. They've also doubled weekly rotations between Chicago and China, added flights between South Carolina, Korea, and China, and launched new air cargo gateways near Atlanta and Chicago airports this year.
California Tightens Climate Transparency for Large Companies
On October 7, 2023, California Governor Gavin Newsom signed two pivotal climate-related bills, reinforcing the state's commitment to transparency and accountability among its businesses. These new laws impose notable reporting requirements on companies, emphasizing greenhouse gas emissions and climate-related financial risks.
Mandatory Emissions Reporting for Billion-Dollar Companies
Senate Bill 253 requires businesses earning over $1 billion annually to publicly report greenhouse emissions. By 2025, they'll disclose Scope 1 and 2 emissions; by 2027, Scope 3. These reports must be clear for Californians and third-party verified. 5,300 California companies may be affected, with firms like Microsoft, Ikea U.S.A., Patagonia, and Apple in support.
Financial Risk Disclosures for High-Revenue Firms
Senate Bill 261 requires businesses earning over $500 million to biennially report climate-related financial risks and strategies starting January 1, 2026, affecting over 10,000 state companies. While supporting California's climate actions, Governor Newsom expressed concerns about the bill's timeline and business impacts, stressing collaboration next year to tackle these issues.
Maritime Import Volumes: A Shift in Tide
Recent forecasts from the National Retail Federation and Hackett Associates suggest declining maritime import volumes and potential shifts in trade trends.
Lowered Forecasts and August Insights
Loaded import cargo volumes peaked at 1.96 million TEUs in August. However, a reduction in forecasts anticipates these figures to drop slightly to 1.94 million TEUs over the next couple of months. Previous predictions were more optimistic, expecting figures around 2 million TEUs. Hackett Associates Founder Ben Hackett highlighted that ships aren't fully loaded, causing a dip in freight rates. He added, "No cargo growth from current levels is expected on the near-term horizon."
Port Performance and Future Expectations
11 of the top 12 U.S. container ports reported a year-over-year decrease in total cargo volumes for August 2023. The only exception was the Port of Los Angeles, which saw an annual uptick. Collectively, ports managed 4 million TEUs in August, representing a 3% monthly increase but a 15% decline year-on-year. Despite this decrease, ports emphasized that volumes are still on par with pre-pandemic levels. As the year progresses, cargo volumes may remain strong but not reach the initially forecasted heights. Shipping lines will likely adjust to manage lighter volumes by year's end.
Shipping Earnings: A Sea of Mixed Fortunes
As the shipping industry sees fluctuating rates, financial forecasts for maritime players are varied. While some companies have downturns, others boast impressive profits.
Challenging Waters for Major Players
The shipping rate rally witnessed this summer has cooled, prompting financial analysts to adjust their forecasts for shipping stocks. Even though many companies could report profits for Q3, backed by significant cash reserves, some big players have challenges. Yet, Maersk and Hapag-Lloyd saw their stocks downgraded by Deutsche Bank from "hold" to "sell." At the same time, Zim's forecasted to incur a loss of $1.83 per share in Q3 2023, translating to an adjusted net loss of $220 million.
Silver Linings in the Shipping Cloud
Despite the overarching gloom, some carriers are posting promising results. China's Cosco Group reported a net income of $866 million for Q3 2023, six times its Q3 2019 income. Meanwhile, OOCL's Q3 2023 revenue per forty-foot equivalent unit in the trans-Pacific trade remained steady, declining by just 2%. Additionally, Taiwan's Evergreen witnessed an 8% increase in operating revenues from the previous quarter, reaching $2.25 billion. Lastly, Matson's share prices are nearing their 52-week high, up by a commendable 45% year-to-date, outperforming many peers.
Unlocking Supply Chain Resilience with Vizion API
The latest in this week's logistics news emphasizes resilience and adaptability amid challenges. From geopolitical tensions at Israeli ports to shifting maritime import volumes and company fortunes, these uncertain times require tools for better supply chain visibility, adaptability, and forecasting. That's precisely where Vizion's services come into play:
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