Far East & Indian sub-cont westbound (import) rates/space/equipment – Carriers are now announcing winter schedules as demand slackens off towards Christmas and the  Grand Alliance has withdrawn its Loop D sailings until further notice on the Asia to Europe trade. Maersk have introduced a new daily sailing product with late cut-off times at origin ports aimed at improving transportation times at Europe’s main ports of Rotterdam, Bremerhaven and Felixstowe. Whilst this new daily service has slower transit times deliveries can be any day of the week. The service is supported with money-back guarantee of up to US$300 per container depending on the number of days late. This new daily service is being studied to assess the benefits to clients.

Flooding in Bangkok, Thailand has badly affected the Old Port. Clients are advised to deliver their cargo to Laem Chabang until the flood waters recede.

Supply still exceeds demand and this downward pressure is forcing further rate reductions in November that are adding to losses reported by the shipping lines in quarters 3 and 4, 2011.

Far East & Indian sub-cont eastbound rates/space/equipment (exports) – Ocean freight rates remain at an all-time low. Whilst there has been an increase in exports of scrap products (metals, plastics and paper) most containers are being returned empty.

UK Terminal Handling charges – generally £120 per container except Maersk and SafMarine (£131), Hanjin and MSC (£125) and K-Line (£122).

Heavyweight Container Surcharges - continue for westbound traffic only with each carrier having slightly different weight break points. It should be noted that this surcharge is not part of any ‘all-inclusive’ rate.

North China 20ft Equipment Premium (westbound only) – This charge is applied by all lines but only on 20ft containers ex Dalian, Qingdao, Tianjin, Xingang, Yantai and Lianyungang at $250 per 20ft container. NB. This charge is not included in all-inclusive rates.

Suez Canal Surcharge – remains at $25 per TEU except Evergreen ($47 per TEU) and CSAV ($50 per TEU). This charge is not included in all-inclusive rates.

Gulf of Aden Emergency Risk Surcharge – this surcharge is now $55 per TEU.

UK Landside Charges/Haulage/Fuel/Port Congestion – Fuel Surcharge remains at 25.5% (against a base price of £0.90 ppl) on most published indices reflecting the continuing high price of diesel.

Airfreight – fuel/security surcharges are expected to continue for the foreseeable future and means that we have reasonable airfreight rate stability. Fuel and security surcharge are:

Hong Kong     HK$8.40 (combined) per Kg

Shanghai       CNY9.20 (combined) per Kg.

Kevin Fryer 11^th November 2011.

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Far East & Indian sub-cont westbound (import) rates/space/equipment –

A provisional notice has been issued on a 14-day notice period of the plan to introduce a PSS of $200 to $300 per TEU in expectation of further increases in volumes ahead China closing down for the ‘Golden Week’ (1^st to 7^th October).

Far East & Indian sub-cont eastbound rates/space/equipment (exports) – Ocean freight rates remain at an all-time low and equipment re-positioning remains and issue.

UK Terminal Handling charges – generally remain at £120 except Maersk and SafMarine where THC is £131 per container. Hanjin and MSC have increased THC to £125 and K-Line to £122 per container.

Heavyweight Container Surcharges - continue for westbound traffic only with each carrier having slightly different weight break points. It should be noted that this surcharge is not part of any ‘all-inclusive’ rate.

North China 20ft Equipment Premium (westbound only) – This charge continues to be applied by all lines on 20ft containers ex Dalian, Qingdao, Tianjin, Xingang, Yantai and Lianyungang at $250 per 20ft container only.

Suez Canal Surcharge – remains at $25 per TEU except Evergreen ($47 per TEU) and CSAV ($50 per TEU).

Gulf of Aden Emergency Risk Surcharge – this surcharge is now $55 per TEU.

UK Landside Charges/Haulage/Fuel/Port Congestion – Fuel Surcharge remains at 25.5% (against a base price of £0.90 ppl) on most published indices reflecting the contuing high price of diesel.

Airfreight – fuel/security surcharges are expected to continue. Current rates:

Hong Kong     HK$9.20 (combined) per kg reduces to HK$8.40 on 15/9/11.

Shanghai remains at CNY9.20 (combined) per kg.

Kevin Fryer 9^th September 2011.

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Far East & Indian sub-cont westbound (import) rates/space/equipment – It is pleasing to report that carriers have postponed intended rate increases for July 2011. Whilst there are some equipment shortages in China and Malaysian ports slow steaming continues to affect equipment turnaround times. Supply still exceeds demand and thus it is very difficult for carriers to push through rate increases.

Whilst 2010 saw record profits for carriers 2011 to date is witnessing significant losses such that several carriers are considering emergency measures and the removal of vessels. It is clear however that present low rates are not sustainable and it is inevitable that significant increases will have to be made in the near future.

Far East & Indian sub-cont eastbound rates/space/equipment (exports) – Exports rates remain extremely low with many containers being returned to the Far East empty and this adds to carriers losses.

UK Terminal Handling charges – generally remain at £120 except Maersk and SafMarine where THC is £131 per container and MSC where THC is £125 per container.

Heavyweight Container Surcharges – continue for westbound traffic only with each carrier having slightly different weight break points. It should be noted that this surcharge is not part of any ‘all-inclusive’ rate.

North China 20ft Equipment Premium (westbound only) – This charge continues to be applied by all lines on 20ft containers ex Dalian, Qingdao, Tianjin, Xingang, Yantai and Lianyungang at $250 per 20ft container only.

Suez Canal Surcharge – remains at $25 per TEU except Evergreen ($47 per TEU).

Gulf of Aden Emergency Risk Surcharge – this surcharge is now $55 per TEU.

Equipment Inspection Fee – Hapag Lloyd has introduced a surcharge of £6.00 per container as the result of packaging being dumped inside ‘empty’, returned containers. No other carrier has yet applied this surcharge.

UK Landside Charges/Haulage/Fuel/Port Congestion – Fuel Surcharge remains at 25.5% (against a base price of £0.90 ppl) on most published indices.

An infrastructure charge of £3.00 per container continues at Southampton.

Proposed ‘No-show’ fee – over booking and inaccurate booking and lateness in arrival of containers at port are likely to face cancellation fees of around $100 per container. It is not expected that this cancellation charge will introduced until the capacity issue is addressed.

Airfreight – fuel/security surcharges are expected to continue. Current rates:

Hong Kong  8.80 HK$ (combined) per kg.

Shanghai     9.20 CNY (combined) per kg.

Kevin Fryer 16th July 2011.

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Logistics Case Studies – October 2009

Ken Rogers – UK Freight & Distribution and Fleet Costs

Fuel Oils – Market Review – April 2011

Lloyd Fraser (Bulk Liquids) -  February 2011

Has the bad weather been a catalyst to review your Fuel-oil Supplies?  – January 2011

How much fuel do you use ? -  October 2010

Major Structural Changes in UK Freight – September 2010

Confusion on the way for Gasoil Users – August 2010

Logistics Market Update -  June 2010

Tax upon tax with Fuel ! – March 2010

Fuel Cost Case Studies - October 2009

Internet Shopping – The new Retail Revolution – October 2009

Kevin Fryer – International Freight & Distribution

OCEAN & AIRFREIGHT UPDATE – JULY 2011

OCEAN & AIRFREIGHT UPDATE – February 2011

OCEAN & AIRFREIGHT UPDATE – November 2010

OCEAN & AIRFREIGHT – October 2010

Fergus Smith – Warehousing, Parcel distribution, and specialist Movements

PLASTIKOTE CASE STUDY

No carrier should have imposed any Peak Season Surcharge (PSS) and this position should continue up to the New Year at least.

Ocean freight rates for November have also reduced from October levels. However, carriers continue to withdraw vessels from service to match supply with demand. As examples of this the ‘Grand Alliance has only two-weekly sailing on ‘Loop D’ and Maersk has removed its ‘AE Loop.’

Slow steaming in both directions continues to be a feature adding 5 to 10 days to previous transit times. Several carriers have announced plans to increase ocean freight rates from 1st January 2011 by $250 $300 per TEU and if space becomes an issue then PSS may be re-instated.

In an effort assist in budgeting, it is thought that oil prices and thus fuel/bunker charges will remain much as they have been during most of 2010.

Far East & Indian sub-continent eastbound rates/space/equipment update (exports)

Exports rates have reduced during October and represent good value.

UK Terminal Handling charges – generally remain at £120 except Maersk and SafMarine where THC remains @ £126 per container.

Heavyweight Container Surcharges – continue for westbound traffic only with each carrier having slightly different weight break points. It should be noted that this surcharge is not part of any ‘all-inclusive’ rate.

North China 20ft Equipment Premium – This charge continues to be applied by all lines on containers ex Dalian, Qingdao, Tianjin, Xingang, Yantai and Lianyungang at $250 per 20ft container only.

Suez Canal Surcharge – remains at $25 per TEU except Evergreen ($47 per TEU).

Gulf of Aden Emergency Risk Surcharge – generally $45 per TEU except MSC ($55 per TEU).

20ft Equipment Imbalance Surcharge – MSC has suspended this surcharge from 1st August 2010.

UK Fuel Surcharge – remains at 18.5% on most published indices. However, fuel prices are increasing again and thus an increase in fuel surcharge is likely.

Airfreight – fuel/security surcharges are expected to continue at the present relatively low levels well into 2011:

Hong Kong + 5.80HK$ (combined) per kg (down).
Shanghai + 9.20CNY (combined) per kg.

Kevin Fryer 7th November 2010.

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Diesel fuel now represents up to 40% of the cost of operating transport fleets, and should therefore be an area attracting serious attention to anybody responsible for the costs of such an operation. However, there remains very little understanding of how the fuel markets actually work, and therefore establishing whether best prices are being achieved.

Nevertheless, the largest part of the cost is in duty, and nobody has yet successfully negotiated a decrease with the Chancellor of the Exchequer! After allowing for the net price of diesel being set on international markets (Rotterdam) and duty, the net sums available on which to base negotiations with fuel suppliers are limited. Typically, the pump price in the UK averages at about 6 pence per litre over the Rotterdam price. Whilst a couple of pence price reduction can be significant in absolute terms, in percentages, it has only a small effect on that 40% !

Some managers (probably a minority) have invested more time in investigating the potential to achieve reductions in actual consumption. In many cases, such attention has resulted in short term initiatives, for example in trying alternative fuels, or driver training programmes. Very few have however, been matched to long-term management and monitoring programmes with continued actions to ensure that short term gains are maintained. There almost needs to be a leap of faith in investing up-front in more expensive fuels or intensive driver training such as the SAFED programme, without any guarantee of long term gain.

It is easy to measure short term improvements on the same day that a driver is trained, but what is really happening 6 months down the road, when other priorities are demanding management attention at the operational level. The Freight Best Practice Programme has identified that a typical 10% consumption saving on the training day can have disappeared within half a year unless there is a rigorous programme of monitoring and appropriate intervention. But how many companies have the operational commitment or the in-house expertise to do this effectively ? Nevertheless, with a 10% long term savings goal, who can afford not to be doing so.

Fortunately, Expense Reduction Analysts are now able to include a review of fuel consumption in road transport fuel projects. This means that we can create an accurate benchmark of current consumption to give a firm basis on which to measure any future savings. Our objective  market expertise means that we can give an independent view of what is on offer and facilitate and monitor  the effective implementation of any consumption project.

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The Department for Transport has recently published its annual Road Freight Transport Statistics Bulletin 2009, and interpreting the figures provides a fascinating analysis of the changes occurring in the Distribution Sector. This year’s publication is significant in that not only does it show the impact of recession when compared with 2008, but also as the 20^th edition, showing the fundamental changes over two decades.

Unsurprisingly, total tonnage uplifted declined markedly in 2009 compared to the previous year, but the balance of goods moved between different sectors has continued recent trends.  The volume of food and drink products has been at a stable 370 million tonnes for three years, after a fairly constant upward trend, whereas all other categories declined, noticeably Bulk Products, which fell from 620 million tonnes to 440 million tonnes year on year. Perhaps worryingly for British Manufacturing, this compares with levels of over 600 million tonnes being uplifted in this sector even during the recession years of the early nineteen nineties.

Analysis of usage by vehicle type shows artics moving 58% of goods compared to just 40% in 1989.  Not only does this show the impact of increased vehicle weights on improving efficiencies, but also goes some way to explain why unit haulage rates have failed to keep pace with inflation, whilst still allowing haulage businesses to continue.

However, from a cost analysts’ perspective, the most interesting statistic must be the change in the proportion of goods being moved by own-account vehicles versus 3^rd party hire and reward hauliers. In 1989, hire and reward operators uplifted 60% of goods (by weight), declining slightly to 57% in 1991 as the recession bit. However, with a trend for more companies outsourcing logistics functions, this then peaked to 67% in 2001. A gradual decline to 61% in 2007 has then been followed by big drops to 51% in 2009. Actual volumes for the hire and reward centre have dropped from a peak of 1,145m tonnes in 2007 to just 723m tonnes in 2009 – a 47% drop ! Undoubtedly, the impact has been large numbers of providers disappearing from the scene with record administrations and insolvencies in the sector, and the survivors following rigorous cost cutting programmes and capacity reductions. For the future, however, from the service procurors perspective, this means reduced competition as hopefully volumes begin to recover.

Although the own account sector suffered a small volume reduction to 699 million tonnes, this was still the third highest volume moved in this sector since 1989. However, the sector moved its goods further than any previous year and therefore recorded its highest ever tonne kilometre measure. The re-emergence of the own account sector must be a relief to suppliers of fleet services: our internal data shows that margins charged on fleet supplies (eg fuel, tyres, maintenance, fleet insurance, etc.) are consistently higher than being achieved by the same suppliers to the hire and reward sector.

Therefore, despite the fact that own account operators are working their fleets harder, there are still major opportunities to improve their cost base through detailed effective procurement reviews.

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“Apart from the financial rewards of reducing expenditure, our work with Neill Summerfield and his team in securing service level agreements and key performance indicators from suppliers has encouraged people within the Academy to be more focused on working pro-actively to ensure that we receive the best possible service from our supplier base”

Importantly the decision to engage Neill Summerfield and his team of cost management consultants was supported by the Executive Management Board and the Board of Trustees. Progress in finding sustainable extra profits for the RAD is reported to both teams on a monthly basis.

Price inflation in some of the key operating costs for Logistics service providers is manifesting in price increases to customers.  Coupled with this, providers are becoming more inclined to push for these increases in some markets because the recession has taken a lot of capacity out of provision, and the continuing lack of readily available investment capital is constraining any growth in physical provision.

For example, there have been numerous reports in recent weeks heralding the return of pre-crisis, global trading activity. Indeed, two key airports, Hong Kong and Frankfurt, have reported record monthly Air Cargo volumes in May with year on year growth at around the 40% mark. It is also anticipated that Ocean Container import volumes into the USA for 2010 will match 2008 levels. While this news is encouraging for the global economy and, in particular, Asian markets, where confidence is growing, there still remains uncertainty around economic prospects in the European and US markets. For cargo shippers this means that it is as important as ever to review transport expenditure. Focus on improving service and rates while some capacity is still available makes great sense. Action now will also make dealing with the impact of potential capacity constraints in the future that much easier to manage.

Within the UK, anecdotal evidence from what we would regard as upper tier (in terms of service capability) providers indicates that they have been busier in the first half of 2010 than has been the case for many years. Similarly, although new LGV registrations have still not recovered, trailer manufacturers are reporting significantly fuller order books, and some are investing in additional manufacturing capacity. Ironically, although one trailer manufacturer is currently reporting that their UK facility is under threat because of overall reduced demand across Europe, the UK plant’s domestic order book is now significantly higher than this time last year.

Undoubtedly, the web has caused a major change in distribution patterns. The knock-on effect is that both client companies and logistics providers are having to learn to adapt at a faster rate than ever, and some are more successful in this than others. Consequently, although pricing from incumbent suppliers may be competitive for your business profile 12 months ago, that may no longer be the case. Not only are providers having to change, but purchaser’s staff need to build new levels of market knowledge as to who is providing what, and who can meet their needs competitively going forward.

The one sector of the Logistics business where we are seeing increased capacity availability within the UK is Warehousing. Our Logistics Team held their quarterly meeting in the North Midlands last week, and remarked on the availability of vacant properties on what has been regarded as one of the prime distribution estates for several years.  Despite the best efforts of property agents, travelling around the country, we cannot fail to see the proliferation of properties to let.  Even in those areas of previously insatiable demand in the golden triangle, properties lie vacant.  The availability of warehousing property is in our view a reflection of the overall depressed demand for storage and handling facilities. Our dealings with full-service providers also shows that many are finding they have more free space on offer.

Stock costs money both in terms of cash flow and storage costs.  The better organisations are actively managing stock levels and, as a minimum, ensuring that they mirror any downturn in sales, aided by sophisticated I.T. packages that allow total visibility of stock and demand throughout the supply chain.

The implications of this are that, for those looking to acquire property or already in situ, rents should remain competitive to attract and retain tenants. Shorter term lease commitments and attractive rental rates are available with the opportunity for further negotiation.

For those who have contracted out their warehousing and storage activity, or looking to change distribution networks, or even flex capacity to reflect growth demands without capital commitment, storage and handling rates remain competitive.  However the main message for these companies is that they should ensure that any storage arrangement is flexible with no long term commitments that may not match the future needs of their business.

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