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Drewry: Asia-East Coast North America container trade to cool
Volume growth in 2016 is unlikely to match the 15 percent growth rate seen last year despite the opening of new, expanded Panama Canal locks, according to the London-based consultant.
The growth in container shipping volumes from Asia to the East Coast of North America this year is unlikely to match the strong increase seen in 2015, according to Drewry. In its current issue of Container Insight Weekly, the London-based consultant says Asia-East Coast “Headhaul demand growth for the full year 2015 should settle at 15 percent but such a growth rate is unlikely to be repeated in 2016 even with the forthcoming opening of the widened Panama Canal.” Eastbound volumes on the trade lane “rose 7.7 percent year-on-year in November – better than the recording for October but still a far cry from the heady double-digit growth rates that prevailed for well over a year until the end of the third quarter,” said Drewry. “December figures for Asian exports bound for the core USEC market reveal an uplift of only 2.2 percent compared to a year earlier. In the same month, overall imports into the US from the Far East dipped by 0.8 percent, thus the eastern seaboard terminals are still outperforming their West Coast counterparts but the margin has shrunk.” In an accompanying article, Drewry said, “A global recession cannot be discounted but the current bear run on stocks is not proof that one is imminent. Trade indicators might not be particularly strong but they haven’t weakened significantly in the last month to make us think world container traffic is about to go into reverse.” “It is too early to tell if the latest stock market bearishness is indeed an early signal of a global recession, or simply herd-like panic, but as far as the prospects for container trade go there hasn’t been a significant change in the fundamentals to shift us from our current prognosis of continued muted growth in the short-to-medium term.”
A new map by the folks at HowMuch.net provides a fascinating perspective on the worldwide economy.
The map represents each country relative to the size of its nominal gross domestic product, the type of GDP that is not adjusted for inflation. The larger the area, the larger the size of the economy.
Each area is divided into three sectors — services, industrial, and agricultural — to visualize which industries contribute most to the country’s GDP.
The result is as follows: Howmuch.net
With a GDP upward of $17 trillion, the US comprises nearly a quarter of the world’s economy. Using data from the CIA’s World Factbook, HowMuch.net determined that most of that comes from the service sector (79.7% compared with a global average of 63.6%). Agriculture and industry make up below-average portions of the economy (1.12% and 19.1% compared with averages of 5.9% and 30.5%).
China, on the other hand, has struck more of a balance between its service and industrial sectors, with a lagging agriculture sector. HowMuch.net notes this is unusual considering other robust economies have service sectors that far outweigh industry and agriculture. HowMuch.net predicts that as China continues to grow, the service industry will expand while industry and agriculture shrink. This article is published in collaboration with Business Insider. Publication does not imply endorsement of views by the World Economic Forum. To keep up with the Agenda subscribe to our weekly newsletter. Author: Matthew Speiser is an editorial intern for Business Insider covering a variety of topics. Image: A boy touches a 45-metre (148-feet) long wall lighted by colour rays at an exhibition hall in Wuhan, central China’s Hubei province May 1, 2007. REUTERS/China Daily.
Too many firms use technology as a silver bullet without addressing the underlying process. Technology is a process enabler. As a result, the golden benefits are not achieved.
Maersk Line is diverting the UK call of its AE1 service 8,850 teu Maersk Lavras to London Gateway at the end of this week due to increasing berth and landside congestion at Felixstowe.
The carrier issued an advisory notice to customers late last week. The Maersk Lavras is scheduled to discharge 2,251 containers (all Maersk Line cargo) at London Gateway within a 24-hour window commencing at 1am on Saturday.
There are no plans to load exports and the ship will proceed to Bremerhaven to resume its normal schedule.
Like many of its North European counterparts, the UK’s biggest container port of Felixstowe has been challenged in the past year by a surge of ultra-large container vessels (ULCVs) that require more gangs and more cranes to service the increased cargo exchange – regularly more than 5,000 boxes per call.
This in turn exerts pressure on the landside operation in a vicious circle of reduced port productivity.
And, according to sources at Felixstowe, the ULCVs often arrive outside their official schedule windows, resulting in a bunch of big ships all vying for the same berths at the same time.
Indeed, one of the largest containerships in the world, the 19,224 teu MSC Oscar, was last week reported to have been held at anchor off Felixstowe unable to secure a berth for more than 24 hours, notwithstanding the importance of the world’s second largest line to the UK east coast port.
One local source confirmed to The Loadstar this morning that the current congestion was due to the port having to handle too many big ships over a short time frame.
He said Felixstowe was “not coping well” and berthing delays of 48 hours or more were now quite common – especially for feeder ships.
In the past, when carriers have diverted Felixstowe-bound ships to London Gateway and other North European ports at the eleventh hour, it has resulted in some supply chain confusion. However, the significantly longer notice given to Maersk Lavras consignees suggests that the co-ordination between carrier and port planners has improved, with Felixstowe now seemingly prepared to flag-up potential working problems at a much earlier stage.
London Gateway opened officially in November 2013 with the call of the SEACs consortia, and has since added several new services to its portfolio. It must now hope that its proven flexibility in handling diverted ships will ultimately win it the holy grail of a regular Asia-Europe loop. It is becoming more important, given that the port is due to open its third berth at the facility in the second half of this year.
When Apple CEO Tim Cook took to the stage at the Flint Center in Cupertino, California, in September, he showed off not just a new version of the company’s iPhone, the iPhone 6 and 6S, but also an entirely new device for Apple — the Apple Watch.
The watch seeks to become a part of its users’ wardrobes — to be taken everywhere from a workout at the gym to board meetings. Two of the device’s underlying technologies — near-field communication, or NFC, and inductive charging — might allow it to become an essential device.
Radio frequency identification, or RFID — of which NFC is a subset — and inductive charging are two key technologies that allow machines to become more both more robust and more flexible than other devices.
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They allow devices to exchange data with other machines and recharge their batteries without compromising their structural integrity through the intrusion of external wires. Increasingly indispensable
In fields ranging from transportation to construction, RFID, for one, is becoming increasingly indispensable to users of brilliant machines that are designed to collect and transmit data as they go about their work.
Technology research firm IDTechEx estimates that the global market for RFID technology will more than triple in the next 10 years, from $8.89b in 2014 to $27.31b in 2024. Among the benefits driving the adoption of RFID technology are more resilient and versatile machines as well as supply chains. [Also on Longitudes: The Future of Tech] Smarter homes
Construction is another industry that stands to benefit. The Hong Kong Housing Authority, for example, has mandated that new housing be built with materials such as window frames, doors, and drywall that are embedded with RFID chips.
These smart building materials can then be tracked throughout the construction process as they are handled by construction equipment designed to communicate with them.
RFID-enabled building materials can also be equipped with strain gauges and other sensors to report on their condition wirelessly following natural disasters such as earthquakes and floods, thus enabling the replacement of only those structures that report significant damage.
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Manufacturing plants, too, are increasingly turning to RFID technology to allow machines to communicate with the equipment and raw materials used in the creation of new products.
For example, a worker driving a RFID-enabled forklift can be electronically directed to a RFID-enabled tank of chemicals that reports that it needs to be filled.
Similarly, inductive charging cuts the power cord to electric devices. This allows such devices not only to maintain greater structural integrity through the elimination of external cords — as benefits the Apple Watch — but, in the case of robotic machines, to have greater range and flexibility as well. [Also on Longitudes: Cities are Getting Brighter] Taxis in 20 seconds?
Mobile phone chip giant Qualcomm is developing inductive charging systems for electric car makers.
According to Joe Barrett, senior director of marketing at Qualcomm, this technology, combined with driverless car technology, could eventually allow fleets of autonomous taxis to respond to rider requests for drop-offs and pickups.
No human intervention would be required even for refueling. Cars could simply park themselves over a charging pad when they detected low battery levels.
The benefits to major cities would be fewer cars on the streets, cleaner air and a waiting time for taxis as short as 20 seconds.
It’s too early to tell whether the Apple Watch—which won’t be available until at least early 2015 — will be the blockbuster hit that the iPod, the iPad and the iPhone were before it. But it does seem fair to say that two of the device’s capabilities — NFC and inductive charging — could give it an advantage over previous smart watches.
Cutting the cord gives electronic devices and other machines increased resilience and flexibility, which is why the technologies allowing them to do so are taking the world by storm — even if the success of the newest devices remains to be seen.
More demand for the New Supply Chain to drive omnichannel and customer expectations--
January 21, 2016, 1:05 PM
Shoppers want their online orders faster
By Matt LindnerAssociate Editor
A Temando study shows 80% of shoppers want retailers to offer a same-day shipping option, but just 53% of retailers offer one.
Online shoppers in the U.S. want more shipping options, and they want to receive their online orders faster than many retailers offer to deliver them, according to a survey from fulfillment software vendor Temando.
Temando’s data found that 80% of shoppers surveyed want same-day shipping, while 61% want their packages even faster—within 1-3 hours of placing an order. In the study, titled “State of Shipping in Commerce 2016,” Temando surveyed 1,000 consumers on their online shopping preferences and 214 retailers selling online and offline across various product categories in October 2015. Most retailers surveyed were in the small to midsized range, with 76% of all retailers surveyed shipping 1,000 or fewer online orders per week. Temando CEO and co-founder Carl Hartmann says the study exposes a glaring problem: “Consumer expectations are increasing. Retailers still aren’t offering the full gamut of services that consumers are expecting.”
Temando’s data bears that out.
While 80% of shoppers surveyed want same-day shipping, only 53% of retailers surveyed offer it. Likewise, while 61% of shoppers want the option to receive their package within three hours of placing the order, just 20% of retailers offer that option.
Hartmann attributes this to what he calls “Uberization,” the expectations of individualized services created by companies like the ride-sharing app Uber, which lets consumers summon a ride when they want one.
“People want more precision,” he explains. “It’s about a need to control when I’m going to get (an online order), because if you’re constantly traveling for business, you might only have certain windows when you’re home to receive it.”
While consumers say they want faster shipping options, not as many are willing to pay extra for them.
Temando’s data shows only 31% of shoppers surveyed are willing to pay to receive an item within 1-3 hours, about half of the 61% who say they want such speedy delivery. Likewise, 55% are willing to pay for same-day shipping, but 85% say they want such service, and 60% are willing to pay for express shipping (defined as 1-3 days), yet 85% of shoppers surveyed want express service.
Also gaining popularity: More shoppers want to pick up their orders in stores.
Temando found that 82% of shoppers surveyed want the option to buy online, pick up in store, and just 50% of the retailers surveyed offering it.
Retailers with bricks-and-mortar locations can satisfy both—the faster delivery and the buy online, pick up in store shoppers—by using their stores as mini-fulfillment centers, Hartmann says.
“The multichannel guys, they know that if they leverage that correctly, it does give them a competitive advantage,” he says. “It’s about fitting into consumer convenience, meeting that instant gratification want.”
Hartmann says online retailers can boost revenue this year by offering shoppers more shipping options; he says three to four options is ideal so as not to overwhelm the consumer.
“Ultimately the customer cares about ‘if I order by now, what are my options for when I get it, and when I do receive it? Am I getting it straight from one of the carrier stores, and is there a locker option?’” he says. “They don’t want to see 20 (choices) at a checkout because it overwhelms the customer.”
Stores and more dedicated web fulfillment centers are the key to continued e-commerce expansion, president of online Kevin Hofmann tells Internet Retailer.
Key to future e-commerce growth for The Home Depot Inc. is to link the chain retailer’s 2,200 stores to its web and mobile properties, says president of online Kevin Hofmann.
The Home Depot, No. 10 in the Internet Retailer 2015 Top 500 Guide, has grown web sales at a compound annual growth rate of nearly 40% over the five years through 2014, and by 26% over the prior year for the first nine months of 2015. To grow online, the home improvement products retailer concentrates on what Hofmann calls the basics of quicker fulfillment and sticking with an e-commerce game plan that works. Home Depot, which is growing accustomed to increasing its annual web sales by about $1 billion each year, calls its game plan for e-commerce success “interconnected retail,” reflecting the crucial role of its 2,200 stores in growing web sales. “We stick to what we know and can do best,” Hofmann says. “It’s been working pretty well so far.”
Making the best use of existing assets, especially stores, is how Home Depot plans to grow online in 2016. At the end of 2014 about 25%, or nearly $1 billion, of its total web sales of $3.76 billion came from its buy online, pickup in store and buy online ship to-store program, the company says. Through new and expanded initiatives, including equipping store associates with web-enabled tablets that allow them to complete an order online if an item is not in stock, the percentage of e-commerce sales that involve a Home Depot store increased to about 40% by the end of September, Hofmann says. “We have 300,000 store associates, and that’s an incredible asset to utilize,” he says. Home Depot continues to invest heavily in e-commerce and faster fulfillment. Over the past several years it has spent about $300 million to upgrade its e-commerce distribution capability, on integrating its web and store inventory, and on supply chain initiatives. In September, Home Depot opened its fifth fulfillment center dedicated to e-commerce, this one in Troy, Ohio. The others are in Atlanta; Perris, Calif.; Hagerstown, Md.; and Mexico, Mo.
Home Depot plans to expand a pilot deliver-from-store program to all stores this year. Once it does, the retailer will be able to reach 90% of its U.S. e-commerce customers in two business days or less via ground delivery services, Hofmann says. “We are looking at new ways to do old things that will always resonate with customers,” he says. “By bringing more of the stores in play, we can now give web shoppers a precise window when their item will be available for pick-up.”
Home Depot also will continue to expand online in other ways, Hofmann says. Its online inventory exceeds 1 million products, compared with about 35,000 in a typical Home Depot store. In 2015 the company launched a new e-commerce site in Mexico and updated its Canadian e-commerce site. E-commerce continues to account for a bigger slice of total sales. Home Depot won’t release its year-end 2015 numbers until February, but through the first nine months of 2015, the web accounted for 5%, or $3.37 billion, of total sales of $67.54 billion, compared with 4.3%, or $2.75 billion, in the prior year. To maintain growth online, the company plans to continue to give web shoppers what they want most: more assortment, quicker delivery and even more convenient ways to shop, Hofmann says. “Anywhere the customer is, we need to be there,” he says. The Home Depot Inc. took home the top honor in the inaugural Internet Retailer Excellence Awards in June in Chicago at the annual Internet Retailer Conference & Exhibition.
Shipping lines operating in Hong Kong could soon fall foul of new competition laws, unless their application for a block exemption is accepted.
In a statement last month to the newly formed Hong Kong Competition Commission, the Hong Kong Liner Shipping Association (HKLSA) argued that vessel-sharing agreements (VSAs) and vessel discussion agreements (VDAs) were integral to Hong Kong’s status in the shipping world.
It said the agreements – which form the basis of commonly used container shipping alliances – played “a critical role in enabling trade and are a key driver behind Hong Kong’s status as a leading port and international maritime centre”.
Concerned that shipping lines without an exemption could be fined up to 10% of their revenue, the HKLSA cited Singapore’s decision to continue granting carriers exemption from its competition laws as a pressing reason for Hong Kong to follow suit.
“The Singapore Competition Commission last month recommended an extension of Singapore’s existing block exemption for liner shipping agreements for another five years, until the end of 2020, citing the significant economic benefits that stem from these important agreements.”
The HKLSA hoped “the commission will recognise the need to keep Hong Kong consistent with its trading partners in this important area”.
The commission is expected to give serious consideration to the exemption, given that a large majority of Hong Kong’s container port business relies on carriers which are part of VSAs. Furthermore, since around 70% of its annual container throughput is transhipment cargo, a scenario in which profit-challenged carriers shift business to neighbouring Shenzhen is not unfeasible.
However, shippers in Hong Kong are welcoming what they see as overdue regulations, and are vehemently opposed to granting carriers any special privileges.
The Hong Kong Shippers’ Council (HKSC) has issued an official objection to any block exemption, arguing that liner shipping is no different from other industries and should be subject to the same competition laws.
A statement by HKSC chairman Willy Lin cited a 2002 OECD report which rejected the liner industry’s claim of uniqueness. Mr Lin said the report helped lead to the demise of shipping conferences in Europe and Asia.
Mr Lin took particular exception to carrier demands for exemption for both VSAs and VDAs. He said the HKSC did see some rationale for VSAs, since they allow liners to rationalise their fleets and offer better services. However, VDAs deal with commercial affairs and so “there is no benefit for shippers for lines to collude on price and charges”.
But there appears little chance of an amended application that omits exemption for VDAs. The HKLSA argues that VDAs bring about rate and service stability, and that “VDAs and VSAs are complementary” – both types of discussions “necessary to achieve the efficiencies identified”.
When The Loadstar asked Mr Lin for his response to carrier threats to quit Hong Kong should an exemption not be granted, he said: “Hong Kong shippers resent this kind of threat very much. I believe that the HK government should look at this threat very seriously.
“In a democratic world and free economy such as Hong Kong, is it correct for a sector of the transport industry to make such a threat? Is it correct for one transport sector to hold all HK import and exporters and livelihood to ransom?” he demanded.
Mr Lin added that around 35,000 factories in the Pearl River Delta were owned and managed by Hong Kong shippers.
The saga is another worry for Hong Kong’s port sector. The port has recorded monthly declines in throughput since July 2014, and ended 2015 down 9.5% for the year at 20.1m teu.
Amazon will push ahead with more investment in its ‘European Fulfilment Network’, creating several thousand new jobs this year, it said this morning.
The internet retailer has invested more than €15bn since 2010 on infrastructure and operations in Europe, but said there was “stronger demand than ever”.
The news came after it was revealed that the company has been testing a new logistics network in Europe. Cargo Factsreported recently that Amazon had been working with DB Schenker to connect cities in Poland, Germany and the UK by air.
ASL, the main contender to take over TNT’s air operations, has been flying a 737-300F six times a week to airports near Amazon fulfilment centres in Wroclaw, Kassel and Doncaster, reported the website.
Amazon has famously been trying out its own air cargo operations in the US, and lessors are said to be jostling for position after it was reported that Amazon was looking for up to 20 767Fs to set up its own US air network.
However, in a recent Barclays research note, analysts questioned the wisdom of such a move, citing high capital cost and seasonality.
Brandon Oglenski and Paul Vogel, of Barclays Equity Research, wrote: “Air transportation, especially of goods, is an expensive proposition. FedEx Express remains the market leader in terms of domestic US air shipments, but financial returns have remained stagnant, (beyond recent fuel and pension cost reductions) for over a decade.
“We know aircraft and airlines drive disproportionate attention from the media, flying is still sexy. However, for Amazon, we view the potential launch of an air operation at the old DHL hub in Wilmington, Ohio as a likely experiment, or ultimately small network designed to meet very specific high-value product inventory requirements for the company.
“Further, with only limited financial returns and plenty of existing air capacity during non-peak periods in the incumbent package networks, we question the need for Amazon to devote the significant capital required to operate a standalone time-definite air network.”
Amazon is certainly working on greater control of its deliveries, and by “zone skipping”, could cut shipping costs according to Barclays.
“By reducing the need for FedEx and UPS to sort and move individual shipments in a high-cost linehaul network, we think Amazon can lower package distribution costs by $2 to $3, relative to current ground package prices.
“We genuinely believe the intention of Amazon is not necessarily to replace FedEx or UPS, but rather drive faster and lower-cost package delivery to consumers, albeit potentially with other carriers.”
It may not be trying to replace UPS, but according to a Wall St Journal article on deteriorating relations between Amazon and its delivery provider, the e-tailer has poached some 40 UPS managers in the last three years.
Amazon is also investing in Prime Air drone delivery, which could begin in Europe rather than the US, depending on regulatory issues.
In an interview this week, vice-president Paul Misener said packages would be delivered within 30 minutes of being ordered, and that the company was developing various types of drones. If they were ready before the regulatory environment in the US, Amazon would start its Prime Air service elsewhere.
Ascribes Fed's rate increase as spurring market volatility
China torn by 'pull for control' vs market desire: economist
China’s vice president underlined the Communist leadership’s pledge to avoid pursuing a policy of devaluation of the yuan, after criticism that his nation’s policy makers haven’t been clear on their intentions with the exchange rate.
"The fluctuations in the currency market are a result of market forces, and the Chinese government has no intention and no policy to devalue its currency," Li Yuanchao, who is also a member of the party’s Politburo, said in an interview with Bloomberg News Thursday after arriving at the World Economic Forum’s annual meeting in Davos, Switzerland.
Li Yuanchao
Photographer: Matthew Lloyd/Bloomberg
Moves last year to make the yuan more responsive to market forces, and to end its peg to the dollar, have spurred confusion among market participants, and days ago the U.S. Treasury chief to urge clear communication on the matter. Secretary Jacob J. Lew’s message, delivered in a call with an aide to President Xi Jinping, was echoed in Davos by attendees including International Monetary Fund Managing Director Christine Lagarde.
Li redirected concerns about exchange-rate volatility to actions by the Federal Reserve, saying "fluctuations in the currency market started with the raising of interest rates by the Fed." Li came to the Davos gathering with a message of reassurance that the world’s second-largest economy remains on track, despite international investor concerns. He and fellow delegation members pledged to stay with a reform program that has seen China move away from reliance on investment, in the process slowing its growth.
Yuan’s Value per Dollar
The comments by the Chinese vice president on the yuan follow a volatile start for the year, which began with an unexpectedly large reduction in the reference rate in onshore trading in China. The currency dropped 1.5 percent in the first week of January, stoking concern about policy intentions. More than two decades ago, China opted for a sharp depreciation of more than 30 percent in 1994.
After the drop early this month, the People’s Bank of China intervened to support the yuan, whose fall had accompanied a renewed sell-off in Chinese stocks. Authorities also took steps to drive up the cost of borrowing in yuan in the offshore market in Hong Kong, aiming to thwart speculative bets against that exchange rate. Along with tightening restrictions on the flow of money across the country’s borders, the steps all spurred doubts among global investors about the leadership’s commitment to give markets a central role and make the yuan an international currency.
Give Credit
"To give the leadership credit, they have put the key objectives in sharper perspective, but by doing this they have brought the tension into sharper focus," said Louis Kuijs, the head of Asia economics in Hong Kong at Oxford Economics Ltd., who previously worked at the World Bank in Beijing. "We need to see how this will be resolved -- whether the pull of the desire for market-oriented reforms is going to be stronger than the pull for control."
Fang Xinghai, vice chairman of the China Securities Regulatory Commission, acknowledged in a panel discussion hosted by Bloomberg Thursday in Davos that some observers might have thought sometimes China was moving "back to a crawling peg" against the dollar.
"There is a communication issue," Lagarde said on the same panel. Gary Cohn, president of Goldman Sachs Group Inc., echoed that "the communication is really what’s important here."
Fang, who participated in the Li interview, responded on the earlier panel that "you’re right we should do a better job, and we are learning."
Global Phenomenon
Li highlighted that it’s not just the yuan that has been moving lately, pointing to reverberations from the Fed’s decision in December to hike interest rates for the first time in almost a decade. "The fluctuations in China’s currency market are only moderate fluctuations. There are more severe fluctuations as well," he said. Among other currencies seeing declines this month has been India’s rupee, which hit a record low this week.
The incentive to free up China’s exchange rate increased after the IMF said in November that the yuan qualified to join its basket of reserve currencies, and policy makers pledged to pare back capital controls by 2020 -- a key step toward yuan internationalization.
As part of the effort to internationalize the yuan, authorities in August moved to allow the market a greater say in setting the currency’s value, spurring its decline. They followed up in December by flagging a loosening of the yuan’s links to the dollar and said its strength would be judged against a basket of currencies.
Despite recent weakness against the dollar, the yuan has gained 36 percent over the past decade against a Bloomberg basket of 13 currencies designed to replicate the official CFETS RMB Index.
"So on the one hand what China’s trying to do is expand our (yuan) market," Vice President Li said. "On the other hand we also need to ensure that the currency stays stable."
Omnichannel and E-commerce need a Supply Chain that accelerates the movement of inventory through the entire supply chain to deliver customer expectations.
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