APRIL 2021 View this email in your Edition - Orbit Newsletter browser Welcome to this month's edition of the Orbit Logistics Newsletter. Dear Valued Partner I hope you find this months newsletter provides you with valuable information around the Logistics industry. The Suez Canal situation with the Vessel being stuck will provide its challenges to equipment and sailings until schedules can catch-up with the delays. Global Consumer demand continues to be high as we are all prevented from any significant travel for holidays. The team is monitoring the situation and will keep you informed of any changes within the market. Like 2020, we will continue to work with our valued partners to ensure minimum delays and costs to your supply chain. If you need to contact me please don’t hesitate to call or email me for assistance. Thanks again for your great support, its appreciated by everyone at Orbit Logistics. Best Regards Glenn Allison Managing Director Orbit Logistics Pty Ltd 5B Catalina Drive PO Box 728 Tullamarine, VIC 3043 P: +61 3 9330 2625 | F: +61 3 9330 2468 M: +61 404 444 447 E: [email protected] W: http://www.orbitlogistics.com.au IMO 2020: The Sulphur Cap One Year On Posted by Ian Ackerman | 1st February, 2021 ON 1 January 2020, new reduced limits on sulphur in fuel oil brought about a 70% cut in total sulphur oxide emissions from shipping, according to the International Maritime Organization. One year on, indications are that the transition has been extremely smooth, a testament to the preparations of all stakeholders prior to the new rules entering into force, the IMO said. The upper limit of the sulphur content of ships’ fuel oil was reduced to 0.5% (from 3.5% previously) – under the so-called “IMO 2020” regulation prescribed in the MARPOL Convention. This significantly reduces the amount of sulphur oxide emanating from ships. IMO head of air pollution and energy efficiency Roel Hoenders said through 2020, 55 cases of 0.50% compliant fuel being unavailable had been reported in IMO’s Global Integrated Shipping Information System. “Given that more than 60,000 ships plied the world’s oceans in trade last year, this was a remarkably low percentage of ships encountering difficulty in obtaining compliant fuel,” Mr Hoenders said. “We had a great deal of preparation during 2019 and before, from all stakeholders and all indications are that there have been no significant issues with supply of low sulphur fuel oil.” The majority of ships trading worldwide switched from using HFO to using VLSFO. Generally speaking, these are new blends of fuel oil, produced by refineries to meet the new limit, in accordance with IMO guidance and ISO standards. Guidance issued by IMO on dealing with the new fuel blends in advance of the new requirement addressed implications of switching to VLSFO, including assessing and managing risks and highlighting potential safety risks, so that the risks can be mitigated. Through 2020, and into 2021 to date, IMO has not received any reports of safety issues linked to VLSFO. Nonetheless, during 2020, an IMO correspondence group considered fuel oil safety issues in general and the need for further mandatory requirements to ensure fuel oil supplied meets the required standards and quality. The report of the group (MSC 102/6) is available on IMODOCS and will be discussed at the next session of IMO’s Maritime Safety Committee (MSC), MSC 103 in May 2021. Prior to that, the eighth session of the Sub-Committee on Prevention of Pollution from Ships (PPR 8), scheduled to meet remotely from 22 to 26 March 2021, will further consider VLSFO fuel quality issues, including possible effects on black carbon emissions. Demand boom on collision course with ocean transport ceiling Shoppers could find more goods out of stock as import delays mount Source: American Shipper U.S. containerized imports show no sign of letting up as the second quarter begins. On the contrary: Consumer demand is strengthening in the wake of fiscal stimulus and falling inventories that necessitate even more restocking. The biggest risk to Q2 container-shipping volume is not demand for goods, it’s transport supply. Fallout from the Suez Canal accident will constrain vessel and container-equipment availability, leading to longer delays. By the end of this quarter, shoppers in America’s stores could find more bare shelves. Online shoppers could increasingly see the words “out of stock.” Inventory restocking tailwinds The positive data on demand keeps piling up. On Thursday, the Institute for Supply Management (ISM) Customers’ Inventories Index (SONAR: ISM.MCIN) sank to 29.9 points. “This reading is the lowest ever reported since the subindex was established in January 1997,” said Timothy Fiore, chairman of the ISM survey committee. “For eight months in a row, [the index] has been at historically low levels.” According to Amit Mehrotra, transportation analyst at Deutsche Bank, this falling index number “tells us there is additional runway for restocking demand as retailers shift away from just-in-time inventory.” Mehrotra expects cargo volumes to be “stronger for longer” as a result of both inventory restocking and increased consumer confidence driven by vaccines and stimulus. New retailer surveys at investment bank Evercore ISI paint a similarly bullish picture. As of Thursday, the Evercore retail sales survey index was at 67.5, up from an average of 47.1 in February. Evercore ISI’s retailers pricing power survey index rose to 33.4, its highest level since December 2019. “Improving demand with lean inventory” drove the rise, said the bank. In general, if demand outpaces inventory replenishment, import demand grows. Bookings are still rising FrieghtWaves’ SONAR platform features a proprietary index of shippers’ ocean bookings. Bookings are measured on a 10-day-moving-average basis in terms of twenty-foot equivalent units (TEUs) as of the scheduled date of departure. On Friday, the index for China-U.S. bookings (SONAR: IOTI.CHNUSA) hit a record high. The nationwide index for inbound cargoes from all countries (SONAR: IOTI.USA) reached its highest-ever level on Wednesday. The index also tracks bookings seven days into the future. This forward view shows that a fresh all-time high is coming next week. (Chart: FreightWaves SONAR. To learn more about FreightWaves SONAR, click here.) The cargoes tracked by this data will not arrive at U.S. ports until late April or early May. In other words, as strained as ports are now, they face even greater pressure in the near future. In California’s San Pedro Bay, off the ports of Los Angeles and Long Beach, there were 32 container ships at anchor on Thursday. That’s back up above the average of 30.5 container ships per day that have been at anchor since the beginning of the year. (Chart by American Shipper based on data provided by the Marine Exchange of Southern California) Meanwhile, up in Northern California, ship-position data showed 14 ships at anchor off Oakland on Friday. Anchorage levels there have been in double digits since February. Suez Canal fallout is coming The Suez Canal accident is putting more pressure on an already strained global system. The number of ships waiting to transit the canal peaked last Monday, at 367. About 80-90 ships have transited per day since the Ever Given was refloated, according to Leth Agencies. Prior to the accident, there were 52.7 per day (year to date). But even as transits surge, more ships keep arriving. As of Saturday, there were still 156 ships at anchor awaiting passage through the Suez Canal. That’s about three times as many as normal. After container ships transit the canal northbound, they head to Europe or the East Coast. “What’s going to happen is we’re definitely going to see bunching at European ports,” said Nathan Strang, global head of ocean freight at freight forwarder Flexport, during a webinar presented by Flexport on Wednesday. “Bunching” refers to too many ships arriving at once, creating congestion. “There may be reduced time in port to try to recover those schedules. That’s going to lead to export cargo and equipment being left behind,” said Strang. He added that “there’s going to be delays for Europe and East Coast services.” ‘Curveball’ to prolong situation Strang also speculated that carriers could “blank” (cancel) sailings on other routes so they could switch more ships to Asia-Europe services to counteract the accident fallout. “Carriers may start blanking trans- Pacific and trans-Atlantic routes to recover on the more lucrative Far East [to Europe] route,” he said. Anders Schulze, Flexport’s global head of ocean freight, predicted that the Suez Canal accident would lead to “a capacity reduction across the board, both in terms of vessel capacity and [container] equipment. There will be a domino effect in terms of vessels and equipment getting back to Asia.” The disruption at the Suez Canal and congestion at European ports will limit the number of empty containers transported back to Asia. This, in turn, will reduce the number of empty containers available to stuff with Chinese exports bound for the U.S. on trans-Pacific routes. “The equipment situation was already somewhat critical,” said Schulze. “We were just seeing a light at the end of the tunnel with equipment availability and now this curveball will prolong the situation.” Further compounding challenges for shippers, at least one carrier — Maersk — has temporarily halted short-term bookings in the wake of the Suez Canal accident. As of Friday, Maersk’s short-term bookings from Asia to both North Europe and North America remained suspended until further notice.