June 2016 Industry News
No end in sight for Bangladesh congestion as garments fail to sail
If you are trying to get garments out of Bangladesh, expect delays, both by air and sea. Shippers are looking to sea-air services to avoid airport delays, where security and scanning issues have slowed processes. Sea-air services are via Singapore, Dubai or Colombo. At Chittagong port, however, ships carrying raw materials have been unable to dock after the port suspended operations in May due to a cyclone – and the congestion has yet to ease. Delays are four to five days, according to one company. To make matters worse, reported Sourcing Journal, an April strike by shipping workers has added to the congestion.
Storms likely to affect operations of ports in Brisbane and NSW
The storms lashing the Queensland and NSW coast as far south as Sydney are likely to see port delays and disruptions. Flooding, and flash flooding, has occurred in many areas so there may be landside logistics delays too.
Vietnam's ports brace for chaos as they await clarification on how to apply VGM rule
Vietnam’s shipping community is in a state of confusion over the SOLAS Verified Gross Mass (VGM) regulations, with widespread disruption to its burgeoning export industries expected from 1 July.
With only a month until the IMO’s new container weighing rules come into effect, a lack of finalised guidelines from the Vietnam Maritime Administration (Vinamarine), coupled with poor shipper awareness, could mean boxes piling up at ports, as well as road congestion caused by a possible “no-VGM, no gate-in” policy by terminal operators.
The managing director of one container terminal in Ho Chi Minh City (HCMC) – the country’s commercial capital and main export gateway – told The Loadstar: “I expect a relatively high degree of disruption of the supply chain in the first few weeks of SOLAS’s implementation.
“This will include congestion from an accumulation of laden export containers in the yard unable to be loaded on vessels due to no VGM,” he added.
According to a source, Vinamarine is working with terminal operators and shipping lines on a “draft circular”, but which is now in its fourth version. He said a major issue – and one that has come as a surprise – was the inclusion of a “weight variance verification” condition. This says terminals must weigh every export container to verify the shipper VGM is accurate – to within 500kg for containers weighing less than 10 tonnes, or within 5% for those weighing more.
The source explained: “If weight variance verification is mandated in the circular, it looks like every laden export container would have to be weighed to obtain the ‘derived weight’ – although it is not certain that every terminal operator in Vietnam is capable of weighing every laden container coming in.”
Indeed, he added that at least one terminal at Cai Mep – the large port complex located south-east of HCMC – has already announced it doesn’t have weighing equipment and that it will levy a US$100 fee on containers arriving via barge without a VGM.
Other terminals, the source said, were also considering “deterrence fees” if export containers are not loaded onto a vessel due to VGM-related issues. This would include scenarios where the VGM has not been communicated to a terminal by a shipping line before the submission cut-off time.
Another area of confusion, according to the source, is because “terminal operators are still deciding whether to allow laden export containers to gate-in without VGM, or to allow gate-in pending receipt of VGM-data through the carriers”.
According to Jan Segers, vice-chairman of the Transportation & Logistics Sector Committee at EuroCham Vietnam, clarification is desperately needed.
“The current situation is changing daily. We’ve been asking for clarifications from Vinamarine and from shipping lines on what will happen from 1 July. If the terminals implement this ‘no-VGM, no gate-in’ rule, then there will be disruption to tradelanes.
“Plus there will be a lot of traffic jams, which could mean containers will be too late for loading. This is the potential risk we are facing.”
Vietnam’s ports currently rank among the fastest-growing in the world. APM Terminals-run Cai Mep International Terminal recently announced that, year on year, it had doubled its first-quarter throughput in 2016, to 277,303 teu. This followed an 80% expansion in container traffic overall last year to 724,768 teu.
APMT said Vietnamese ports had handled 10.6m teu in 2015, representing annual growth rate of 16%, while HCMC and Cai Mep handled 7.2m teu, more than two-thirds of the country’s total.
Transhipment trade at risk from bigger ships and bigger alliances
Transhipment trade is set to come under increasing downward pressure as a consequence of bigger alliances and bigger ships, according to one leading industry analyst.
The impact of the relentless rollout of ultra large containerships on ports has been well documented, as has the complexity of new service rotations driven by new alliance formations, given how each line often has a vested interest in affiliated facilities and terminals, but Drewry senior analyst Neil Davidson says that these factors could also have a negative bearing on the future of transhipment.
In the case of Europe, he highlighted how multi-port calling is still the norm and how all the big ships even on the premier Asia-Europe trade, for example, are serving a number of north European ports and not just calling Rotterdam and transhipping to everywhere else.
“They are calling the UK, Germany and France and some are going even further to the Baltic, which reduces the need for transhipment,” he said.
Moreover, he added that bigger alliances mean there is even less need to tranship as they tend to create more port pair combinations facilitating a greater level of connectivity.
Also furthering the case for more direct services is the low bunker price.
“We have got too many ships and it is a good way of using up ship capacity, by putting in a direct service to somewhere as the fuel is cheap,” said Mr Davidson.
“There is an interesting dynamic developing and at the moment it looks like transhipment might even start heading downwards in the industry.”
But it isn’t all bad news for those in the transhipment business as he also noted that with bigger ships there is added pressure to use hub and spoke transhipment to help fill ships and draw cargo in.
“With the bigger ships you have greater interconnections of deepsea services and more space to do relay transhipment from mainline to mainline,” he said.
Mr Davidson was speaking at the eighth annual UK Ports Conference in London. In the instance of the UK, however, he said that he did not expect any major impact stemming from the latest alliance shake-up and larger ships on services to and from the UK, at least in the short to medium term.
“For the UK it is pretty clear that direct calls by mainline vessels make sense and will continue to make sense,” he said.
“It is a big market in the north European context, a short deviation from the shipping routes and significantly UK ports can accommodate the biggest ships.”
In this instance he referred to how Felixstowe, Southampton, London Gateway and most recently Liverpool, through its new deepsea terminal Liverpool2, have all invested heavily to meet these requirements.
“There is no sign of increased hub and spoke operations from Continental ports to serve the UK, but as an aside feedering from ports to the north and west of the UK from Rotterdam still makes sense and is still effective for those more distant smaller markets.”
World still confused – but Australia looking good
Drewry Maritime Research surveyed 180 registered users of its Container Insight Weekly publication, breaking down into 49 shippers, 31 carriers, 39 freight forwarders and 61 ‘others’ and discovered it was clear many shippers and forwarders still do not know how to comply.
“Better information on compliance requirements and options is starting to be communicated but there is still a lack of standardisation and coordination,” Drewry said. “Complicating matters further the US Coast Guard recently said that existing US laws for providing the gross verified mass of containers were equivalent to the requirements in the amendments to SOLAS, but it’s unclear if one of the Coast Guard’s approved methods breaks the IMO’s standpoint that shippers have responsibility for providing the VGM.”
While awareness of the new rules wasn’t a problem amongst respondents, 45% of shippers said they hadn’t been given sufficient information by their service providers. Some 55% of shippers said that they expect some delays to container shipments and/or cargo rolls as a direct result of the VGM rule implementation on July 1. The ratio of forwarders and ocean carriers expecting delays was even higher.
However, in good news that appears to reflect local bodies’ confidence in Australian and New Zealand mastery of the situation, Oceania had noticeably fewer respondents anticipating delays.
Asia was the region with the highest number of respondents anticipating delays and/or cargo rolls, followed closely by North America, Africa, Latin America and Europe.
The International Air Transport Association (IATA) has notified its member airlines about possible disruptions in the ocean sector from the new SOLAS law that could lead to spikes airfreight volumes, but according to Drewry’s survey results any uplift will be minimal at best.
“Approximately 80% of shipper/ BCO respondents said that they will not shift any volume to the sky, while 17% said that will shift only to a very limited extent i.e. not more than normal volume +20% and just one respondent said that they will to air to a large extent – that is in excess of 20% above normal volume.”
When asked if they would build in safety stocks to counter the supply risks caused by VGM only 17% said yes, implying that while delays are generally expected they are not thought to be sufficient to cause stock shortages.
Samples of comments received as part of the survey show a predictable range of attitudes to the new regulations and their implementation.
“Long-due measure, would have avoided several accidents and a tremendous amount of unnecessary planner/vessel/terminal hours when and every time a weight discrepancy is detected,” one carrier said.
“Horrible rule-making, horrible communication, horrible implementation,” said a shipper. “No communication between carriers and terminals. The tare weights should be managed 100% by the carriers.”
A freight forwarder huffed: “This half-baked rule is thrust upon us by the carriers but they cannot get out of their own way in formulating standard procedure. What a joke to have 160+ countries concoct their own rules of compliance. Tare weights should never have been part of the equation. Shippers should report what they control, which is gross weight of the payload.”
But another said: “Those who don’t comply have solutions; they may not like them but they are there. If they spent as much time and energy finding the solution for themselves as they have in fighting this they wouldn’t have the problem.”
“Some grace period would be recommended,” another respondent suggested. “Detailed regulations are not yet implemented and many companies (shippers, forwarders) do not see a problem so they did not launch any special preparations.”
Drewry concludes that progress is being made, but it is clear that not all shippers will be ready to comply with the new IMO rule.
New biosecurity rules to take effect in June 2016
On June 16, 2016 the new Biosecurity Act 2015 will come into force, and the Department of Agriculture and Water Resources wants you to know what that entails.
The department’s head of biosecurity, Lyn O’Connell, urged importers and those involved in supply chain logistics to make sure they are across the legislation and are aware of any changes that might affect them.
“Time is now running out, and I strongly encourage all interested parties to look into the changes that are being made and to make sure that they are ready,” she said.
“There are serious consequences for non-compliance with our biosecurity laws and importers will be expected to have familiarised themselves with the changes.”
The new Biosecurity Act 2015 replaces the outdated Quarantine Act 1908.
“This [new] legislation replaces ageing laws originally designed to respond to diseases like the bubonic plague, measles and cholera at a time when people and goods only arrived by sea,” Ms O’Connell said.
“Much has changed since then, with vastly improved means of transportation and ever-increasing volumes of trade and passengers, presenting new biosecurity challenges.”
Ms O’Connell said the new legislation would update the 108-year-old Quarantine Act.
“This legislation is modern and flexible and has been designed to provide long-term support to the biosecurity system, regardless of advances in transport or technology,” she said.
“Key stakeholders were given one year to transition to the new arrangements to make sure everyone understands their rights and responsibilities.”
“Australia has strong biosecurity laws to protect us from exotic pests and diseases that could threaten our agriculture export industries as well as our unique environment, native flora and fauna, our tourism industries and lifestyle.”
Vietnam the new global hot-spot as pirates become hi-tech hackers to find high-value cargo
Piracy attacks in South-east Asia now account for 60% of global incidents, with a surge of activity in Vietnam marking it as a new global hotspot.
Using data from the International Maritime Bureau (IMB), a new report by insurance firm Allianz shows global piracy attacks increased for the first time in five years in 2015, albeit by just one incident, up to 246 compared with 245 in 2014.
While attacks in Africa are declining as international naval efforts slow down piracy off the coasts of Nigeria and Somalia, incidents are increasing in South-east Asia, with 55% of the region’s 147 attacks taking place against moving vessels, compared with 37% a year earlier.
“A problem in the region is that the traffic is very dense and different national territorial waters are adjacent to each other, making it very hard to distinguish who has responsibility,” said Captain Jarek Klimczak, Allianz senior marine risk consultant.
The majority of attacks were low-level theft, which the IMB says increases risks to vessels and crew. This was the case in Vietnam, where a surge of robberies on anchored vessels at the port of Vung Tau meant total nationwide incidents leapt from seven to 27.
And Vietnam is growing increasingly wary of regional piracy. According to local news reports, the Vietnam Maritime Administration (Vinamarine) has ordered port authorities across the country to inform shipowners of increasing crew abduction incidents in regional waters.
Vinamarine acted after receiving a report from the Regional Cooperation Agreement on Combating Piracy and Armed Robbery against Ships in Asia (ReCAAP). The report cited three tugboat hijacking incidents in the coastal areas off eastern Sabah, Malaysia, and the southern Philippines.
Meanwhile, the Allianz report also highlights the relatively new phenomenon of ‘cyber-savvy pirates’ and the threat they pose to shipping companies.
Ron Johnson, regional marine manager for Allianz Pacific, cites the growing utilisation of Internet of Things (IOT) cloud-based technologies by the maritime industry as fuelling the “potential for hackers to access shipping company and port records, as well as on-board vessel identification and navigational systems”.
He added: “This leaves the entire shipping system exposed, enabling pirates and terrorists to identify target cargo and obtain information about more vulnerable ships and locations”.
In one recent example of the risk posed by so-called hacker-pirates, US telecoms giant Verizon made global headlines in March by revealing its role in foiling high-seas piracy aided by network intrusion.
Verizon’s security response team helped a major container carrier avoid further cargo losses after it suffered a series of highly targeted attacks, whereby, after boarding a vessel and forcing the crew into hiding, pirates would seek out and ransack specific containers, already aware of the high-value cargo within.
Recounting the incident in its Data Breach Digest report, Verizon said: “They’d board a vessel, locate by barcode specific sought-after crates containing valuables, steal the contents of that crate – and that crate only – and then depart the vessel without further incident. Fast, clean and easy.”
Upon investigation, the Verizon team was able to identify the source of the security breach as a web-based content management system (CMS) the container carrier used to handle bills of lading. After identifying the source of the hack, the servers were shut down to fix the vulnerability and prevent further targeted attack.
Although the risk of loss or damage as a direct result of cybercrime remains low, Allianz says, more needs to be done to educate shipping companies since “generally the risk is not well understood and the consequences can be disastrous.”