Month: October 2019

In Madrid, a partnership between leading Spanish bank Banco Santander and blockchain certification startup Vottun will soon allow the city transport users to pay for their transit using a single unified digital payment system powered by blockchain. Vottun develops interoperable platforms over which blockchain applications can be built and made to interact with distinctly different public or private blockchain networks. 

The idea is to create an application that can be used by Madrid commuters to centrally access and pay for all different modes of public mobility available within the city. The use of blockchain here is justified as it helps bolster the security behind the payment platform through its decentralized ledger technology, with Vottun promising high levels of user data security in the application. 

This is part of an initiative called Madrid in Motion, which was begun by the Municipal Transport Company of Madrid (EMT) in an attempt to digitalize the city’s transit system and bring order to the myriad of transport companies that offer services under the EMT umbrella – including the metro, buses, taxis, e-scooters, bikes, and car rentals. Currently, all these mobility types have their own applications; users have to separately install and register themselves, making processes extremely redundant. 

Unifying the system will not just help make processes more seamless for an average commuter, but will also help the government gather tremendous amounts of data on commuter transit patterns. This can be channelled to create insights on transit corridors that are frequently congested, which can be used by the city planning authorities to improve sections that need added transit options. 

Vottun’s proposal on a unifying transport application won in a startup competition conducted by Madrid in Motion; it was chosen from among 300 such proposals. During its presentation, Vottun allowed attendees to test its product features like facial recognition and biometric payment gateways for EMT buses. 

“The user registration and validation system will be unique in all mobility services in Madrid because of the EMT app. This will facilitate the use of any mobility service to the citizen, and the payment in a simple and transparent way,” said Luis Carbajo, the CEO of Vottun. 

Before Madrid, there have been a few instances where public transport networks are leveraging the potential of blockchain to improve commuter interaction. Argentinian state public transport card SUBE was in the news earlier this year, when it announced a partnership with Bitex, a blockchain financial firm, for introducing the option of paying for services through bitcoin cryptocurrency. 

Though this is not necessarily innovation in itself, it is a decisive move towards greater understanding of the technology and to promote it across different avenues. SUBE cards are used by over seven million people in 37 locations in Argentina, to travel in trains, trams and buses. 

The Brazilian city of Fortaleza has also jumped onto the blockchain bandwagon, announcing that it will allow commuters to pay for bus tickets by bitcoin and other cryptocurrencies alongside conventional card payments. Users of the city transit app can pay through their smartphones through which they will get a QR code that they can scan as they get aboard a vehicle. 

The German police had a field day marshalling people around at the world’s largest beer festival Oktoberfest, mediating in nearly 2,000 altercations at the 16-day event. Held annually in the months of September and October in Munich, Germany, Oktoberfest witnesses 7 million people every year, who consume over 7.5 million litres (~2 million gallons) of beer. 

Though mild road skirmishes have always occurred in the area surrounding Oktoberfest, this year saw the entry of e-scooters that added to the complexity. Throughout the length of the event, e-scooters were stopped en masse by the police as people under the influence drove them recklessly. Of the 414 people who were caught driving intoxicated, 254 e-scooter riders lost their automobile driving licenses on the spot. 

Understanding the impact of e-scooters on such a large-scale event, the city of Munich had imposed several restrictions on the movement of e-scooters in the vicinity of Oktoberfest, setting up large no-ride and no-park zones around the festival grounds. 

“Many see e-scooters as toys and unfortunately too often they’re ridden while drunk. In order to avoid this and to not tempt anyone, we city administrators, police and also rental companies want to keep e-scooters far away from the Wiesn (Oktoberfest),” said Thomas Böhle, Munich city administrator in a statement. 

With this comment, Böhle had hit the bullseye on the primary issue plaguing the e-scooter segment – users looking at these vehicles as part of a harmless mobility system where the ‘fun’ element trumps road safety. 

Munich had legalized the use of e-scooters within city boundaries in June this year and has since then penalized over 400 users for driving drunk (not including the people caught at Oktoberfest). 

Most of the e-scooter usage and their associated accidents happen on weekends and after hours, as people zip ahead at high speed without worrying about oncoming traffic or pedestrians on the pavement. Though the e-scooter segment emerged as an alternative to high-emission personal automobiles, it is a justification that cannot be substantiated today. E-scooter usage points to people using it for fun, rather than as a means of transport that replaces their daily transit medium. 

The German Federal Environment Agency (UBA) studied the impact of e-scooters in reducing vehicle density on the streets, and concluded that there were not enough positive indicators that pointed to reducing carbon emissions. On the contrary, the study suggested that proliferation of e-scooters will only put more vehicles on the road, and will have a negligible impact on displacing existing high-emission automobiles. 

Cities like Paris and London have come down heavily on the e-scooter menace after thousands of such vehicles flocked their streets and overflowed pavements. This September, Paris banned e-scooters from ever riding on the sidewalk, with violators fined €135. In the U.K., e-scooters are technically illegal to ride, as the battery-powered vehicle is classified as a Personal Light Electric Vehicle (PLEV), making it unlawful to ride on pavements and the roads. 

For now, e-scooter company Bird is the only company that is allowed to run scooters in London, as it is available for hire only on its private enclosure in Stratford. All the vehicles are mandated to have license plates, and the riders are required to have insurance, driving licenses, and their helmets on before they take to the road. However, navigating through the myriad of city and national road laws with regard to taxes and licensing is nearly impossible, making all e-scooters on U.K. roads essentially illegal. 

Meanwhile, German politicians are criticizing the government for passing a law that allows the use of e-scooters on German roads, without contemplating the repercussions that followed. 

The Austrian capital Vienna has taken a sensible approach towards e-scooters, by restricting the number of vehicles and also having a check on the number of e-scooter businesses that operate within city boundaries. Companies like Bird have dedicated e-scooter supervisors who manage a fleet of 100 vehicles, making sure there are minimal disruptions to regular traffic. Users are also required to take a picture of where they park their scooters to make sure Bird maintains cognizance of all its vehicles.

Over the last couple of months, major container lines and alliance carriers have been blanking several of their headhauls from Asia to Europe, citing weak peak season demand. Since July 2019, seasonal rates have been consistently lower year-on-year with container prices in China to North Europe lanes moving lower; there was a 21% decline this month compared to October 2018. 

Container lines blank their headhauls because it helps them marginally stabilize the declining container spot rates. However, this would come at the expense of North America, as every vessel withdrawn from the European market will mean a lost backhaul voyage from North America. 

To a neutral observer, the shrinking of maritime capacity between Asia and Europe could be a marketing opportunity for the trans-European railway intermodal system that now boasts a connection to the industrious Chinese East Coast, made possible through Beijing’s One Belt One Road initiative. But unlike the way the U.S. leverages its extensive railroad network to move freight, Europe does no such thing, with its freight rail system lagging behind the U.S. by several decades. 

The reason for this chasm in rail freight growth is because of a fundamental difference in perspective. Europe never measured the effectiveness of its well-engineered railway system by the volume of freight it hauled, but by the number of passengers it could move. 

“As railroads are privatized in the U.S., we have constantly moved towards heavier axle loads over the last four decades. Our standard railroad cars can take 286,000 pounds. Every car has four axles, and thus every axle can roughly handle 71,500 pounds, which is equivalent to 32.5 metric tonnes. But in Europe, a typical axle load is only about 20-23 metric tonnes,” said Jim Blaze, a retired U.S. railroad veteran. 

Compounding problems is the permitted length of every freight train in Europe. For operational purposes, the total allowed length of a freight train in Europe is 700 meters (~2,300 feet) and the maximum length of a train including its locomotive and lengthening can be 750 meters (~2,460 feet). 

This is diminutive compared to the U.S. freight trains that average around 2,000 meters (6,600 feet). Freight train lengths exceeding 6,000 meters (~19,700 feet) can also be frequently sighted in the U.S., which are made possible by adding a few more locomotive units to the cars, either at the end or in between for additional power. 

“The 750-meter maximum train length in Europe is necessary for a system that depends on passenger transport rather than freight. Trains need the ability to brake rapidly when they are moving passengers, and it becomes difficult as the trains lengthen,” said Blaze. 

Another issue is the vertical height of cars. In the U.S., the vertical height limitation has been rewritten several times, with newly built cars now topping 23 feet from the rail. In Europe, the vertical car heights have remained at 15 to 16 feet, roughly 30% lower than the U.S. rail cars. 

“At 15 to 16 feet, European railroads cannot handle double stacks. If you go to a double stack-engineered freight car platform, you get an immediate 35-45% per container mile drop in your shipping costs on the railroad,” said Blaze. “Europe has been stuck with the same freight train size as they had after World War II. Meanwhile, maritime competitors have grown by orders of magnitude over the years.”

European railways had no incentive to take risks to re-engineer and spend billions of euros to increase clearances and rework tunnel heights for double-stacked railcars, because the European railway business model was about moving passengers and not freight – the opposite of how North America dealt with its railroad system. 

That said, Blaze pointed out to how commercial necessity has helped transform a Scandinavian railway line running within Norwegian and Swedish borders to carry around 30 metric tonnes on each axle load, unlike the regular 20 to 23 metric tonnes that is carried in the other parts of Europe. 

“This line runs from the port of Narvik, a Norwegian town north of the Arctic Circle, to the Swedish town of Kiruna, where iron ore is mined. It so happened that in 1998, the Swedish mine owner announced that it was very expensive to move its iron ore from Kiruna to Narvik and that it would be forced to shut down the mine if the cost per tonne mile was not brought down,” said Blaze. 

This set off massive renovations to the railway line, with Sweden strengthening the rail, fortifying the anchors that hold the track down, increasing rail lengths on curves and at crossovers. These improvements helped to make sure the rail cars could carry heavier loads. 

“Increasing the axle loads meant an increase of loads per car by 20%. Though it had to increase the track maintenance budget by roughly 20%, the railway had lower crew costs, lower engine costs and lower equipment costs because it was getting much better utilization of the equipment. This led to a 28-30% net increase in savings for the movement of the iron ore,” said Blaze. 

Going by this instance, it can be gathered that what was done in Scandinavia can be replicated by the German Deutsche Bahn or Swiss Rail. Europe failing to take an interest in bolstering its freight railway system eventually boils down to the lack of incentive. Respective countries run their share of Europe’s railway network and have not allowed the rail sector to be privatized like in North America. 

In essence, it is about time Europe addresses the elephant in the room. For the EU, the equation is simple – increase capital expenditures on its aging railway system and look to take  volume from a maritime market that looks particularly vulnerable today. 

London had its first taste of self-driving cars when autonomously driven Ford Mondeos made their way on the roads surrounding Stratford’s Queen Elizabeth Olympic Park earlier this week, albeit with safety drivers in the driver seats. The pilot test was conducted by U.K. startup Oxbotica and the Driven program, a consortium partially funded by the U.K. government. 

The Driven consortium is a £13.6 million program that was initiated to propel the U.K. to become one of the leading stakeholders in the self-driving segment. The 30-month program has stakeholders that include Transport for London (TfL), Oxford Robotics Institute, Axa XL, Nominet, Telefonica, TRL, RACE, Oxfordshire County Council and Oxbotica. The autonomous vehicle test in Stratford was successful in showing that Oxbotica’s systems were safe to navigate in an urban setting. 

The U.S. and China have been the hotspots of autonomous driving technology, with automakers and cash-rich mobility startups working at perfecting self-driving vehicles across urban environments. Companies like Waymo and Cruise Automation have been the pick of the lot, having completed thousands of miles of autonomous vehicle miles without human intervention and devoid of accidents. 

That said, autonomous driving technology is merely an umbrella term that includes several levels of automation and varying technological approaches to self-driving. For instance, Tesla fundamentally rejects the idea of using LiDAR – a sensor that uses light pulses to define the driving environment – saying it will use artificial intelligence-powered cameras, GPS and maps to better effect. Companies like Waymo, Cruise Automation and Uber swear by LiDAR, and consider it to be an integral part of their automation efforts.  

However, irrespective of the route to automation, a rudimentary need to build autonomous technology is data, which can be gathered both by simulating miles or by getting a car to drive on the road. Oxbotica, with its autonomous Ford Modeos, will now have real-life data to work with in order to perfect its technology. In the trial run, the Mondeos weaved through residential streets and traffic intersections in the Stratford East Village area, without the need for the safety drivers to take control. 

“The car is a bauble on top of the iceberg: underpinning that is a host of other things that need to happen, from cybersecurity to ensure we have constant, secure communication; insurers for product liability; and real-life risk assessment,” said Graeme Smith, program director at Driven. 

Smith’s careful optimism is justified, as the autonomous driving segment cannot hope to skip through regulatory hurdles without convincingly answering questions concerning security, ethics and liability. For instance, bolstering the system firewalls around autonomous driving software is critical, as the vehicle will be subject to frequent hacking attempts. The ethical dilemma surrounding accidents involving autonomous vehicles need adequate scrutiny, based on which regulations must be cemented in place. 

In the context of the economy at-large, autonomous driving technology can eventually end up replacing thousands of driver jobs. Paul Newman, founder and chief technology officer of Oxbotica, believes that though the technology will be replacing drivers, it will create avenues where new jobs will be created. “There is no doubt we’re not going to be sitting behind wheels in the future,” he said. “It is going to be a revolution but not a tragedy; more people will survive [on roads]; these vehicles will share their experiences and be even safer.” 

The driver shortage plaguing Europe’s northern freight markets has now spread southwards.

A new survey by the International Road Transport Union (IRU) has found that 20% of all positions remain unfilled in Spain, a situation the haulage lobbying organization said was causing “profound” logistics difficulties.

“In Spain, the acute shortage looks set to escalate in the coming years, with IRU’s figures showing demand for drivers is set to increase by 18% by 2020,” the IRU said in a statement. “Coupled with recruitment into the industry stalling, this means the driver shortage could reach 30% within one year if not addressed immediately.”

The Spanish shortages are reflected across Europe. The IRU told FreightWaves last month that driver shortages were a “real and growing threat” to the ability of the European logistics sector to meet the needs of shippers.

Polling of IRU members and associated organizations in Europe from October 2018 to January 2019 revealed a driver shortage of 21% across the freight transport sector.

The U.K.’s shortage of truckers is currently growing at a rate of 50 drivers per day, while in Germany the average driver’s age is now over 47, meaning that some 40% of truckers are expected to retire by 2027 when it is estimated there will be a total driver shortfall of around 185,000.

In Norway, trucking companies estimate their demand for drivers will increase by 12% this year. Combined with the 22% vacancy rate identified in 2018, this will increase the country’s shortage to around 35%.

“The situation in Spain is part of a wider trend we are seeing across Europe,” said Esther Visser, IRU’s Manager of Social Affairs. “There are simply not enough drivers to meet demand and the problem is accelerating rapidly as experienced, older professionals leave the industry and are not being replaced in large enough numbers.”

Visser continued, “This is one of the most urgent issues facing the road transport industry, which is a lifeblood of Spanish mobility and the economy. If we do not reverse the tide soon there will be knock-on effects on our capacity to move goods and people around the country, which will impact many millions of people, businesses and communities.”

The lack of women and young people entering the driving profession is a problem across Europe, and Spain is no exception – female drivers make up just 3% of the country’s commercial driver workforce, and young people aged 25 and under constitute just 5%. The average Spanish professional driver is now 46 years old and male.

IRU research shows that 79% of drivers across Europe believe the difficulty of attracting women to the profession is one of the top reasons for the driver shortage. Of those polled, 76% believe that a perception that the industry has poor working conditions is deterring large numbers from applying, while 77% think long periods away from home deter many from entering the profession.

“It is clear that the industry has a serious challenge when it comes to attracting women and young people – these two groups together make up the majority of the Spanish workforce and yet the clear minority within the road transport sector,” said Visser.

“Changing the perception of the industry among these groups should be a top priority if we are to reverse this trend. But doing so will require action from all stakeholders connected to the industry, including governments, local authorities, and social, industry and educational partners.”

To address these challenges in Spain and throughout Europe the IRU has launched a joint initiative with the European Shippers Council to develop common principles aimed at improving the treatment of drivers at delivery sites.

The IRU has also established an expert group to address driver training legislation and its effectiveness, which will report back later this month, while a Women in Transport Network has been set up to promote the sector to women.

FreightWaves articles by Mike

The introduction of new IMO 2020 low-sulfur fuels and blanked sailings will dominate container markets in the fourth quarter, according to one leading analyst.

As reported in FreightWaves, shippers and forwarders have expressed confusion over the timing and transparency of new charges now being introduced by container lines as they phase in low-sulfur fuels — and pass on higher costs to customers — ahead of the Jan. 1 mandatory implementation date set by the International Maritime Organization (IMO).

Shippers are also wary that container lines might hike the fuel component of freight to compensate for bearish spot rates.

The latest monthly report from Maritime Strategies International (MSI) argues that liner charges to customers as they introduce the more expensive low-sulfur fuels will define box shipping markets in the coming months, although MSI is skeptical of claims that expected fuel price increases in January will lead shippers to front-load cargoes.

“As January 2020 looms, there is anecdotal evidence that shippers will bear increased bunker components of freight once the industry switches to cleaner fuels,” said the report. “This is admittedly clearer on the trans-Pacific trade, where the prevalence of annual contract arrangements provides better visibility than on other trade lanes including Asia-Europe, where annual contracts are less extensively used by shippers and forwarders.”

After recent spot rates losses on the main east-west ocean trades, analysts are mostly in agreement that further rate weakness is likely, even though carriers are expected to blank more sailings in the coming weeks. Some capacity also will be withdrawn as carriers rush to fit vessels with scrubbers to avoid paying premiums for low-sulfur fuels.

“In the most recent Shanghai Containerized Freight Index assessment, Asia-North Europe spot rates fell to $593/TEU and Asia-Mediterranean rates to $742/TEU, leaving North Europe rates 19% lower than in 2018 and Mediterranean rates 3% lower,” said MSI. “Assessments by Platts and Freightos also point to a marked weakening in recent weeks.”

CMA CGM has now announced a $200 per TEU cut to its published Asia-North Europe rates from mid-October, with other carriers expected to also offer discounts.

Trans-Pacific spot rates also declined during September after a brief rally in late August. “Rates on both U.S. West Coast and U.S. East Coast trades sit 30-40% lower on an annual basis,” said MSI. “Carriers have responded with additional blanked sailings, with the 2M alliance partners the latest to cut capacity.”

As a result, MSI’s near-term outlook for spot rates on the major Asia-Europe and trans-Pacific trades “remains weak,” with the impact of significant blanked sailings deemed “a key variable in the next several months.”

In November MSI predicts average Asia-Europe spot rates of $700 per TEU, although an early lunar new year could lift rates toward the end of Q4.

On the trans-Pacific trade, the picture is more complex due to the “confusing array of different drivers,” including front-loading, new tariffs, old tariffs, seasonal patterns, inventory holdings and the lunar new year.

“Looking at the bigger picture, our view remains much the same,” said the analyst. “Volume growth at the end of 2019 will be negative and likely significantly so to the U.S. West Coast.

“In 2020 the previous year point of comparison for some products will become less challenging, although products targeted in the most recent tariff increases will be more expensive than one year earlier.

“The trans-Pacific’s troubles are here to stay for now.”

More FreightWaves articles by Mike

Taking its quest to become a global leader in
electro-mobility and software solutions for vehicles, Traton SE has announced investments of €2 billion
by the end of 2025 in electric and autonomous vehicles.

Chief Executive Officer Andreas Renschler made the announcement
on Oct. 2, 2019, at the company’s Innovation Day in Södertälje, Sweden.

“Our goal is to become the leading provider of e-trucks and
e-buses,” Renschler said. “By 2025, we plan to have spent a total of more than
€1 billion (approximately USD$1.096 billion) in electro mobility.”

Traton, which is the truck subsidiary of Volkswagen AG, will
also invest €1 billion in software to digitize vehicle operations.

“We want to move into the digital fast lane and are
continuing to evolve from a hardware supplier to a provider of software and
services,” Renschler said.

Renschler said customer interest in electric power is
growing, even if the infrastructure is lagging at this point.

“If all necessary prerequisites are in place at the right
time, I expect for our group, that in the next 10 to 15 years, every third of
our trucks and buses can have an alternative drivetrain, most of them fully
electric,” Renschler said. “One of the prerequisites is that the infrastructure
for alternative fuels and electricity must be fully available to guarantee
seamless operation.”

Renschler noted that the total cost of ownership for battery-powered
vehicles used in distribution services and city buses “will be comparable with
vehicles powered by fossil fuels.”

Traton is leveraging its three brands – MAN, Scania and Volkswagen
Caminhões e Ônibus, to spread development costs out. A common modular electric
powertrain toolkit will be used to produce the first serial all-electric city
buses put into operation by Scania and MAN, Christian Levin, chief operating
officer, explained.

“It can be individually modified depending on the brand and
area of use. As a result, a maximum number of individual solutions can be produced
with a minimum number of components and costs,” he said.

In Brazil, Volkswagen Caminhões e Ônibus has announced the
formation of an e-consortium at is Resende development and production complex.
The e-consortium will manufacture, set up charging infrastructure, and manage
the lifecycle of battery packs in electric trucks deployed throughout Brazil.

Those trucks will include current 11- and 14-ton electric models
and the new Volkswagen e-Delivery 4-ton model.

“Our team has conceived and built a pioneering technological
configuration and a business model that will enable us to introduce our range
of commercial electric vehicles on the world’s transport market,” Roberto
Cortes, president and CEO of Volkswagen Caminhões e Ônibus, said.

The e-consortium includes seven suppliers that will share in
the responsibilities of building the vehicles, the company said. Partners include
Siemens, which provides the charging infrastructure and equipment, and supplies
electrical energy to the client; CATL and Moura, which are responsible for
distribution, management and maintenance of the battery packs; Bosch, WEG and
Semcon, which will share responsibility for developing and supplying
components. 

That e-consortium will provide primary support for Ambev, a
Brazilian beer and beverage producer that has already placed an order for 1,600
electric trucks.

Traton has invested millions already into its software capabilities.
In 2016, it created the digital brand RIO, which develops digital services for logistics.
There are more than 115,000 trucks connected to its open, cloud-based platform
and the company considers software to be more important in the development of
autonomous vehicles than the vehicles themselves.

Part of that digitalization effort is the continued
development of a common autonomous driving platform. Levin said vehicles have
already been delivered and testing is ongoing.

Scania unveiled a concept vehicle last week, the AXL. The
vehicle has been engaged in testing in the Rio Tinto mine in Australia since
2018. Featuring no driver’s cab, the AXL is monitored by a logistics system
that tells it how it should perform.

“With the Scania AXL concept truck we take a significant
step towards the smart transport systems of the future, where self-driving
vehicles will play a natural part,” Scania’s President and CEO Henrik
Henriksson said. We continue to build and pilot concepts to demonstrate what we
can do with technology that is available today. “ 

Later this year, Scania expects to put into operation an
electric and autonomous bus to transport passengers in Nobina, which is part of
the Stockholm metropolitan area.

MAN is also engaged in autonomous projects. It will
introduce self-driving trucks in the port of Hamburg in a few months. The
trucks will be driven by drivers on the highway, in some sections in highly automated
mode. Once at the port, the driver will exit the vehicle and the truck will
continue to drive autonomously to the Altenwerder container terminal, where it
will be autonomously unloaded before driving back to the driver on its own.

Not all the innovation will fall to electric. Traton said
that “highly efficient diesel drive systems, alternative drives and fuels like
biofuels, ethanol or the gas technologies LNG and CNG as well as hybrid and
plug-in hybrid solutions are playing a major role in efforts to reduce CO2
emissions.”

Renschler concluded his remarks by urging leaders in each
country to create an “incentive program for electric commercial vehicles and a
European master plan for charging infrastructures.”

Shippers and forwarders want more detailed explanations of the charges being levied by container lines as they phase in new low-sulfur bunker fuels ahead of the Jan. 1, 2020, International Maritime Organization deadline.

“It’s very difficult to understand the charges,” Jordi Espin, policy manager for maritime transport at the European Shippers’ Council, said. “There are so many different charges from lines that we need more explanation behind them.

“At the moment shippers are just being served with fees and told they must pay for ‘sustainability.’

“It is important that shipping lines, who are the ones facing this drastic change, invest effort in explaining how all these formulas translate into the real world. This is what we need,” Espin added.

The CEO of a leading Hong Kong-based forwarder told FreightWaves new liner charges were confusing. “We are bewildered,” he said. “It’s almost like they are designed to confuse. And they are totally different for each line.

“How are we supposed to pass these costs on to our customers and explain the amounts when we don’t understand them ourselves?”

Espin said he was concerned some lines could use the transition to low-sulfur fuels as a profit center. “Not all of them, but some of them might,” he told FreightWaves. “We have seen this before with BAFs (Bunker Adjustment Factors) and surcharges which sometimes seem to have been used to compensate for low rates, so it is something we’re watching.

“We also can’t understand why there are charges now before the new rules are in place.”

Even before the attacks on Saudi oil fields drove up fuel prices, analysts estimated that the extra annual fuel bill for container shipping associated with the move to IMO 2020 low-sulfur bunkers would total approximately $10 billion to $15 billion. Given that the container shipping industry registered a total profit of circa $1.5 billion last year, lines are understandably eager to pass on the full costs of the hikes to customers. However, they have taken varied routes to covering the heightened costs.

For example, Taiwan-based Evergreen Line, a member of Ocean Alliance, will from Oct. 1 enforce an array of new low sulfur charges on U.S. shipments. Its Low Sulphur Fuel Charges (LSS and LSS/L) have also been replaced by a Low Sulphur Fuel Compliance Charge (LSFCC), now renamed the IMO Sox Compliance Charge (ISOCC).

The weekly price gap between CS 380 (IFO 380) and the new 0.5% Sulphur Marine Bunker Fuel will be used by Evergreen to establish separate charges for West Coast and East Coast All-Water Services.

Evergreen said it would assess its fuel usage as a percentage of total voyage costs and factor in the imbalance ratio between Transpacific eastbound versus westbound and “other factors affecting fuel consumption,” using an average in “the interest of uniformity and price predictability.”

It will also use an index “based on averaging of carrier costs per container per voyage assuming specific fuel price levels.”

It is how these carrier-assessed costs are formulated and passed on to customers that is causing so much consternation among customers.

“The supply chain is so fragmented from the buyer to the consumer and by trade that a higher level of transparency is needed. Shippers need to know how all these factors that have a bearing on fuel usage are being passed on,” Espin said. “They are all taking very different approaches.”

A representative for Hapag Lloyd told FreightWaves the carrier would start using low sulfur fuel during Q4 and pass on its higher costs to customers via its Marine Fuel Recovery (MFR) mechanism. “The MFR, which will be reviewed quarterly – or monthly if fuel price fluctuations are above USD 45 per ton – takes into consideration various parameters such as the vessel consumption per day, fuel type and price, sea and port days, and carried TEU.”

Maersk will adjust its Bunker Adjustment Factor (BAF) based on the price of low sulfur fuels from Jan. 1 for long-term contracts of more than three months.

“For our spot business and shorter contracts of less than three months we will introduce an Environmental Fuel Fee (EFF), a mechanism to recover the extra costs of the more expensive IMO2020 compliant fuel,” said a spokesman. “On Sept, 11, 2019, we informed our customers about the mechanism, which takes effect on Dec. 1, 2019.

“As with our Bunker Adjustment Factor (BAF) mechanism for long term contracts, the EFF is centered around providing predictability in calculating the price of shipping with Maersk.”

FreightWaves articles by Mike

The World Trade Organization (WTO) cut its 2019 forecast for trade growth in half due to slower global economic growth and ongoing political issues of U.S.-China trade relations and the U.K.’s pending departure from the European Union.

While 2020 is expected to be stronger, the WTO warned that its member nations will have to create a more stable business climate for trade to grow again. 

The Geneva-based group charged with enforcing the rules set out in trade agreements said trade in real goods is expected to rise 1.2% this year, compared to an earlier forecast of 2.6% made in April.

The first half of 2019 saw export and import volumes rise 0.6% from a year earlier, a “substantial slowdown compared to recent years,” the WTO said.

North America remains the standout among regional economies for its trade growth. It had the fastest export growth in the first half of 2019 at 1.4%, while import growth was 1.8%. 

Europe saw smaller growth in exports and imports, rising 0.7% and 0.2% respectively in the first half. Asia’s exports grew 0.7% and imports suffered a 0.4% decline.  

As the fourth quarter could surprise in either direction, 2019 trade growth could fall within a range of outcomes from 0.5% to 1.6% growth, the WTO said, if trade tensions continue to build, or if they start to recede. 

The new trade forecast is based on a downgraded forecast for global gross domestic production (GDP) of 2.3%, down from an earlier forecast 2.6% growth in 2019.

The weaker GDP forecast reflects the regional and cyclical slowdowns across the world. The European Union saw its economy slow down in the second quarter, led largely by weakening industrial production in Germany. China’s 6.2% GDP growth in the second quarter was its slowest in 27 years. The U.S. economy is expected to see 2.1% GDP growth in the third quarter, according to the Atlanta Federal Reserve Bank.

WTO Director-General Roberto Azevedo said the weaker economic and trade outlook “is leading some businesses to delay the productivity-enhancing investments that are essential to raising living standards.” It is also creating a negative feedback loop as “job creation may also be hampered as firms employ fewer workers to produce goods and services for export,” he added. 

“Resolving trade disagreements would allow WTO members to avoid such costs,” Azevedo said. 

The 2020 trade outlook was also trimmed from 3% to 2.7%. The WTO said that the actual outcome could fall anywhere from 1.7% to 3.7%, depending on how the global economy performs next year. The WTO said that the “risks to the forecast are heavily weighted to the downside” due to the potential for further tariffs, changes in monetary and fiscal policies, and the inability of the U.K. to extricate itself from the European Union.

Logistics giant Deutsche Post DHL Group announced its new five-year group strategy where it has set aside €2 billion ($2.178 billion) for investing in the end-to-end digitalization of its logistics operations. Titled “Strategy 2025 – Delivering excellence in a digital world,” the company seeks to hold on to its considerable market share by channelling greater transparency and visibility into its value chain. 

“Deutsche Post DHL Group has never been in better shape. We are convinced that future growth will come from a consistent focus on our profitable core logistics businesses – and digitalization will become the greatest lever. We need not reinvent ourselves, we will digitalize ourselves,” said Frank Appel, CEO of Deutsche Post DHL Group, while presenting the new strategy at Frankfurt, Germany. 

The DHL Group consists of five distinct and diversified logistics portfolios that include Post & Parcel Germany (P&P), Express, Global Forwarding, Freight (DGFF), Supply Chain and eCommerce Solutions. The common denominator of future growth in all these segments is unsurprisingly dependent on the continued expansion of the ecommerce market, which has opened up opportunities in end-to-end logistics operations like first-mile, warehousing, last-mile delivery, and even returns’ logistics. 

The evolution of consumer expectations in the context of expedited delivery has forced companies like DHL to look at digitalization as a necessity rather than as an option. The company understands that if it does not adapt to the changing logistics landscape or fails to recognize the ‘Amazon Effect’ that defines modern-day supply chains, it will be left behind in the rat race that is geared towards making shipping faster than ever. 

The €2 billion allocated for digitalization will be spent over the next five years, with the amount already being included in the company’s planned Opex and Capex spending. DHL hopes to realize at least €1.5 billion in annual run-rate benefits by 2025. That apart, the company has set a financial target of growing its group earnings before interest and taxes (EBIT) to at least €5.3 billion by 2022. 

Though digitalization as a strategy is now officially a part of DHL Group’s five-year plan, the logistics major had consistently shown interest in adapting to technological disruption over the last few years. 

In the logistics landscape, the threat of Amazon looms large. Amazon has made its intentions clear on expanding its services from the current fulfilment centers it operates to the last-mile delivery segment. This would pose a direct competitive threat to incumbent logistics forwarders like DHL, which will have to digitalize and automate large swathes of its value chain to continue staying relevant. 

Warehouse automation through floor robots is a part of the wider modernization drive within DHL, as the company looks to integrate new technologies within its workflow and also offer employees targeted advanced training to bring them up to speed. 

“Moving forward, we will bundle our technological capabilities as a Group in global Centers of Excellence. Here we will centrally develop key technologies like Internet of Things, or IoT, and then provide them to our divisions. This way, we can leverage the strength of our Group to push forward our digitalization,” said Appel.