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December 13, 2021

CHINA's IMPACT ON THE GLOBAL SUPPLY CHAIN


China shipping: from its monopoly on containers, to its critical role in the global supply chain.

Behind China’s economic might is the world’s biggest shipping industry, and 2021 has seen it tested like never before China has seven of the world’s top 10 container ports, plus about 400 smaller ones.

In terms of its cargo capacity for seaborne trade, China’s role in the global shipping network is bigger as seen on the supply chain. China is ranked third globally with 6,896 ships and a total deadweight tonnage (DWT) of 128,892,849 in 2020, trailing only Greece and Japan, according to United Nations Conference on Trade and Development.

China’s major shipping companies include state-owned COSCO Shipping and China Merchants Group. COSCO Shipping, the world’s biggest shipping company, said that it had a fleet of 1,371 vessels with a combined capacity of 113.7 million DWT as of August. The company is also the world’s biggest terminal operator, with the annual throughput of its container terminals amounting to 129.4 million twenty-foot equivalent units – a standard measure of volume in units of twenty-foot long shipping containers.

With more than 400 ports scattered along its inland rivers and coastline, China has four of the top five global container ports, and seven of the top 10. Shanghai Port is the world’s largest port in terms of container throughput, and Ningbo-Zhoushan is the largest port in terms of cargo tonnage.


And because of that, when there are issues in supply chain and especially revolving around China, You will see there will be a crisis. For Example, Recently, Shipping rates from China to surrounding Asian countries have soared amid the peak season ahead of the Lunar New Year, adding fuel to an already overheated global shipping market disrupted by the coronavirus pandemic.

The Southeast Asian routes of the Ningbo Containerised Freight Index, which reflects the spot rate of container ships departing from the Ningbo-Zhoushan port – the world’s largest port by cargo tonnage – recorded a price surge in the past month and reached an all-time high, with freight costs to Thailand and Vietnam rising 137 per cent from the end of October to the first week of this month, while the Singapore-Malaysia freight costs also increased by 49 per cent.

A 20-foot container, shipped from Shenzhen to Southeast Asia, cost about US$100 to US$200 before the pandemic, but the price has since surged tenfold, from US$1,000 to US$2,000, said Yan Zhiyang, a manager with a logistics company based in Guangdong province.

“Shipping costs to various destinations have risen and fallen repeatedly. Sometimes the export demand for a specific place suddenly rises and pushes up the rates immediately, and when the demand cools a bit, the rates drop. But in general, the freight costs have gone up multiple times,” Yan said.

Meanwhile, freight costs to South Korea also quickly picked up in the past two months, according to Zhou Jie, who manages a freight-forwarding company based in Dalian, a coastal city in northeast China.

“Generally, the prices of other routes have been soaring since the beginning of the year, but the route to South Korea started to rise quickly in the past two months, and now it has reached US$1,600 per 20-foot container, compared with US$200 during normal times,” Zhou said.

But Does the shipping industry need China-made vessels and containers?

China is the world’s leading shipbuilder. In the first three quarters of this year, China delivered 30.34 million DWT worth of new ships, accounting for 45.6 per cent of the world’s total deliveries, according to the China Association of the National Shipbuilding Industry.

Despite China’s dominant position in the industry, most of the ships it makes, including bulk carriers, are low value-added and low-tech compared with those produced by the other two top shipbuilders, South Korea and Japan. In the “Made in China 2025” initiative that China launched in 2015, shipbuilding was identified as one of 10 priority sectors, with an aim of making advancements in high-end shipbuilding.

Meanwhile, China also has a monopoly on the world’s container production, with almost every ocean shipping container in the world being built in the country, thanks to governmental support for the industry, low labour costs and huge local demand.

According to British maritime consulting company Drewry, China produces more than 96 per cent of the world’s dry cargo containers and 100 per cent of temperature-controlled – or “reefer” – containers.

What are the impacts of the Covid-19 pandemic on China’s shipping industry?
As China’s manufacturing sector quickly has recovered from the impact of the pandemic while its major competitors in Southeast Asia are still facing surging caseloads, it has become almost the best option for importers and consumers from around the globe to get the products they want.
And the economic stimulus measures in the US and Europe have also helped release the pent-up demand caused by the pandemic.
Amid strong demand for exports, there has been a surge in cargo and container throughput at major Chinese ports this year. In the first nine months, China’s ports handled 3.5 billion tonnes of cargo for foreign trade, some 5.2 per cent more than the same period last year, according to the Ministry of Transport.
Unbalanced global trade patterns have also disrupted container supplies in the country. With North America and Europe producing fewer products for export, empty containers are piling up at ports, delaying their return to Asia and leading to shortages in China.


To combat the problem, Chinese authorities have coordinated with domestic container manufacturers to increase output, but industry insiders have expressed concerns about an oversupply of containers once the pandemic is over.
More disruptions have been unveiled since the middle of the year due to sporadic outbreaks among port workers at major Chinese ports. In May, Yantian port in the southern province of Guangdong was shut down for weeks, followed by the Meishan terminal at Ningbo Port in August. Both shutdowns caused unprecedented congestion and further wreaked havoc on the global logistics network.
Even without port closures, Chinese authorities have imposed strict disease-prevention and quarantine measures for port workers and sea crew, but these actions have hurt operating efficiency and worsened port congestion.

Most importantly, all of the disruptions have led to runaway shipping costs. Freight prices have jumped more than 400 per cent from their lowest point last year, according to the Shanghai Containerised Freight Index.
The cost of shipping a 20-foot container to Europe from Shanghai has rocketed, to between £5,736 (US$6,640) and £9,112 (US$10,550), depending on the port, according to ManSys, a software company specialising in global trade management. By comparison, the average cost of exporting the same container from Shanghai in 2020 was £855, and in 2019 it was just £592.
For the China-US route, the container shipping costs are about four times higher than the same period last year, and more than 10 times higher than pre-pandemic levels, according to Freightos, a digital booking platform for international shipping.

 

October 30, 2021

ZIM SHIPPING LINE POSTS HISTORICAL $525 MILLION DOLLARS PROFIT, PURCHASES 7 MORE SHIPS

 

Zim Lines revenues up with 20% in 2020.

ZIM wasn’t the only company to benefit from the pandemic; the Israeli shipping firm Zim has rebounded spectacularly in the past year from a long period of financial decline.

The rebound is in large part attributable to the pandemic, which caused a shortage of empty containers due to disruption of global trade, thereby driving up shipping rates. According to the Financial Times, “the cost of shipping goods from China to Europe has more than quadrupled in the past eight weeks.”

Zim expects to report revenue for 2020 of $4 billion, 20% more than in 2019, and to swing to a profit of $500-525 million, mainly coming in the fourth quarter, from a loss of $13 million in 2019, reported Globes on Sunday.

Zim’s stock flotation in New York has seen a return of almost 90%.

CEO Eli Glickman told the paper that “in the last three to four months we have seen peak prices for container shipping, leading to excellent results for the companies. Zim has been improving substantially for many quarters, and is a leader for its profit margins among shipping lines around the world.”

Glickman described several factors behind the trend: “First of all, the halting of air cargo services because of the pandemic contributes to extra demand at sea; secondly, people are sitting at home and spending less money on restaurants, vacations and trips abroad, so they have more money to spare and they invest in home improvements, in buying office equipment, building materials, and so on, and that creates extra demand in the Western world; thirdly, there’s a rise in the transport of goods bought through ecommerce, which were mainly transported by air, such as mobile telephones and home appliances.”

Zim Lines to repay $ 85.4 million on bonds listed on the Tel Aviv stock exchange

The company raised $218 million in the flotation at $15 per share, giving it a pre-money valuation of $1.5 billion, lower than the price range it had aimed for ($16-19 per share). Even so, the share price still managed to fall 23% on its first day, to a low of $11.15.

Zim’s share price has continued rising. At the end of last week, following a 30% jump the week before, it closed at $28.25, giving the company a market cap of $3.25 billion. Since its flotation, the return on the share has been 89%.

Two recent announcements have also bolstered Zim’s profile: the company reported that it had signed a strategic agreement with Seaspan to lease ten natural gas-powered ships, in a deal valued at over $1 billion; the second was of partial redemption of two bond series listed on the Tel Aviv Stock Exchange. Altogether, the company will repay $85.4 million, 28% of the bond principal.

Meanwhile, ZIM Integrated Shipping Services Ltd., announced that during the month of October 2021, it purchased seven secondhand vessels (built between 2007-2009) in a number of separate transactions. The vessels purchased include five 4,250 TEU vessels and two 1,100 TEU vessels, for a total consideration of approximately $320 million.

Eli Glickman, ZIM President & CEO, stated: "Since going public our focus has been to allocate capital to strengthen our commercial prospects and create long-term shareholder value. With the opportunistic acquisition of these much-needed vessels, we have drawn on our strong cash position and our agile approach to maintain and expand our operating fleet to meet growing customer demand, while remaining committed to delivering industry superior profitability. Going forward, we will continue to complement our primary strategy of chartering-in the vast majority of our vessels, by selectively acquiring second-hand tonnage when the appropriate opportunities arise."

PIL LAUNCHES DIRECT CHINA -GULF SERVICE


Pacific International Lines (PIL) is pleased to announce the launch of a new weekly direct service connecting Central and South China to the Gulf area in the Middle East. This new service augments our existing CSG service linking China and South East Asia to the Gulf area.

Effective from 23 November 2021, this new service, known as Gulf China Service (GCS), will be offered by a consortium of vessels with an average capacity of 3000 TEUs, jointly deployed by PIL, Regional Container Lines (RCL) and CULines (CUL).

This new direct service is part of PIL’s continuous efforts to respond to the needs of our customers for more direct and efficient services. Customers who book on this new GCS service will enjoy fast transit times from Ningbo, Nansha and Shekou, to Jebel Ali and Dammam.

PIL’s vessel “Kota Kamil” will embark on the maiden voyage of this new service commencing ETB NGB 23 November 2021.

The ports of call for this GCS service are:Gulf China Service (GCS) Service Rotation:

Ningbo - Nansha - Shekou - Jebel Ali - Dammam - Ningbo