Companies trying to prepare for a ‘no-deal’ Brexit by stock-piling supplies will face another headache this time around – warehouses already fully booked for the Christmas rush, The Sunday Times reported yesterday.

The prospect of the UK leaving the EU without a withdrawal agreement has become a real possibility again, with several of the candidates to succeed Teresa May as Conservative leader and UK prime minister, including frontrunner Boris Johnson, pledging to take the country out of the bloc by the end of October with or without a deal.

Ahead of the first Brexit target date of March 29, many firms stockpiled a broad range of goods in anticipation of chaos and gridlock at Channel ports due to the re-introduction of border controls.

But Shane Brennan, chief executive of the Food Storage and Distribution Federation, told The Sunday Times: “We have built our warehousing infrastructure in this country around being able to cope with Christmas. It’s booked up already. Unless (companies) know for certain no deal is going to happen within five or six months’ notice, they will have to carry on as normal and deal with problems as they arise.”

His comments echo those expressed by Tesco boss Dave Lewis last week, who said: “To do (in October) what we did in March (this year) will be more difficult because we won’t have the space in our logistics system to be able to cope because we’ll be preparing for Christmas.”

Carmaker BMW, which had brought forward the annual shutdown of its Mini plant near Oxford to April to offset any potential disruption around the original Brexit deadline, said it had no plans for a repeat, while Jaguar Land Rover said “no decision has been made” about the autumn, the report noted.

Commenting on the prospect of company chiefs having to gear up for a no-deal Brexit again, Adam Marshall, director-general of the British Chambers of Commerce, told the newspaper: “Businesses are incredibly frustrated.”

The development of new trade routes will help meet predicted freight transport demand growth in the decades ahead, according to a major new report.

ITF Transport Outlook 2019 – produced for the OECD by the International Transport Forum (ITF), an intergovernmental think tank,  predicts global freight demand will triple between 2015 and 2050, based on current demand growth rates.

ITF argues that new shipping, barge and rail routes will help meet such demand growth, transforming trade flows and logistics strategies in the process. “These shifts could result from new and improved freight networks in Eurasia and Africa and from new maritime routes opening up in Arctic waters,” it said.

“Using the Northern Sea Route for maritime freight between Northern Europe and Japan could reduce voyage distances by 37% relative to routing through the Suez Canal,” it added. “The distance from Northern European ports to Korea would be reduced by 31%, to China by 23% and to Chinese Taipei (Taiwan) by 17%.

“Regular use of the North-West Passage could reduce voyage distance between North America and large ports located in Northeast Asia by up to 20%. New canals could also provide alternative maritime routes that would shorten existing trade routes.”

The report said plans to construct the Kra Canal across the Malayan peninsula would cut the distance for oil and other shipments from the Middle East to China and Japan by 1,200 km, the equivalent of two to three days vessel transit time via the Strait of Malacca. Equally, the proposed Nicaragua Canal across the Central American isthmus could theoretically provide an alternative to the Panama Canal that would be better able to accommodate the biggest ships.

Modernising infrastructure and improving the efficiency of customs processes at border crossings on Euro-Asian overland routes has the potential to shorten transit times by four to seven days, helping ease rail flows on the three main corridors between China, Central Asia, Europe, South East Asia and South Asia.

“Among these corridors, the northern route – using the Trans-Siberian railways or Kazakhstan’s rail system – is currently the only route with stable and reliable transport services and infrastructure,” said the report. “[But] Azerbaijan, Kazakhstan, Georgia and Turkey have agreed to construct the Trans-Caspian International Transport Route as part an intermodal East-West transport infrastructure initiative.”

The report said the economic case for rail transport from Asia to Europe was clear and in China there was now considerable political will to increase network capacity.

“Although transport by rail is five times more expensive than transport by sea, it is about 1.7 times faster,” said ITF. “This makes rail an attractive mode for transporting highly time-sensitive goods, such as fashion goods, electronics, car parts and perishables including food.”

In Africa, the report found that investments in infrastructure projects were accelerating quickly and a number of plans and initiatives could further the continent’s integration and boost trade. The construction of the Mombasa-Kampala corridor between Kenya and Uganda, for example, had reduced transit times from fifteen to five days, while in Namibia and Zambia, the Walvis Bay Corridor Group had reduced customs clearance time from forty-eight to two hours.

“Greater connectivity between South Africa and eastern Africa is expected to be developed by 2030, and between eastern and western Africa by 2040,” added the report. “In Africa, trans-continental freight transport options could lead to increased intra-African trade and could also shorten international trade routes by 2050, if current and planned transit infrastructure projects in Africa continue to reap similar benefits in terms of cost and time savings.”

However, the report also warned that while the environmental decimation of the Arctic could mean the Northern Sea Route will be ice-free on a seasonal basis sometime between 2040 and 2050, operators would face high costs.

“Apart from meteorological conditions and heightened safety concerns in Arctic waters, operators face logistical barriers due to scarce infrastructure, strict certification requirements, and tight environmental regulations,” the report noted.

“The Polar Code sets strict standards including on ship design, crew training, fuel tank characteristics, or sewage discharge. Even more stringent environmental regulations could apply to Arctic shipping in the future, for instance regarding the use of heavy fuel oil, already prohibited in the Antarctic.

“Conforming to these regulations reduces the net economic gains of shorter transit times.”

After two tankers were reportedly hit by torpedo attacks in the Gulf of Oman early this morning, the UK Maritime Trade Operations (UKMTO) Royal Navy agency has issued a warning to shipping, urging “extreme caution” in the area.

The 110,000 dwt Aframax oil tanker Front Altair was en route from the UAE to Taiwan when it was attacked at around 2.30am local time, while the 27,000 dwt product carrier Kokura Courageus, going from Saudi Arabia to Singapore with a cargo of methanol, was attacked in roughly the same area around three hours later.

According to sources, the crew of both tankers abandoned ship and 44 seafarers were picked up by passing merchant vessels, with fortunately no reports of serious injuries.

Both ships are reported to be ablaze and drifting, with their AIS systems still operational, but reports that the Front Altair sank have been denied by the ship’s Norwegian owner, Frontline.

The ships had already transited the 21-mile wide Strait of Hormuz, which Iran has repeatedly threatened to block as tensions rise over US trade sanctions, when they were attacked.

In a statement this morning, the Singapore office of Bernhard Schulte Shipmanagement (BSM), the Kokuka Courageous’ manager, said it had launched a “full-scale emergency response following a security incident” on board the vessel.

It said the 21-strong crew of the vessel had abandoned ship after an incident that saw damage to the ship’s hull on the starboard side.

“The master and the crew were quickly rescued from a lifeboat by a nearby vessel the Coastal Ace,” it added. “One crewman was slightly injured and is receiving first aid.”

BSM added that the vessel remained in the area, was not in danger of sinking and that its cargo of methanol “is intact”.

The incidents come after four tankers suffered “sabotage” attacks off the UAE last month, while anchored outside the port of Fujairah.

It is estimated that over 20% of the world’s oil is exported from the Middle East through the Strait of Hormuz, making any disruption a potential choke point for supply. The US has deployed warships in the region to counter “clear indications” of threats from Iran.

Oil markets around the world were understandably nervous this morning, with Brent Crude spiking 5% from a five-month low in early trading in London.

Brokers told The Loadstar today that shipowners were “increasingly concerned” at the development of events in the Gulf of Oman, adding that the whole region was becoming a “tinderbox”.

Paolo d’Amico, chairman of tanker trade association Intertanko, also expressed concern about the risks to ships and their crews transiting the area.

“If the waters are becoming unsafe, the oil supply to the entire western world could be at risk,” he warned.

Meanwhile, the international shipping association, BIMCO, said the increase in attacks and the escalated threat to seafarers was “an urgent concern for the industry”, and agreed that any disruption would have a “major impact on the oil trade and shipping industry”.

BIMCO secretary general Angus Frew said: “We strongly call for nations to do what they can to de-escalate tension and ensure a safe passage for merchant shipping in the Strait of Hormuz.”

The trade war between the US and China has started to impact the makeup of US containerised imports from Asia, with a significant shift away from China.

According to Alphaliner data, in the first five months of the year, imports from China to the US fell 6.5% on the same period of 2018, to 3.87m teu, while imports from Asia excluding China jumped 14.6%, to 2.25m teu.

Vietnam is the biggest beneficiary of the tit-for-tat trade war, growing its exports to the US by 30.7%, to 564,420 teu, notes the consultant.

It added: “Transpacific carriers have been cashing in on the increased volumes from Vietnam, adding two new direct calls at northern Vietnam’s Haiphong (HICT) this year to complement 12 calls at Vietnam’s southern port of Cai Mep.”

However, there has been some scepticism over whether Vietnam has really been able to ramp up production so fast. Bloomberg reported yesterday that Chinese firms were allegedly producing fake product-origin certificates and making illegal transfers to avoid tariffs, routing US exports through Vietnam.

According to Alphaliner data, US containerised imports grew overall by 2.8% between January and May, to 9.3m teu. After Vietnam, the biggest winners in Asia were Malaysia with a 19.8% gain, Thailand at 18.1%, Taiwan at 11.5%, South Korea at 11.1% and India with 11%.

Other notable above-par increases were recorded from Africa, at 14.3%, the Middle East, at 10.3%, Europe, at 8.1% and Latin America, 6.6%.

Putting this shift of trade into perspective, Alphaliner said that after China, the next 15 largest origins, with a combined volume of 3.6m teu, was still smaller than the 3.87m teu of Chinese exports to the US during the period.

Drewry has also looked at the impact the escalating trade war is having on trade. Referring to the ramping up of rhetoric and the US president’s threat to encompass 100% of Chinese imports with trade protectionist duty of 25%, the consultant said Mr Trump’s “weaponisation of tariffs is forcing cargo owners to seek cover and re-shape global supply chains to avoid fallout”.

It added: “Switching the locations of production is not something done lightly and cargo owners have to weigh a myriad of factors, including local labour costs and skills, infrastructure and proximity to demand, as well as political and legal stability – that all varies in importance depending on the sector.”

Drewry warned that cargo owners having identified a new location should be aware that “there can be no guarantees that the new production countries won’t find themselves being targeted by future tariffs”.

“It is a costly endeavour with no safety assurances,” cautioned the consultant.

Drewry added that while it seemed likely that all Chinese imports to the US would ultimately be affected by tariffs, expediting a trade diversion, it would take time for new location sources to ramp up production capacity to meet demand, and in some cases this was “doubtful”, due to China’s dominance of certain products.

Meanwhile, economists do not expect any further developments in the trade spat between the US and China until the potential meeting by presidents Trump and Xi on the sidelines of the G20 summit in Osaka on 28 and 29 June.

Exports from Vietnam to the US grew 40.2%, year on year, in the first three months of 2019, while exports from China to the US slumped by 13.9%, in what appears to be a clear indicator of the effects of the ongoing US-China trade tensions on international trade and supply chains.

The latest US Census Bureau data shows that if Vietnam’s recent exceptional pace of growth can be sustained for a full year, unlikely though that may be, it could leapfrog Italy, France, the UK, and India in the ranks of top exporters to the US, rising from 12 to 7 in US export rankings, figures from Reuters indicate. Meanwhile, India would improve two spots and France by one if they keep growing at the same pace for the rest of the year. Ireland would slip by four, and the UK and Italy each would drop two, Reuters observed.

Although China remains by far the biggest exporter to the US and will remain so this year, if its current pace of declining export volumes to the US continues for the rest of this year Chinese exports by value will fall from US$539 billion in 2018 to $464 billion in 2019, analysis by Reuters indicates. They would still place it ahead of Mexico and Canada, the second- and third-largest exporters to the US, at $346 billion and $318 billion, respectively, in 2018.

Reuters noted that Vietnam was “a standout in a region where the world’s export engines largely are hurting amid trade-war tensions and a slowing electronics cycle”. Japan, South Korea, Singapore, and Taiwan all saw export contractions in April, while in the same month Vietnam’s exports gained 7.5% from a year earlier.

Logistics and trade observers believe Vietnam is benefiting from businesses shifting their supply chains in response to increased US tariffs on Chinese goods, although Vietnam’s economy was growing anyway thanks to continuing international investment in the country, which offers low-cost labour and an improving business climate.

                 

CMA CGM has announced that its Singapore-headquartered subsidiary, APL, will exit the Asia-Europe trades after the summer.

The announcement came as the French carrier reported its first-quarter results this morning, which included $1.7bn in revenue from recently acquired 3PL Ceva Logistics.

However, it was the decision to withdraw APL from a series of trades and instead focus on its transpacific and intra-Asia services that caught the eye, potentially reversing CMA CGM’s long-held philosophy of maintaining the separate branding of acquired companies.

“The new organisational setup will allow the group to simplify its offer, making it more legible to its customers, and benefit from the expertise of specialist companies from coherent regional groups, while reducing its costs,” CMA CGM said.

It added that a $1.2bn savings plan, first announced in March, was today upped to target $1.5bn in savings, “mainly by streamlining its organisation and its maritime routes”.

As a result, CMA CGM would be the sole carrier in the group to operate on the transatlantic, Asia-Europe, Asia-Mediterranean, Asia-Caribbean and Europe-India/Middle East markets.

For the first three of those routes, of course, CMA GCM operates as part of the Ocean Alliance, with Evergreen and Cosco/OOCL.

Meanwhile, APL will continue its focus on the transpacific trade, where it launched the Eagle Express (EXX) service for US importers willing to pay premium freight rates for guaranteed container deliveries and which operates outside of the Ocean Alliance grouping.

The ‘Eagle GO Guaranteed’ concept was expanded to the Asia-Europe and Asia-Latin America markets last year, and it remains to be seen whether CMA CGM will continue selling the service to shippers and forwarders.

APL will also continue to operate Asia-Indian Subcontinent (where it will be the CMA CGM group’s only brand) as well intra-Asia routes (in cooperation with CMA CGM’s CNC subsidiary), the US cabotage services (which are protected by the Jones Act and require US-flagged vessels) and the Asia-Oceania routes.

However, CMA CGM said its Australian subsidiary, ANL, which was one of its first acquisitions, would “remain the lead brand for Oceania”.

The changes are set to take effect on 1 October.

Earlier this year, CMA CGM consolidated its intra-Europe brands and dispensed with 250 years of history by folding MacAndrews into the newly acquired Finnish shortsea operator, Containerships.

Prolonged US-China trade tensions will weigh on China’s port operators, according to Moody’s Investors Service.

The ongoing trade war, including the latest round of tariffs, would reduce container throughput growth in China over the next 12 to 18 months, which would be a credit negative for the country’s port operators, Moody’s said.

The ratings agency forecasts container throughput growth this year could range from flat to low single digits, from 4.7% in 2018 and 8.3% in 2017.

In addition, port handling charges will likely continue to decline, reducing operators’ cash flows and further pressuring operators, it added.

“We expect US-China relations to remain contentious and trade negotiations to continue for some time even if the two countries reach a trade agreement, resulting in a difficult operating environment for China’s port sector,” said Moody’s Hong Kong-based assistant vice-president and analyst Ralph Ng.

“Ongoing consolidation within the shipping sector, overcapacity in the port sector and regulations will likely further reduce handling charges, which is credit negative because these charges account for most of the port operators’ cash flows.”

The decline in port handling charges will erode the total revenue and profit margins of China Merchants Port Holdings, Hutchison Port Holdings and Shanghai International Port Group, the three major China-based port operators rated by Moody’s.

Nevertheless, Moody’s expects them to manage these challenges, even as their credit quality weakens.

Observers at the Port of Liverpool reported dramatic scenes early this morning at the UK port’s Liverpool2 container terminal, when the crew of the MSC Matilde containership “were disembarked from the vessel as a precaution” after it started listing heavily during the night.

Liverpool Echo published a dramatic photo showing the vessel listing and said the crew from the 20-year-old ship had abandoned the vessel at around 2am.

Global container line MSC confirmed that there had been an incident at Liverpool, but that the vessel and its crew were back to normal. It said: “Early Friday morning on 24 May, the container ship MSC Matilde was found to be listing in dock at the Port of Liverpool, UK. As a precaution, to ensure the safety of the captain and crew, they were disembarked from the vessel.

“There were no reports of injuries, loss of cargo or damage to ship and operations are back to normal. The cause of the incident is still being nalysed by the relevant authorities.”