Overseas news:

The possible consequences of IMO 2020 rules

The sea transportation of containers will be deeply impacted as from the beginning of next year with the introduction of the new International Maritime Organisation (IMO) 2020 regulations which advocates the use of low-sulphur fuel (a 0.5% sulphur limit) by vessels to protect the environment.

According to the firm of consultants Dewry, shipping companies may have increasingly recourse to slow steaming and transhipment.

Furthermore, the IMO 2020 rules may have negative consequences for some container lines especially if they cannot recover the extra costs from their customers through tariff increases.

When the sailing speed of a vessel is slower, the overall trip will take a longer time to complete and thus, ship owners may be tempted at stopping to call at certain ports so that the transit time between two major points remain competitive.

As a result, fewer ports will be serviced directly with an increasing need for transhipment and feedering.

The low-sulphur fuel is expected to cost around 50% more than the fuel currently used by container ships.

Another possible scenario will be for the shipping companies to equip their vessels with scrubbers to be able to continue purchasing cheaper high-sulphur fuel oil (HSFO). These exhaust gas cleaning systems will enable them to abide by the 0.5% Sulphur limit. However, the initial investments in the scrubbers and their operational costs will have to be recoup.

In case shipping companies are driven out of business, this will further disrupt the supply chain and reduce the intensity of competition which may result in higher freight rates in the short to medium term.

Furthermore, sea carriers which are in a financially difficult situation, may look for mergers and acquisitions to survive. Less shipping companies will hence stifle competition on several markets.

Currently, the top seven sea carriers control about three-quarters of the world’s fleet of containerships.

However, the consultants of Drewry think that “the possibility of any takeovers among the top 7 lines is remote in our opinion, primarily due to the likelihood of such deals being shot down by competition regulators.”

Posted by: Editor on Monday, 30th Sep 2019

Maersk’s outlook for 2019

The A. P. Moller – Maersk Group to which the shipping company Maersk belongs, achieved a 43% growth in its turnover from 2016 to last year. In 2018, its turnover amounted to 39 billion US dollars.

Analysts attribute this financial performance to the integrated service offerings following the acquisition of the shipping company Hamburg Sud, increasing digitalisation and improvements in its networks.

The A.P. Moller-Maersk Group has a diversified portfolio ranging from oil drilling to energy-related businesses, port terminal management services to the transportation of containers on its vessels.

Profitability during the year 2018 reached 3.8 billion US dollars (earnings before interest, tax, depreciation and amortization), an 8% increase compared to year 2017.

Concerning the ocean segment, revenues increased by 29% last year to attain 28.4 billion US dollars.

Operational revenues rose thanks to higher freight rates, synergies with the shipping company Hamburg Sud but they had been negatively impacted during the first few months by the rising price of bunker fuel.

The A.P. Moller-Maersk Group expects for 2019, the EBITDA (earnings before interest, tax, depreciation and amortization) to be 5 billion US dollars when applying the International Financial Reporting Standard (IFRS) 16 regulation. This IFRS 16 entails that any lease beyond 12 months should be included in the balance sheet as assets and liabilities.

Without the effects of this new accounting norm, the EBITDA may be around 4 billion US dollars in 2019.

However, the outlook for 2019 has a high degree of uncertainties owing to the risk of restrictions in global trade following the Brexit and the trade war between the United States and China, bunker prices and foreign exchange rates.

Moreover, the emerging African markets might be vulnerable to fluctuations in the US dollar.

Last but not least, Maersk expects a growth between 1% and 3% in its ocean freight volume.

Posted by: Editor on Friday, 1st Mar 2019

Major developments at the Port of Tamatave

The port of Tamatave has set as its ambition to become the largest port in East Africa. The expansion works have already started and are expected to be completed by year 2026. The capacity of the port will then be tripled.

A total investment of US $ 639 million will be required and most of the funds are brought by the Japan International Cooperation Agency through a loan of US $ 411 million.

Dredging will be carried out to reach a draft of 16 m so that the Port of Tamatave can accommodate larger vessels.

By year 2021, 320 meters of new deep-water quays will be operational.
The extension works will be carried out in two phases. The first stage will involve 10 hectares of land to be reclaimed to increase the storage capacity of containers as well as the installation of wave breakers over a distance of 345 metres.

During the second phase, a new quay of 470 metres will be set up for the vessels and the three existing quays will also be rehabilitated.

In addition, a sophisticated computer management system will be implemented.
With these developments, 400 metres long ships will be able to call at Tamatave while currently, only vessels not exceeding 240 metres can cast their anchor there.

In 2017, the Port of Tamatave handled 243 000 twenty feet equivalent containers, a 16% growth compared to the previous year.

Nowadays, 90% of the international movement of containers and 70% of domestic cargo go through that port.

The port authority expects to maintain the two digits growth during the next years and attain 1 003 500 containers of twenty feet long by the year 2035.

The new port of Tamatave will strongly position itself as an important link between Asia, the Gulf countries, Africa and Latin America.

Posted by: Editor on Tuesday, 29th Jan 2019

The US-China trade conflict

According to Luxembourg-based investment bank Nomura, there could be a sharp slowdown of exports from China this year, both for air and sea freight.

The consulting firm Mc Kinsey stated in a recent report that “the US–China economic equilibrium of the past 20 years has gone.”

However, there are also signs that the Chinese government wants to narrow the trade deficit with the United States.

Its Ministry of Finance announced during the end of December 2018 that it will scrap import and export tariffs on several goods. For exports in 2019, China will not levy any tariffs on 94 products including fertilisers, iron ore, slag, coal tar and wood pulp.

On its part, the United States have postponed their plans to increase at the beginning of 2019 its customs tariffs from 10 to 25%on $ 200 billion worth of Chinese goods.

Nevertheless, the ceasefire in the US-China trade conflict is only temporary, the two sides may take up to March to negotiate customs tariffs before reaching a deal.

Furthermore, in the meantime, the United States intend to limit its exports of technological products to China, thus complicating the future trade negotiations.

China may enter into technological and trade agreements with European Union countries to avoid that its high-tech industry suffers from these disruptions through the US supply chain.

In addition, China is also trying to diversify its export markets especially with countries located along its Silk Road sea and road initiative. These states accounted for 27.3% of China's total foreign trade value during the first seven months of 2018.

However, these markets would be an insufficient substitute for the United States.

Moreover, the US-China trade war is also pushing several foreign companies to shift the manufacture of their labour-intensive products such as textiles, apparels, footwear…from China to other Asian countries. Indonesia, Thailand and Vietnam may benefit from this production shift.

Posted by: Editor on Thursday, 3rd Jan 2019

Mixed fortunes for the port of Chennai

During the financial year 2017-18, the port of Chennai has managed to generate profits of Rs 320 million compared to Rs 130 million during the previous financial year. 51.88 million metric tons (MMT) were handled with container traffic representing 30 MMT.

An above average performance despite the sluggish growth in global trade and heightened competition from new ports especially the nearby port of Kattupalli.

The Chennai port authorities are optimistic about their future since the National Highway Authority of India (NHAI) has announced that it will resume work on the Chennai Port-Maduravoyal elevated expressway. This 19 km expressway consisting of six lanes will open new commercial opportunities.

However, since October 2018, the port of Chennai suffered a big blow when the shipping line Maersk moved all its operations for productivity reasons to the new Adani Group terminal located at the nearby port of Ennore. The latter has an annual capacity of 800 000 TEUs.

Maersk stated to the press in India that it sees Ennore as a potential South India gateway and expects considerable productivity benefits from a congestion-free operation there.

As a result, in October 2018, container traffic declined by 7% to 140 500 TEUs while it amounted to 150 444 TEUs the preceding month.

The port of Chennai is trying to target the transshipment of containers following the recent decision of the Indian government to liberalize cabotage and allow vessels bearing a foreign flag to transport laden cargo or empty containers between ports of India.

Furthermore, to increase its attractiveness, the port of Chennai has introduced since last July a tariff discount program for vessels handling cargo for transhipment.

Several sea carriers have expressed their interest to rework their service routings to include Chennai as a transshipment point for freight to/from the South of India.

Posted by: Editor on Wednesday, 5th Dec 2018

IMO 2020 raises fear of slowing down world trade

The International Maritime Organisation (IMO) has established a new regulation that shipping companies will have to comply as from the 1st January 2020.

The IMO 2020 rule as the press calls it, will make it mandatory for vessels to use fuels with a maximum sulphur content of 0.5% (compared with 3.5% now). The objective is to reduce harmful emissions from ships and protect the environment.

If this measure is implemented in less than 13 months’ time, it will lead to an increase in the transportation costs of goods to and from Mauritius.

Sea carrier Hapag-Lloyd has estimated that the compliance to the IMO 2020 rule, will result in an approximately additional $ 1 billion compared to cheaper heavy fuel oil the shipping company is currently using for its fleet of 220 containerships.

These supplementary expenses will certainly be recovered from the shippers through surcharges.
During the end of October 2018, the International Maritime Organization rejected a proposal -- supported by both the U.S. and shipping groups -- for an experience-building phase. Analysts have warned that the firm implementation of the IMO 2020 regulation will undermine world trade.

Moreover, several countries such as the Bahamas, Panama, Liberia and the Marshall Islands have also supported the phased implementation of the IMO 2020 rule.

A spokesman from the administration of the American President Donald Trump stated to the press that “the United States supports an experience building phase, which has been proposed by several other countries in IMO 2020 in order to mitigate the impact of precipitous fuel cost increases on consumers”.

This phase-in approach would mean that the IMO 2020 rule would not have to be fully complied with until at a later date to be specified.

Posted by: Editor on Tuesday, 30th Oct 2018

Escalating trade war between the United States and China

The trade war between the United States and China is escalating. It is expected to slow down global economic growth.

The Chinese government has announced that it will impose customs tariffs on US goods worth US $ 60 billion, in retaliation of President Donald Trump’s decision that new tariffs will be levied on $ 200 billion worth of Chinese goods.

The US tariffs which will be applied on the 24th September, will start at a rate of 10%, before rising to 25% as from the 1st January of next year.

Thousands of products from China, from food seasonings to network routers and parts of industrial machinery, will be affected.

On the other hand, the Chinese government will implement new tariffs at 5% or 10% depending on the product, entering the People’s Republic of China.

More than 5 000 goods will be impacted, including meat, alcoholic drinks, chemicals, clothes, machinery, furniture and auto parts from the United States.

The office of the US Trade Representative (USTR) stated to the press that the latest move was “part of the United States continuing response to China’s theft of American intellectual property and forced transfer of American technology”.

Posted by: Editor on Monday, 5th Nov 2018