ASEAN Economies are Benefitting from Supply Chain Diversification

Supply chain disruptions from the pandemic and the war in Ukraine cost the ten-member Association of Southeast Asian Nations (ASEAN) economies around $17bn annually. Research by the Economic Research Institute, created to mirror the OECD, found that ASEAN’s larger economies, including Singapore, Thailand and Malaysia, were the worst hit by these global shocks.

Supply chain consultancy TMX Global said ASEAN’s total GDP was $3.62tn last year and, despite the impact on regional economies, ASEAN countries continue to grow. “Driven by exports and domestic demand, ASEAN’s GDP is forecast to more than quadruple over the next two decades, increasing to $13.3 trillion by 2045,” said Dean Jones, TMX’s director of the Asia region.

Although COVID regulations in China have eased, the recent disruptions have led companies to consider ASEAN's role “when anticipating future volatilities in global supply chains”, according to Jones. This has brought about a ‘China Plus One’ strategy which involves diversifying certain aspects of operations, such as production centers and warehouses, outside China.

“Southeast Asia has been emerging for some time as the natural next stop for manufacturing reliant on low labor costs. As manufacturing cost remains around 50%-60% lower than in China, the region is popping up as a viable alternative for a lot of companies,” said Jones.

According to TMX, Thailand and India, the latter a non-ASEAN member, are seeing an influx of companies creating regional manufacturing hubs to ease their reliance on a single supply chain. “There is no better time than now for businesses and leaders to re-evaluate changes to inventory systems. The earlier improvements are made, the higher the chances of the business becoming more resilient and effective in the long-term,” said Jones.

Source: The Loadstar

Shake up in China’s Port Rankings in 2022

The combination of changing trade patterns, pandemic-related closures, and strategic restructuring have led to a change in national rankings for eight of China’s 12 major ports during the pandemic, reports Alphaliner. Overall, China’s container throughput increased by 4.7% during 2022 to reach 295.9 Mteu.

Dalian, Rizhao and Lianyungang recorded the greatestgrowth at 21.5%, 12% and 10.7% respectively. Shanghai retained top position with annual throughput of 47.3 Mteu, recording a 0.6% increase compared against 2021. Comparatively, the number was below the national average following COVID-related closures.

Qingdao is in fourth position, overtaking Guangzhou, after increasing its throughput by 8.3%. Just three years ago, Qingdao became the first port in north China to handle more than 20 Mteu.

Rizhao and Liangyungang have overtaken Yingkou and Dalian, whose port groups merged in 2021. Lianyungang, ranked as China's tenth busiest port, has become a springboard for China's Belt and Road initiative. Throughput exceeded 5.0 Mteu for the first time in 2021. In November, Shanghai International Port Group (SIPG) took a 23% stake in the Lianyungang Port Group, providing RMB 1.5 bn (USD 220 M) in new investment.

Ningbo Zhoushan handled 33.3 Mteu in 2022, coming within 4.0 Mteu of Singapore. In contrast, Hong Kong's throughput fell for the fifth consecutive year to 16.6 Mteu. It is today China's 7th busiest container port versus third place a decade ago. Dalian has also slipped down the rankings, with throughput volumes halved from five years ago.

Source: Alphaliner

Dampened Air Freight Rates Still More Than 50% Above Pre-COVID Levels

Airfreight rates continue to face downward pressure in January but remain above pre-COVID levels. According to the Baltic Exchange Airfreight Index (BAI), contract and service rates paid by forwarders on services from Hong Kong to North America in January 2023 have fallen from their highs year-over-year but is still 67.8% above pre-COVID rate levels. Services from Hong Kong to Europe also reflect the same trend.

Higher fuel prices, the lack of bellyhold capacity on certain trades, and ongoing expensive charter/BSA operations signed at the height of the pandemic are contributing to the elevated rates. Boeing's figures released at the recent World Cargo Summit showed total capacity in November was only 3% behind 2019 levels. Although belly capacity fell -23%, a 16% increase in dedicated freighters made up the difference.

“One thing to note is that although index levels for the biggest outbound destinations such as Hong Kong and Shanghai are still well above pre-COVID levels, it is not the case for some smaller but also significant markets – such as Vietnam and India. said Neil Wilson of data provider TAC Index in the latest Baltic Exchange market update. He explained that a higher proportion of business in markets like Vietnam and India “has always been ad hoc business conducted at spot rates – with prices often much more volatile”.

Wilson said more recent contracts under renegotiation for 2023 have generally been signed at lower levels. "Initial research also suggests that falling demand from consumers is also visible in the data. Prices [are] generally falling fastest from locations which have the highest proportions of consumer goods in their exports," he noted.

Source: Air Cargo News

Warnings of 2.5% Drop in Global Box Volumes in 2023

The global demand for shipping could fall by as much as 2.5% this year because of “muted” economic growth, said ocean carrier Maersk, widely seen as a bellwether for the container shipping industry.

Global ocean container market growth in 2023 is set to range from negative 2.5% to positive 0.5%. Maersk noted in a company report that the overconsumption of goods is now leading to a sharp correction in demand.

The world is facing “a significant inventory adjustment” after a period where demand has been “absolutely exceptional,” said Maersk's newly appointed chief executive officer, Vincent Clerc.

“We believe that this guidance reflects the substantially lower container freight rates going into 2023 but also very low visibility in the container market outlook,” Brian Borsting, a credit analyst at Danske Bank A/S, said in a note.

The reduction in global shipping volumes comes just as the container fleet is expected to grow significantly. Container lines ordered many vessels in the past two years while earnings were high.

Source: American Journal of Transportation

The U.S. Invests $662m in Port Development

The U.S. Department of Transportation's Maritime Administration (MARAD) announced a US$662m investment to develop port infrastructure and strengthen the supply chain sector in the nation. "America's ports play a central role in our supply chains," said U.S. Transportation Secretary Pete Buttigieg.

MARAD's Port Infrastructure Development Program (PIDP) investment would be used to modernize U.S. ports. Buttigieg explained that the goal is to strengthen supply chains for future generations, reduce shipping time, costs, and the costs of goods for the American people.

Grants will also be awarded on a competitive basis to support projects that improve the safety, efficiency, or reliability of the movement of goods through ports and intermodal connections to ports. MARAD will also consider how projects address climate change, sustainability, equity, and workforce development objectives.

Funding from the PIDP is intended to improve port and related freight infrastructure needs and support future growth. "The program also includes a statutory set-aside for small ports to continue to improve and expand their capacity to move freight reliably and efficiently, support local and regional economies, and support supply chain improvement," said Maritime Administrator Ann Phillips.


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