En route to a new order

Since the Covid-19 pandemic, everything in the transport, logistics and shipping sectors has been on the move, both literally and figuratively. The significant supply chain bottlenecks during this period continue to have an impact, for example. Indeed, the realisation that some dependencies pose risks, that global trade must become more resilient, that functioning supply chains are vital and that sufficient capacity on ships and in ports is essential for this.

In reaction, the container liner shipping companies are expanding their fleets at record speeds. According to international shipping organisation Bimco, 350 new container ships with a total capacity of around 2.2 million TEU were delivered in 2023. This significantly exceeded the previous record of 1.7 million TEU set in 2015. It does not end there. This year, 478 box carriers with a capacity of 3.1 million TEU are expected to enter the market , which is a 41 per cent more than last year.

But what does the increase in large container ships associated with the boom in new builds mean for the ports? “The impact of larger ships and larger call sizes on container terminal operations are considerable,” explained Aad Scholten, Managing Director of the North Sea Terminal Bremerhaven. “In my experience, larger ships bring economies of scale for shipping companies, but not at all for terminal operators.”

Normally, a vessel calls at the terminal once a week. “If this weekly volume arrives on fewer larger ships with correspondingly more containers, this will have an impact on how work at the terminal is distributed,” Scholten added. The result is more peaks and troughs, making it harder to organise operations efficiently. Furthermore, the fact that larger ships generally transport more containers per call is also challenging. “This may require investment in larger container gantry cranes and additional yard capacity,” the managing director emphasised. In addition, larger ships require longer lay times and take up more mooring space at the port, which has an impact on berth capacity availability.

“Only by cooperating with other participants in the container supply chain can terminal operators deliver the right container to the right place at the right time throughout the entire process and, in doing so, optimise their operations sustainably,” he summarised. Container liner shipping companies Hapag-Lloyd and Maersk are also joining forces with a new partner, under the name Gemini Cooperation, to create a flexible and interconnected service network starting February 2025.

On 23 February, the German Bundestag decided to deploy the frigate “Hessen” as part of the EU’s “EUNAVFOR Aspides” operation. The ship’s deployment with German military involvement makes an important contribution to protecting vessels in the southern Red Sea and Bab al-Mandab area from both missile and drone attacks, as well as from piracy attempts using helicopters and boats.

And how well is this going down? According to the Bremen Freight Forwarders’ Association (VBSp), this is a purely commercial decision. The markets could even benefit from the alliance if the two shipping companies succeed in boosting the punctuality rate of their services to a new level. Also positive is the fact that Hapag-Lloyd still primarily considers itself a carrier and has no ambitions to operate in integrated logistics.

From Bremen’s perspective, the fact that container terminals in Bremerhaven and Wilhelmshaven will gain additional handling volumes is particularly welcome. “This should be a further incentive for politicians and local authorities to proceed with upgrading the quays and deepening the Outer Weser quickly,” emphasised Thorsten Dornia, VBSp Executive Chairman.

The situation regarding the order books in project and multipurpose heavy-lift shipping is completely different. “There’s no substantial new build programme that would lead to major fleet growth at the moment,” reported Knut Voigt, Branch Manager at BBC Chartering in Bremen. This is despite the fact that, according to UK consultancy firm Drewry, 65 per cent of multipurpose vessels worldwide are 15 or more years old. BBC Chartering and Briese Schifffahrt are therefore currently investing in new tonnage that will gradually replace these older entities.

However, both container liner shipping companies and the multipurpose heavy-lift shipping industry are also having to cope with terrorist attacks by the Houthi rebels in the Red Sea. Indeed, around ten per cent of all global trade usually passes through here, and almost a third of all containers pass through the Bab al-Mandab Strait, which connects the Red Sea with the Gulf of Aden.

Detours, higher container demand and more emissions

But things have changed. Hapag-Lloyd is not the only shipping company that has diverted its ships since 21 December. “Nine out of ten container ships that previously travelled through the Red Sea and the Suez Canal on the trade routes between the Far East and the Mediterranean, Northern Europe and the US East Coast are rerouting via the Cape of Good Hope,” reported Peter Sand, Chief Analyst at Xeneta, a market research company.

According to the “Kiel Trade Indicator”, over 80 per cent fewer containers passed through here in January than would actually have been expected. This also impacts ports such as Hamburg and Bremerhaven, where the number of incoming ships fell by 25 per cent. Experts from the consultancy and analysis firm Sea-Intelligence report that the required transport capacity in TEU miles between the Far East and Europe has also increased by around 35 per cent. Analysts calculated a global increase of 16 per cent in mid-February.

Emissions are also rising. The United Nations Conference on Trade and Development (UNCTAD) estimates that the extra fuel consumption due to the greater distances and higher speeds travelled could lead to an increase in greenhouse gas emissions of up to 70 per cent on a round trip from Singapore to Rotterdam. To put this in context, the ships travel at an average speed of around one knot, but in some cases up to three or four knots faster.

It takes around 10-20 days longer for deliveries to reach northern Europe and the Mediterranean. “The supply chains have been severely disrupted and are still being so,” added Sand. “There’s currently no end in sight; being shot at is still the order of the day”, he continued. “However, all other attempts to board and hijack have been rebuffed so far.” The multinational security initiative Operation Prosperity Guardian has played its part in this since late December.

“Right now, we can assume that vessels will have to be routed around the Cape of Good Hope in the coming months, too,” stated VBSp chairman Dornia. “There’ll be a new regularity, especially as many shipping companies, including Hapag-Lloyd, are maintaining their schedule density with more ships.” The Hamburg-based company has 14 to 15 container ships travelling between Asia and Europe instead of the usual twelve, and has also purchased 125,000 TEU of additional boxes.
According to Dornia, industry and trade will ultimately adjust to the longer journey times and plan their orders correspondingly. “The result is significantly higher freight rates for container transport and higher costs of capital tied up,” he stated. “Industry and trade will pass these on to the market before long.”

Plus: “The ensuing delays are weighing on German foreign trade after an already weak 2023,” said Melanie Vogelbach, Head of International Economic Policy and Foreign Trade Law at The German Chamber of Commerce and Industry (DIHK). “Even if companies’ supply chains have proved resilient so far,” she added, “the delayed imports and exports alongside the increased freight rates are significant and could have an adverse impact in the coming weeks. After all, global freight capacities and alternatives to container shipping are limited.”

Besides the crisis in the Red Sea and the wars in Ukraine and Israel, geopolitical uncertainties in relation to China also remain an issue. Tensions between China and Taiwan and in the South China Sea are escalating. A conflict in these maritime regions would have far-reaching consequences, as roughly half of global maritime trade passes through the Taiwan Strait alone. Although the USA is becoming an increasingly important trading partner for Germany, China remains in first place. Around 500 companies in Bremen regularly trade with China, and around 200 even have their own subsidiary, branch or production facility there.

The “BYD Explorer No. 1” was the first Chinese RoRo carrier to dock at the BLG AutoTerminal in Bremerhaven on 26 February.

Changing supplier relationships and warehousing concepts post-Covid

“Many areas of international trade aren’t running smoothly at the moment,” explained Volkmar Herr, Managing Director and Head of the International Division at the Bremen Chamber of Commerce. “Foreign trade turnover with many target countries is largely stagnating or declining; some countries, including China, are even experiencing significant downturns.” Only for the USA is the picture more positive.

“In my opinion, the predominantly lukewarm situation isn’t primarily due to the looming geopolitical conflicts in the US-EU-China triangle,” he pointed out. “It seems that the negative impact on global trade can be attributed to the aftereffects of the pandemic, the change in interest rates and poor economic policy in China and Europe, especially in Germany.” Then there are distortions in energy costs caused by the Russia-Ukraine war and energy policies in Germany that are not sufficiently open to advances in technology.

The potential consequences of US-EU-China geopolitics on Bremen’s economy is difficult to quantify in reliable figures. “However, we’ve heard in many discussions with those affected that companies are now looking at the emerging risks much more closely,” he added. “They’re trying to diversify their supplier relationships, change their warehousing, adapt their corporate structures to be better prepared for shocks, invest in other third countries and often have the ‘China plus 1’ mindset.” It is noticeable that companies operating abroad are also looking at new third countries for their investment plans. Recent surveys by DIHK also showed this.

China sales opportunities and caution – a difficult balance

Despite all these realignments in supply relationships, we must remember that China is the world’s second largest domestic market. “Due to the sales opportunities there and the proximity to customers, German and European companies are investing in China to remain globally competitive. Plus, innovations pay off more quickly if you can use economies of scale for new products and services, which simply result from the size of the Chinese market,” Volkmar Herr added. “Without well calculated innovations, our companies will fall behind the competition.”

Moreover, there are currently no reliable alternative suppliers outside of China for many products manufactured there, meaning that the Chinese market cannot simply be ignored. Management can see the risks, though. “Business that can still be conducted well, over a manageable period of time, with the associated risk is still taking place. This can also lead to sales growth, but we’re more cautious,” he explained.

The significance of the Chinese economy for automotive logistics is evident in several ways. “Chinese vehicle manufacturers are very interested in the European market. In 2023, we handled 10,000 Chinese cars at the AutoTerminal Bremerhaven – and this number is rising,” reported Frank Dreeke, Chairman of the BLG Logistics Group. “With the arrival of the ‘BYD Explorer No. 1’ in Bremerhaven, the first ship chartered by a Chinese manufacturer has now moored with us. We’re delighted by it. In mooring here, automobile manufacturer BYD is emphasising the importance of our location as an international hub for automotive logistics. We’re very optimistic that we’ll be working for and with the major Chinese OEMs in Bremerhaven during the course of this year.”

Cuxport has also observed the automotive market, particularly in Germany and Europe, increasingly shift from being an export market to an import one. “As a terminal operator, we at Cuxport added an additional eleven hectares of space to our terminal areas to the rear of the port in August 2023 to handle these increased import flows” reported Oliver Fuhljahn, Head of Business Development for Automobile Logistics at Cuxport. “These extra parking spaces will need to be expanded in the coming years, for example through the possible construction of multi-storey car parks.”

Nevertheless, the increased import of new vehicles from markets such as China is leading to a further space shortage in Europe’s already well used terminal landscape. The length of time vehicles spend at the terminals is also significantly longer today than for regular transport because logistical hinterland structures are still under development.
“In Cuxhaven, we’re particularly in favour of developing berths 5 to 7,” added Fuhljahn. “They’re intended to be used for handling cargo flows associated with transport in the renewable energy sector, for example for the construction of onshore and offshore wind farms. This could balance out the capacity of the entire port area.”

Likewise, Mosolf is following the boom in electric vehicles in the Chinese automotive industry with great interest. “By founding Mosolf Port Logistics & Services GmbH at the beginning of the year, the Mosolf Group has focussed on expanding its port operations, particularly with regard to the challenges and opportunities arising from the boom in the Chinese automotive industry,” reported Kai Wenhold, General Manager Port Logistics at Mosolf Port Logistics & Services. “Developments in Asia not only harbour challenges, there are also opportunities for growth and cooperation.” (cb)