Take, for instance, CBP’s enforcement of the Uyghur Forced Labor Prevention Act (UFLPA), established to root out forced labor from the supply chain. CBP requires importers to prove that their goods are free from forced labor before releasing them. For companies lacking full visibility across their supply chain—including sourcing information from Tier 1 and Tier 2 suppliers and their suppliers—this CBP enforcement tactic can be extremely costly. And without key stakeholders within the organization working together to build a holistic compliance strategy, importers are facing an uphill battle.

Navigating murky waters

As enforcement becomes harsher and penalties more severe, ensuring compliance with trade regulations is also becoming trickier for importers. Government stakeholders and policymakers today are significantly less prescriptive in how they identify third parties that are illegal or ill-advised to do business with—and this creates a serious visibility problem for companies.

The U.S. government, for example, publishes a list of Chinese entities involved with forced labor in the Uyghur region but admits the list is not exhaustive. As a result, organizations must conduct their own due diligence to prove to CBP that their goods comply with UFLPA regulations. The bottom line is that simply screening third parties against published government lists is no longer adequate. 

A collaborative model 

As policymakers become markedly less prescriptive, organizations are shackled with the internal operational burden of managing increasingly complex due diligence requirements. Indeed, the rising pressure to mitigate “three-dimensional” risk—regulatory, reputational, and resiliency (e.g., is this supplier facing political instability or climate change challenges that might impact their ability to be a long-term partner?)—is driving a new paradigm of trade compliance that promotes collaboration and the dismantling of departmental silos to build a cohesive risk mitigation strategy.

Due diligence is no longer solely the domain of the compliance group within an organization. Moving forward, companies will need to think collectively and holistically about compliance, working collaboratively across multiple operational areas—legal, procurement, trade compliance, finance, information technology, logistics and supply chain, etc.—to address three-dimensional risk. 

Building the collaborative framework 

How does an organization facilitate internal collaboration to build a compliance program that mitigates regulatory, reputational, and resiliency risk? The first step is to identify the individuals and stakeholder groups within the organization that have the capacity, capabilities, and necessary perspectives to make a meaningful contribution to the compliance discussion.

Executive sponsorship is vital for establishing a common language, lens, and framework to help break down discipline silos and facilitate productive collaboration. By appointing an executive leader, such as the Chief Ethics Officer or Chief Compliance Officer, to chair the internal governance conversations and take ownership of cross-functional collaboration efforts, organizations can build a holistic compliance program capable of meeting complex regulatory demands and reducing compliance risk.

In addition to aligned internal governance, exploring relationships with established third party partners (e.g., freight forwarders, customs brokers, any intermediaries that help enable the supply chain) and technology providers (e.g., contract management, enterprise resource planning, compliance management providers) can yield unexplored collaborative opportunities to address compliance challenges. 

Compliance in the spotlight

Adopting a collaborative approach to trade compliance helps organizations stay ahead of the game, gaining a competitive advantage as the trend towards supply chain transparency intensifies and environment, social, and corporate governance (ESG) becomes a valuable competitive differentiator.  

Notably, the U.S. Securities and Exchange Commission (SEC) has made significant motions towards codifying sustainability directives, with its Climate and ESG Task Force already levying numerous enforcement actions for ESG-related misconduct. In parallel, the European Commission issued the Corporate Sustainability Reporting Directive (CSRD) and recently adopted the European Sustainability Reporting Standards (ESRS), impacting many U.S.-based companies. 

ESRS puts companies under the regulatory microscope, requiring annual disclosure of the impact of companies’ activities on people and the environment, including details of what the organization is doing to address issues like human trafficking, forced labor, and sustainability. For the first wave of organizations affected, sustainability reports will be required as soon as fiscal year 2024.

Taking the proactive path 

With the blurring of regulatory and reputational risk, forward-thinking companies are getting out in front of the transparency and sustainability movement—before disclosure becomes a legal requirement. Organizations are driving a stake in the ground, both internally and externally, with statements from executive and governance leaders that clearly demonstrate a commitment to rooting out any forced labor risk and establishing a transparent and sustainable supply chain. 

Whether this commitment takes the form of featuring compliance outcomes in the annual report or making compliance a reported business metric, for example, companies are being proactive in pledging to set specific goals and to be transparent with consumers and internal staff about the work they’re doing and the resources they’re allocating to effect change.  

A collaborative compliance framework enables an organization to provide supply chain information that investors, the public, and regulatory bodies demand. For instance, did the strategic sourcing group change its standard operating procedures to bring a heightened level of due diligence into sourcing activities? What changes did the logistics and supply chain group implement with respect to how the organization thinks about moving goods from point A to point B? Did the legal and regulatory affairs group change the way it works with stakeholders internally to start bringing more transparency and accountability to the global supply chain?

It is in every organization’s best interest to embrace this paradigm shift in trade compliance and start building the cultural change towards transparency within the organization. By adopting a collaborative approach to trade compliance now, companies will be prepared when the law compels them to disclose their compliance policies and actions.  

Creating value moving forward

With a sustainable commitment at the governance level to transparency and internal cooperation, plus the appropriate level of executive sponsorship, organizations can foster productive collaboration between stakeholders and hold people accountable to executing the agreed upon course of action. This framework is the key to pivoting trade compliance from what has been historically viewed as a cost center to a strategic value creator within the organization. As trade compliance is redefined across the globe, savvy organizations can reap the rewards of enhanced internal and external visibility, while mitigating regulatory, reputational, and resiliency risk moving forward.

The post Global Trends Driving a Paradigm Shift in Trade Compliance appeared first on Global Trade Magazine.

The Houthi attacks continue unabated. In the past week, we witnessed the most intricate series of attacks to date. Fortunately, the military presence in the region, led by the Americans and the United Kingdom, has proven effective in preventing the missiles and drones from reaching their intended targets. Noted Christian Roeloffs, CEO of Container xChange. 

“This is a nightmare situation for shippers and exporters as freight rates, container prices and insurance costs have escalated. The impact has been significantly deterrent for container vessels since last month, 70-80% of container traffic has been rerouted, especially the larger carriers.” Roeloffs added.

Pre and Post-Chinese New Year Implications

“As Chinese New Year approaches amid ongoing disruptions in the Red Sea, we anticipate a tightening of container availability and vessel space in the pre-Chinese New Year phase. The rerouting via the Cape of Good Hope adds complexity to the situation. We expect freight rates to remain elevated, and supply chain managers will need to navigate ongoing schedule disruptions.

Looking beyond Chinese New Year, we project blank sailings and capacity reduction by carriers. The industry is witnessing a focused effort on resetting networks, leading to tightening of container availability and vessel space. While high freight rates and increased costs pose midterm challenges, our analysis indicates that these disruptions are not likely to be long-term. Rate reductions are anticipated on the horizon due to the structural overcapacity resulting from a severe market imbalance.” – Christian Roeloffs, CEO of Container xChange

Global Impact: European Delays and Varied Effects Across the East

The Port of Eilat, Israel’s toehold on the Red Sea, has seen an 85% drop in shipping activity, its chief executive told Reuters last month. 

The impact of disruptions in the Red Sea is reverberating in Europe, causing delays in shipments. Nevertheless, the persistent supply-demand imbalance has provided a cushion to the shockwaves so far and the rates have not skyrocketed yet to the post COVID, pent up demand levels. 

“The impact has been distributed across the Far East. The container prices are escalating at a staggering rate, rising by 750 USD in less than two weeks.” Informed a customer from China. 

The freight rates, for instance, from China to Europe are up by 282% from $1243 as on 1st December 2024 to $4757 in the week of 12 January 2023 (Source: Freightos).  

Regional Insights: India’s Uncertainty and China’s Market Dynamics

“There is a lot of uncertainty and lack of demand ex-India right now. The effect of red sea is still to be determined in more tangible terms in the Indian market.” An exporter of containerised freight from India told Container xChange. 

Another customer of Container xChange, a containerised freight exporter from India said, “Ocean freight costs across the ISC region is increasing drastically. Also, there is enough supply of containers in the region and there is no shortage of SOCs (Shippers owned containers) observed so far due to the Red Sea situation in this region. In the coming days, equipment shortages from main liners will start to reflect in market. All the big liners like the CMA CGM, MSC, Maersk and Hapag Lloyd have suspended operations through the Red Sea and hence, this will impact the SOC market positively. The pickup charges for shipper owned containers will start to increase in the coming weeks.”

While the effects in India have not yet prominently surfaced, the impact of the Red Sea situation is rather glaring in China. 

“The current situation in the container industry reflects a highly competitive and rapidly evolving market. Container factories are operating at full capacity until March, with a surge in demand indicating the intensity of the current situation. The preference for brand new units highlights the market’s anticipation of a prolonged scenario. The heightened demand has led to increased costs across leasing and trading, as suppliers seek quick returns by selling out their units. This has a cascading effect, with leasing suppliers adjusting prices due to rising trading costs, resulting in an overall inflation of prices.”

“The scarcity of units, particularly in the China to Russia and Europe routes, has intensified, leading to exorbitant prices. For instance, some suppliers are quoting $1600 USD for Ningbo to Moscow and over $1300 USD for China to Poland. While the US market has felt the impact, it’s not as pronounced.”

“Intriguingly, entities focused on trading and supplying, such as local depots and trading companies, are strategically limiting sales quantities to 10 units per buyer. This approach stems from the belief that there is room for further price increases. Additionally, these depots face challenges in renewing their stock, as they are unable to obtain CW units from shipping lines. Consequently, stock levels are constrained.”

“The current landscape has also given rise to opportunistic sellers aiming to capitalize on the situation. Notably, sellers are prioritizing profits over traditional cost calculations, leading to uniform pricing in different locations. For instance, 40HC cargo-worthy unit prices remain same in Shanghai and Ningbo, deviating from the norm where Ningbo typically commands a higher price due to lower unit releases by shipping lines. Sellers are presently driven more by profit considerations than a comprehensive cost-benefit analysis, to benefit from the disruption.” Added the customer from China. 

Market Sentiment Shift: Container Price Sentiment Index (xCPSI) Analysis 

The Container Price Sentiment Index (xCPSI) serves as a valuable metric for assessing the prevailing market sentiments among supply chain professionals on the anticipated trajectory of container prices in the upcoming weeks. In the first quarter of 2023, the index values were in the range of -6 to -11, indicating a prevailing sentiment that the majority expected a decline in container prices during that period.

However, the landscape has witnessed a remarkable shift if compared on a year on year, month on month basis. As of January, the xCPSI values have surged to historic highs, ranging between 67-71. This substantial increase signifies a complete reversal in sentiment, with the majority of supply chain professionals now anticipating a notable upswing in container prices.

The scale values were fluctuating within the moderate range of 25-40 in the month of December, on a 100-point scale. 

This significant escalation in market expectations regarding an imminent increase in container prices is a clear indicator of the industry’s perception of how the Red Sea crisis is poised to impact container pricing dynamics in the foreseeable future. The heightened values on the xCPSI underscore a shared anticipation among supply chain professionals that the unfolding events in the Red Sea will likely exert upward pressure on container prices in the coming weeks.

 Industry’s Way Forward: Overcapacity, Ever Given Comparison, and Potential Challenges

“The freight rates are tripled since roughly a month ago, and the container prices are also expected to rise further in the short to midterm. The anticipated impact is significant.” Added Roeloffs. 

“However, it’s crucial to remember that our supply chains currently hold a surplus capacity of over 6 million TEUs, accumulated over the last two years due to a demand deficit. This excess capacity acts as a vital cushion to absorb potential shockwaves in the supply chain.”

“The degree of impact hinges on the duration of the Red Sea crisis. Should it persist for an extended period, and the excess capacity continues to be absorbed, we could potentially face serious challenges. Drawing a comparison to the Ever Given situation, where disruption occurred during a period of extreme difficulty in securing capacity and historic peak demand, rates skyrocketed to 10 times pre-pandemic levels. While we aren’t currently at those historic highs, the recent rate surge is noticeable when viewed in the short term.” 

The ongoing attacks by Houthi rebels, utilizing advanced weaponry is disrupting vital shipping routes, compelling shipping companies to reassess their operational strategies. The increased risk of hijackings and attacks not only endangers the safety of vessels and their crews but also triggers a domino effect on trade, leading to rerouting, heightened insurance costs, and delays.

The post Red Sea Attacks Impact Market Sentiment of Shippers and Exporters in Asia appeared first on Global Trade Magazine.

The analysis of purchase orders and invoices on Tradeshift’s platform shows a remarkable upswing in ordering activity during Q4. Order volumes grew 5 points above the expected range, marking a significant acceleration after tracking below expected levels for the past nine quarters.

In the United States, total transaction volumes stabilized at 3 points below the baseline in Q4, with a noteworthy increase in orders, rising 6 points above the expected range. This surge in orders represents the most substantial acceleration in two years.

Transaction volumes across the Eurozone, which had fallen to 9 points below the anticipated level in the previous quarter, rose to 4 points below the expected level in Q3. Order volumes across the region tracked 3 points above the baseline in Q4. However, UK trade activity remained low compared to other markets, with total transactions 5 points below the expected level, while order volumes grew 1 point above the expected range in Q4.

Tradeshift CEO James Stirk notes that ordering patterns provide valuable insights into businesses’ perceptions of demand signals for the next six months. The data suggests that if order volumes continue to rise in Q1, various sectors, such as transport and logistics, may experience an increase in activity.

Despite the rise in orders, demand for freight capacity remained 6 points below the baseline in Q4, indicating that the overall pattern of decline observed in the past eighteen months has not yet been significantly altered. Transactions across manufacturing remained consistent with the previous quarter, ending the year 6 points below the anticipated level.

While China saw modest signs of improvement from a mid-year slump, trade activity remained in contraction territory. Transaction volumes across local supply chains in China grew at 5 points below the baseline in Q4, compared to a 6-point deficit in the previous quarter.

Stirk emphasizes that the prolonged slowdown in orders requires substantial recovery before demand normalizes, and while sentiment among businesses is improving, the outlook for 2024 remains uncertain.

The post Global Trade Sees Unexpected Surge in Q4 Orders, Signaling Potential Recovery appeared first on Global Trade Magazine.

Amidst ongoing geopolitical conflict, labor disputes, and shifting supply trends, global trade leaders are bracing for a new year likely to bring new challenges. However, for leaders who have taken proactive action and worked to fortify their supply chains, there is hope they can play their part in a global trade rebound in the coming year.

To capitalize, supply chain leaders should be watchful of three trends that will impact their business, the global trade environment, and the world economy for the foreseeable future.

Ongoing threats to the global trade landscape.

The COVID-19 pandemic illuminated the importance of planning and diversification in supply chains, lessons that have been reinforced over the last several years. While backlogs and delays related to the pandemic have ended, ongoing global conflict is creating a new cascade of delays. Namely, the conflict in the Red Sea which is creating complexities around crucial shipping lanes which will impact capacity globally. Additionally, the Russia-Ukraine war continues to be top of mind for many shippers in and around Europe.  

Beyond global conflict, unpredictability in weather patterns and the erratic nature of the global environment remains a common concern. The current crisis in the Panama Canal – where historic drought is triggering delays in a part of the world where 5% of global sea trade and over 40% of U.S. container traffic passes through – is a stark reminder of the volatility of the global supply chain. With the crisis expected to last well into 2024, supply chain leaders need to ensure they have visibility into their supply chain and a plan that can keep them adaptable and resilient in the face of changing circumstances. 

A continued expansion of nearshoring activity.

Nearshoring has become a hot topic in the global economic landscape, and this trend doesn’t appear to be slowing anytime soon. Instead, nearshoring activity is ramping up, with Mexico alone seeing $29 billion of foreign direct investment in the first half of 2023, an increase of 5.6% from the year prior. But Mexico is one of many countries likely to see continued foreign investment. India and Southeast Asia are becoming hotbeds for business and economic growth.

Aside from a shift in foreign investment hubs, new industries aim to take advantage in 2024. The automotive industry and parts suppliers have been the main power players in the nearshoring boom up to this point, particularly among American and Asian companies. Still, other industries are strengthening their diversification through nearshoring activity. The healthcare and technology industries, namely electronic equipment and accessories, are expected to increase nearshoring activity this year. 

For leaders looking to take advantage, it’s essential to consider many infrastructure and procurement requirements that must be weighed before investing in Mexico or another region. Fortunately, there are resources from those who have been shipping to/from these regions for decades and know the nuances and challenges that shippers need to be aware of. We’ve already assisted many shippers in these endeavors and developing a cross-border strategy that mitigates the risks of relocating their supply chain.

Increased business focus on sustainability.

Sustainability initiatives are now business priorities for many global companies. Increased consumer preference for sustainability practices coupled with new regional regulations and stricter ESG requirements from the European Union mean that all global leaders need to have, or at the very least be thinking through, a sustainability strategy. 

Leaders must be aware of the new and pending regulations, most notably the EU’s Carbon Border Adjustment Mechanism (CBAM) law, which requires that all EU importers report carbon emissions related to the production of certain products. Additionally, as of January 1, 2024, carriers shipping to, from, or within the European Economic Area (EEA) are subject to the EU’s new Emission Trading System (ETS) regulations which expanded to include maritime shipping. 

As more international shippers look for ways to address their own sustainability targets, logistics partners are expanding their capabilities to help. Tools like the Emissions IQ can allow businesses to understand their carbon footprint better and identify reduction areas. Digital tools can also help shippers build a long-term plan by developing key performance indicators and benchmarks that will keep the supply chain moving wherever they are in their sustainability journey. 

The global logistics landscape is constantly changing, and while we don’t know everything that lies ahead in 2024, leaders should understand how these trends impact their business. Doing so will keep the supply chain agile regardless of whichever way the winds of the global economy blow. 

The post 2024 Outlook: Navigating Challenges and Seizing Opportunities  appeared first on Global Trade Magazine.

Container xChange, an online container logistics platform for container trading and container leasing, issues a critical advisory as the Red Sea crisis deepens, impacting the landscape of global maritime trade.

Recent attacks by Houthi rebels have persisted on the Red Sea, with the most substantial assault launched on January 9, 2024, indicating a continued threat to maritime traffic in the Red Sea. 

Customers of the Container xChange platform affirm that the shipping lines have raised their slot prices significantly. A Container xChange customer based and operating in Singapore shared on the Red Sea matter that, “Average rate on China-Europe quoted this week is about US$5400/40’HC, up from US$1,500 (3X) just the week before.” 

Container trading spot rates shoot up by 48% in Latin America East in the last 30 days (as on 11 January 2024)

Latin America (East and West), Japan & Korea and Europe Mediterranean witness highest increase in Container trading spot rates over the last 30 days.

“We foresee that the rate hikes will flatten out in the mid to long term. We have enough capacity which can be soaked up in longer transit times and yet not cause permanent capacity crunch.” said Roeloffs. 

Demand for Containers shoot up

There is a growing demand for containers in Asia as shippers and forwarders foresee cargo demand in the coming weeks, to fulfil orders ahead of the Chinese New Year. A container manufacturer from China shared with Container xChange, “Shipping companies are demanding more containers now as they avoid red sea. Therefore, Shipping companies and leasing companies have placed more than 750,000 TEU ISO container orders out of China in the last two months.”

Meanwhile, container trading spot rates are increasing at a staggering rate as observed on the Container xChange platform. Spot rates in Shanghai, Hamburg, Boston, in the illustrations below, indicate examples of the steep demand increase that is currently being witnessed for boxes in these hotspots. 

As an immediate reaction to the disruption, these average container spot rates and prices are expected to rise, but then plateau after reaching a high. 

The container price sentiment Index (xCPSI), a sentiment tool by Container xChange to measure market sentiment for container price development, reached an all-time high as container price anticipation peaks. This indicates that the supply chain professionals are expecting these prices to further shoot up in the coming weeks significantly. 

Chart 5: Container Price Sentiment Index xCPSI 2023-24, xCPSI measures container price sentiment index concurrently amongst the supply chain professionals

The index value peaked at 71 in January from an average of 27 in December, mirroring the significant impact Red Sea attacks have had on prices so far. 

The Ultimate Cost Burden 

The two visible and obvious cost components that are leading to higher transport costs resulting from rerouting to Cape of Good hope are – insurance and fuel costs. 

Insurance for cargo transiting Red Sea has become challenging. On top of it, insurance costs have surged in anticipation of the difficulties and challenges that do not seem to taper off.

Another element is the fuel cost which has increased roughly by 20-23% by way of traveling through the Cape of Good Hope, as compared to the traditional Suez Canal route. 

“Ultimately, the final consumer pays the freight cost. In the short term, usually there is some intermediary that pays the bills, because they have promised at some certain price, but ultimately in normal circumstances, the price per unit is adjusted marginally to the end consumer when such a disruption occurs.” added Roeloffs.

Fine-tuning Inventory management strategies 

“There is always safety stock, that retailers keep, so buffer stock is there. Yes, it soaks up some capacity, but this event doesn’t have the capacity to impact inventory to an extent that we do not see products on the shelves. I don’t see that coming.” added Roeloffs. 

 The shipping and the global trade largely have become relatively more resilient to supply chain shocks as these become evidently more frequent and persistent. 

“As we witness continued disruptions disturbing the global supply chains in the mid to long term, we will see enhanced supply chain resilience.” added Roeloffs. 

The bulk, oil and gas sector have no impact so far whatsoever as the vessels carrying these continue to operate on the Red Sea. There has been no attack on these vessel types. High value container vessels are being diverted, impacting the big east-west trade from Europe to Asia and vice versa. 

So far, Out of 700, some 500 vessels have been diverted soaking up significant capacity from the existing overcapacity that the industry was grappling with. 

As businesses face this new challenge, there are three immediate recommendations that can improve the situation handling currently for companies-

• Hold Adequate Safety Stocks: Maintaining sufficient safety stocks is crucial for absorbing disruptions without significantly impacting inventory levels.
• Enhance Flexibility: Operating with multiple networks and suppliers adds resilience, reducing dependency on a single source.
• Leverage Technology: Embracing technology is paramount for identifying problems in (or almost) real-time and making informed decisions, ensuring a proactive response to disruptions.

 Note of context:

In a troubling turn of events, the Red Sea, a vital artery for global maritime trade, is facing unprecedented disruptions, primarily due to recent attacks by Houthi rebels on ships passing through the region. The Red Sea, with its strategic importance accentuated by the Suez Canal, serves as a crucial superhighway connecting Europe, Asia, and Africa. Recent attacks have escalated operational costs, creating significant challenges for shipping industries and placing downward pressure on profits. The Bab el Mandeb strait, also known as the Gate of Grief, has become a focal point, and its geographical challenges make it a critical chokepoint for maritime traffic. The disruption is not only impacting the flow of goods but also leading to a substantial re-routing of vessels, resulting in increased shipping costs, longer voyages, and environmental concerns.

Impact Highlights:

• Rerouting Challenges: Vessels are diverting around the Cape of Good Hope, leading to increased fuel costs, environmental concerns, and impacts on shipping efficiency.
• Shipping Industry Strain: Shipping costs have surged, with a 60 percent drop in vessels passing through the Suez Canal.
• Oil Tanker Stability: Despite disruptions, oil and fuel tanker traffic in the Red Sea remained stable in December, providing a glimmer of hope for stable energy supply chains.
• Rising Shipping Costs: The Red Sea crisis is projected to push shipping costs up to 60 percent, coupled with a 20 percent increase in insurance premiums, affecting overall operating costs. 
• Insurance Challenges: War risk premiums for shipping have surged, impacting transportation costs and potentially leading vessels to seek alternative routes.
• Re-routing Impact: Re-routing through the Cape of Good Hope results in 10-20 days of delays, adding complexity to logistics and affecting delivery timelines.
• Supply Chain Disruptions: The Red Sea crisis spotlights broader issues of supply chain disruptions, requiring strategic planning and forecasting by companies to navigate challenges.

As the Red Sea crisis unfolds, the global shipping industry faces unprecedented challenges, necessitating collaborative efforts and strategic solutions to ensure the resilience of supply chains and mitigate the far-reaching impacts on international trade.

The post Rising Spot Rates and Container Demand Surge in the Wake of Red Sea Turmoil, ahead of the Chinese New Year appeared first on Global Trade Magazine.

Doug Lawson, CEO of ThinkIQ, expressed gratitude for the recognition from Mitsubishi Corporation, emphasizing the platform’s ability to enhance the efficiency of complex manufacturing supply chains. The strategic partnership and Mitsubishi’s investment aim to broaden market reach and accelerate efforts to provide end-to-end visibility in supply chain management.

Yoshiyuki Watanabe, Division COO of Mitsubishi Corporation, highlighted the meticulous research and diligence in selecting ThinkIQ as the technology partner to drive digital transformation in industrial supply chains. Anticipating a significant impact, Watanabe emphasized the potential of ThinkIQ’s solutions to improve yield, quality, safety, and compliance while minimizing waste and environmental impact. The investment reflects Mitsubishi’s confidence in ThinkIQ’s innovative platform and leadership in digital transformation for the manufacturing sector.

ThinkIQ’s Software as a Service (SaaS) platform establishes comprehensive visibility on the manufacturing shop floor, connecting to legacy and smart equipment, IoT sensors, and operational technology (OT) and information technology (IT) systems. The platform aggregates relevant data into a single analytics platform, providing context, meaning, and discoverability for all participants in supply chain and manufacturing operations. ThinkIQ Vision introduces vision-processing software combined with advanced Machine Learning and Artificial Intelligence capabilities, utilizing standard cameras on the shop floor as sensors to eliminate blind spots and enhance data for Continuous Intelligence.

The post Mitsubishi Corporation Invests in ThinkIQ to Accelerate Smart Manufacturing Solutions in Japan appeared first on Global Trade Magazine.

A couple of global port operators are tackling this discrepancy, including Hutchison Ports, DPWorld, APM Terminals, and ICTSI, which operates five major African ports. Continuously looking for opportunities worldwide, the company recently announced the expansion of its portfolio to include DCT Pier 2 in Durban, South Africa—Transnet’s largest container terminal. 

The state of ports in Africa in 2023

According to the World Bank’s Container Port Performance Index 2021, the top 20 most efficient container ports in the world are all located in Asia and Europe. The highest-ranking African port is the Port of Tanger Med, which is ranked 34th on the list. 

Historically, there are a few challenges to developing sea ports in Africa. Many African ports have been underfunded for many years, which has led to outdated infrastructure and equipment. This can make it difficult for them to handle large volumes of cargo efficiently.

There’s also the geographic and socio-political reality of shipping in Africa that causes interconnectivity challenges. Many African ports are not well-connected to the road and rail networks of their respective countries, which can make it difficult to transport cargo to and from the ports. 

Nevertheless,  there are a number of African ports that are making significant progress in improving their efficiency and capacity. For example, the Port of Durban in South Africa and the Port of Tanger Med in Morocco are now among the most efficient ports in the continent. These two and more are making notable contributions to the economies of the region and changing the landscape of global shipping. 

What are the major ports in Africa?

Foreign investments have led to significant upgrades at major seaports across Africa. These are the major ports in Africa today—and how they’re contributing to the economies of the countries around the continent. 

Port of Mombasa, Kenya

The Port of Mombasa, operated by the Kenya Ports Authority, is the largest port in East Africa and a central hub for trade between Africa and Asia. It has expanded in recent years, and primarily exports tea, coffee, horticultural products, and other goods from inland African countries like Uganda, Burundi, Rwanda, eastern Congo, Ethiopia, and the southern part of Sudan. Approximately 35.9 million tonnes of cargo and 1.49 million TEUs were handled at the port in 2020.

Kenya’s major port in Mombasa also imports petroleum products, consumer goods, and machinery from Western Europe, Asia, America, and the Far East ports. In Kenya, trade contributed 15.6 % of Kenya’s GDP in 2020, making the port a major contributor to economic success in the country. 

Port of Durban, South Africa

While there are many ports in South Africa, the Port of Durban is a major commercial hub on the East African coast. The Port of Durban accounts for around 60% of trade revenue for South Africa and links products traveling between the Far East, Middle East, South and North America, Europe, and Australia. 

Development continues at this key port. Transnet SOC Ltd selected ICTSI as the preferred bidder for the 25-year joint venture to develop and operate Durban Container Terminal (DCT) Pier 2. 

“Our goal is to maximize the Port of Durban’s potential through responsible operations. We look forward to collaborating with Transnet and all the stakeholders involved, who share our vision for a world-class terminal that serves as a catalyst for economic growth in the region,” said Christian R. Gonzalez, ICTSI’s executive vice president.

Port of Toamasina, Madagascar

The Port of Toamasina may not be the biggest port in the world, but it’s among the most efficient—which is why it warrants a mention in this list of major ports in Africa. 

Strategically located on the eastern coast of Madagascar, Madagascar International Container Terminal Services Ltd. (MICTSL)is a key port facility in the Indian Ocean connecting African and Asian trade. The Port of Toamasina handles 90% of Madagascar’s container traffic. 

Since then, the terminal has been modernised to make port operations run more efficiently, reports The Africa Logistics.

Port of Matadi, Congo

Not all of Africa’s ports are located on the coast. Matadi is the most important port on the Congo River, handling 90% of maritime traffic (not including oil tankers). Approximately 150 kilometers upstream from the Atlantic, Matadi is a major import and export point for the whole of D.R. Congo. 

The Port of Matadi is the only terminal in DRC with mobile harbor cranes allowing gearless vessels to operate, and empty depot services accepting empty containers before vessel arrival. This allows Matadi to have the fastest turnaround time in the region for both trucks and vessels. 

Matadi enables the transport of the DRC’s rich agricultural exports, such as coffee, palm, oil, cotton, and sugar. Its mining sector, however, has been driving the economy with copper, cobalt, gold, coltan, tin, zinc, and diamonds as among its major exports. 

Port of Tanger Med, Morocco

The Port of Tanger Med is a new port complex located near the Strait of Gibraltar. It is one of the largest ports in the Mediterranean Sea and is well-positioned to serve as a hub for trade between Europe, Africa, and Asia. Tanger Med is a central hub for the export of automobiles, textiles, and agricultural products, and for the import of petroleum products, machinery, and consumer goods. It comprises four container terminals, two of which are operated by APM Terminals. 

“Tanger-Med handled 7,174,870 TEUs in 2021, and a total cargo volume of 101,055,713 passed through its general cargo terminal. The RORO terminal crossed the 400,000 mark in the same year, a remarkable achievement,” wrote Marine Insight. “This tremendous upward growth was achieved by port digitisation, reduction in waiting times, resumption of industrial exports and upgradation of port equipment.” 

Empowering the future of ports in Africa

Africa’s maritime ports hold so much potential for improvement. Investments from the private sector have led to the development of more efficient and more competitive port facilities like Onne Multipurpose Terminal in Nigeria and Kribi Multipurpose Terminal in Cameroon, both operated by ICTSI. As the largest independent terminal operator, ICTSI is working diligently to develop, modernise, and upgrade ports around the world, including in AfricaI. 

Learn more about ICTSI Africa’s ongoing projects and future initiatives, and stay informed about the evolution of vital port infrastructure across the continent.

The post 5 Major Ports in Africa That Are Strengthening African Trade appeared first on Global Trade Magazine.

Foreign companies looking to import goods from China often face a hurdle to executing these international transactions. This is the need to pay for a large part of their order up front. Payment terms in contracts with Chinese suppliers can require as much as 30% of the total up front as a hedge against the importer’s nonpayment, also known as its credit risk. The remainder of the payment is usually due before the Chinese exporter ships the goods. 

Funding this can tie up the importer’s working capital, which can make some otherwise attractive deals uneconomical, even if the importing company has a demonstrably established market for the goods. If the importer must wait for one purchase be sold to raise the working capital to fund the next order with a Chinese exporter, it can slow down the entire process, depressing demand for the Chinese goods and reducing profits for the foreign buyer. 

The reason for Chinese companies’ reticence to give generous payment terms to their customers is they are unable to do deep-dive credit analyses of all their overseas buyers. This is particularly the case for importers that have not done business with an exporter in the past since there is no track record of successful transactions to establish trust. 

Sinosure, the China Export & Credit Insurance Corporation, is an official financial institution designed to help in cases like that. It provides export credit insurance to companies in China seeking to do business with foreign buyers without having to bear the risk of nonpayment. While Sinosure’s clients are the exporting Chinese companies, its business benefits importers outside of China by eliminating cash flow issues and extended delivery times.

What Is Sinosure

Sinosure is an export credit agency, or ECA. It is owned by the Chinese government, which set it up in 2001 to support China’s foreign economic and trade development and cooperation. It operates as an independent legal entity.

It is similar to those maintained by other large exporting nations. For example, its counterparts in the U.S. and U.K., respectively, are the US Export Import Bank (US Exim) and UK Export Finance (UKEF). 

In China Sinosure’s mission is to “work to actively expand the coverage of export credit insurance and provide comprehensive risk protection for exports of Chinese goods, technologies, and services, as well as overseas contracting and investment projects.”

Sinosure’s primary role is to provide export credit insurance and guarantee services to Chinese exporters and their overseas buyers. For these Chinese companies, the insurance company acts as a crucial risk mitigation factor, offering protection against potential trade uncertainties.

 Sinosure extends its services to a diverse range of small and medium-sized enterprises (SMEs) and large corporations. Typically, when Chinese sellers engage in international trade, they seek payment in advance. As noted above, the conventional contract’s payment terms often include an initial down payment of around 30% before commencing production, with the remaining 70% due once production concludes, but before the order is shipped.

The basis of such payment structure lies in the fact that many exporters may lack the capability or resources to evaluate the creditworthiness of foreign buyers accurately. Consequently, they might be hesitant to extend deferred payments altogether, opting for upfront payments as a safeguard against the considerable risk of non-payment.

However, this approach poses challenges for importers. Their capital may be tied up in existing orders, making it difficult to prepay for new orders. This financial constraint can limit an importer’s ability to meet market demand and expand their businesses.

Sinosure is a company that works with issues like that. The agency offers trade credit insurance coverage to protect exporters against the risk of non-payment by buyers. With this insurance safeguard, suppliers are more willing to extend deferred payment terms and trade turnover with their foreign partners, to the mutual benefit of both parties.

Typically, Sinosure’s short-term credit insurance plans allow for a deferred payment period of around 90-120 days. However, the exact terms can be adjusted, depending on the specific relationship between the buyer and the seller.

In the year 2022, Sinosure ensured export credit worth more than $700 billion for approximately 240,000 Chinese exporters. This compares with only $2.61 billion insured that year by US Exim. Sinosure insures so much more because it is a key part of the country’s export drive, and it maintains a large sales and customer service network throughout China, whereas US Exim generally focuses on a few large-scale industries like airplanes, power generation, and infrastructure. 

Sinosure’s credit analysis acumen is notable. It paid out claims to companies and banks totalling only $1.4 billion in 2022, or one-tenth of one percent of the amount it insured. This proves that the agency has facilitated China’s international trade ventures without putting much of the government’s capital at risk.

Sinosure has five main products.

Short-term export credit insurance.

This protects enterprises from the loss of A/R resulting from commercial risks or political risks when they export goods and services from China. The covered credit period is generally within one year, and not more than two years.

Medium and long-term export credit insurance.

This covers risks in relation to the collection of the accounts receivable (A/R) for financial institutions, exporters or financial leasing companies under the export-related loan agreement, commercial contracts or leasing contracts respectively. The tenor is generally 2-15 years.

Overseas Investment Insurance.

This protects investors and financial institutions from economic losses resulting from political risks such as expropriation, exchange and transfer restrictions, war and political violence, and breach of contract in the host country. The tenor is not more than 20 years.

Short-term project insurance.

This protects exporters from the loss of costs incurred or A/R due to the buyer’s failure or inability to fulfill its payment obligations under the export contracts or engineering contracts. The covered credit period is generally within two years (included).

Domestic trade credit insurance.

This protects enterprises from the loss of A/R or advance payment resulting from commercial risks in domestic trade. The covered credit period is generally within one year.

 How Sinosure Works

The process to obtain a Sinosure guarantee is fairly rapid – fast enough so that it does not typically delay transactions back. Here are the usual steps.

1. An importer goes through Sinosure’s investigation process to determine its creditworthiness. This takes about three weeks. (See below.)

2.  A Chinese supplier applies for an insurance policy with Sinosure, if it does not have one already.

3. The supplier registers the sales contract with Sinosure.

4. The buyer fulfills the initial payment requirement, usually from 10% to 30% of the total invoice price, and the exporter starts the production of the ordered goods, and proceeds to ship them.

5. Once the shipment arrives at its destination, the importer takes receipt of the order. The deferral period typically extends up to 90 days, although it may vary.

6. At the end of this deferred period, the importer pays off the debt owed to the supplier.

How Importers Can Get Sinosure Credit Limit

A Sinosure credit limit is the maximum amount of insurance that ECA is willing to offer an exporter for contracts with a particular importer. If you, as an importer, have a Sinosure credit limit of $1 million, this means you can get $1 million in trade loans from your Chinese partners, secured by Sinosure.

 When seeking a Sinosure credit limit, global buyers face a challenge: Sinosure does not engage in direct communication with foreign companies. It is barred from doing so by China law. Even if a buyer finds Sinosure contact details online, they won’t respond. Therefore, enlisting the services of a specialized consultancy, like Axton Global, is vital for importers who want to prepare to do business with a Chinese exporter under a Sinosure guarantee. 

 How Much does Sinosure Insurance Cost?

The cost of Sinosure insurance depends on the credit limit amount, the importer’s risk, as determined by the underwriters, and the terms of the policy. The fee typically ranges from 1% to 3% of the credit limit amount.

How Axton Global Facilitates Sinosure Transactions

Axton Global operates as the essential intermediary between your import business and Sinosure. The company has expertise to streamline the entire process of applying for a credit limit. The journey starts with the provision of your company’s financial documentation, a first step in Sinosure’s investigation process. It leads to the successful assignment of a credit limit.

 In addition to this, Axton Global helps clients:

1. to increase their Sinosure credit limits

2. to find reliable Chinese suppliers for their business needs 

3. to negotiate deferred payment terms with suppliers and arrange the necessary paperwork

4. to transfer a client’s credit limit from one supplier to another.

Founded in 2008, Axton Global is the market leader in trade finance services for companies that import goods from China. The primary goal is to boost its customers’ business growth by enabling them to get the best possible terms from their Chinese suppliers, improving their cash flow and helping them to run their businesses more efficiently.

Axton Global has unparalleled experience working with – and access to – Sinosure, meaning its clients can benefit from years of experience bridging the cultural and financial gap between Chinese exporters and buyers around the world.

The post How to Deal with Sinosure as an Importer appeared first on Global Trade Magazine.

In response to these geopolitical risks, majority of shipping professionals surveyed in the month of December 2023, by Container xChange, are gearing up to enhance resilience through strategic initiatives like – ‘risk assessment and scenario planning’, ‘diversification of routes’ and ‘suppliers and regulatory compliance’. The biggest ‘headache’ resulting from geopolitical upheaval is the ‘associated costs’ that they will have to bear on top of the rising operating costs that they have to already face. 

Key Highlights:

1. Strategic Focus Areas: In response to geopolitical risks, shipping professionals are prioritizing ‘risk assessment and scenario planning,’ ‘diversification of routes and suppliers,’ and ‘regulatory compliance’ in 2024.
2. Rising Concerns: Survey findings reveal that the biggest concern stemming from geopolitical upheaval is the ‘associated costs,’ compounding the challenges posed by soaring operating costs. Many customers are worried about the rising costs resulting from the Red Sea situation like compliance charges, insurance premiums and war risk charges, etc. The operating costs have already been rising soon after the rates crashed in 2022, and demand failed to recover. On top of the rising costs, these additional surcharges will only add to the worries of shippers and forwarders.
3. BRICS Expansion: The inclusion of new economies in the BRICS bloc, including Saudi, Iran, UAE, Egypt, and Ethiopia, sets the stage for potential polarization of global trade, impacting geopolitical compliance.
4. Technology Utilization: Despite challenges, 82% of industry professionals acknowledge the importance of technology for resilience in 2024, with predictive analysis and forecasting tools taking center stage.
5. Sanctions Compliance: Amidst geopolitical developments, sanctions compliance becomes critical for supply chain professionals, adding another layer of complexity to global trade.
6. Fluctuating Freight Rates: freight rates will increase in the short to midterm, but not in the long run as demand and supply is still highly imbalanced with no clear signs of a strong revival. 

Talking about the Red Sea situation, Christian Roeloffs said, “The Red Sea is a vital artery for global trade which is currently blocked. Thankfully, there are ways to circumvent that artery and keep the global trade moving and therefore, the trade is not stopped. Therefore, the red sea situation is acute but not chronic in the long term for the shipping industry.”

There are still many geopolitical risks that have the potential to significantly impact shipping trade in 2024. We have the Israel – Hamas war, the related situation in the Red Sea, the Russia Ukraine war with no end in sight, tensions between China and Taiwan and an increasing enlargement of the BRICS block. 

BRICS expansion

“What can have a far- reaching and long-term impact on the global supply chain is the BRICS inclusions of more economies.” Roeloffs added. 

There is a host of countries being added in the BRICS block, namely, Saudi, Iran, UAE, Egypt, Ethiopia, while Argentina declined inclusion. BRICS has been viewed as a counterbalance to the Western-led world order. 

“If the block starts to increasingly align political decisions and geopolitical stances, then there could be added complexities to the global trade order with rising polarization of global trade. Ultimately this might lead to a situation where one block is not allowed to trade with the other block and eventually, geopolitical compliance becomes more complex and difficult.” he added. 

The expansion of BRICS will bring further interesting developments worth noting. Iran and Saudi are now in the same organization despite a strained relationship. Egypt has close commercial ties with Russia and India but also with the US. India and China together account for ~2.5bn people and could heavily influence global policymaking if they are more aligned.  And finally, Russia and Iran being able to jointly influence “trade” policymaking within the BRICS group could lead to a “sharpening” of trade rethink of US-allies vs BRICS.

Amidst these developments, sanctions compliance will become critical for supply chain professionals for doing business. 

Any geopolitical unrest has a direct and causal impact on global trade which results in market volatility. Classic case in point is the Gaza Strip and the resulting actions by Houthis in Jemen. This leads to trade rerouting, ultimately resulting in rising operating costs, delays, and service disruptions.” said Roeloffs.

The post Global Trade Braces for Unprecedented Geopolitical Challenges in 2024  appeared first on Global Trade Magazine.

Complete Video of the analysis: https://www.youtube.com/watch/UegHC0btQw8 

Key Highlights from the analysis: 

“Some of the main ports in Germany like Rotterdam, Hamburg, Bremen are posting significant week on week price increases and of course the interpretation is that the situation in the Red Sea has contributed to this increase.”

“The market anticipates that especially in Europe which is on the receiving end of import containers from the Middle East, India, southeast Asia and China, that container scarcity will lead to an increase in container prices and the market.” Explained Christian as part of the analysis. 

7-days price change of container prices 

“Ports at the receiving end of those import containers like the port of Rotterdam and Hamburg, are recording a significant increase in container prices over the last two weeks, since the situation in Red Sea started to escalate.”  

“A consistent pricing trend is observed in the surge of Freight rates. Xeneta’s reports indicate a spot rate increase of 20 to 30% on major East-West corridors.”

“The key question for the industry is the duration of the current situation. Is it a temporary disturbance, a perceived bump in the road, or are carriers capitalizing on the situation as container vessels are diverted around the southern tip of Africa, adding strain due to the Suez Canal’s inaccessibility.” 

Approximately 1.4 to 1.77 million TEU of capacity, accounting for 5 to 6% of the market’s total capacity, is affected. This offers relief for carriers amid the current state of overcapacity. 

“The lingering question is the duration of this circumstance and when naval forces, particularly from Egypt, Great Britain, France, and the US, will take control of security in the Red Sea.” 

“Industry sources suggest that this task might not be straightforward. Forming convoys could impede traffic, and addressing drone boat attacks poses challenges, especially considering the difficulty of detecting these boats in high-traffic areas like the Red Sea.”

The post Red Sea Developments and their Impact on Northern European Container Prices appeared first on Global Trade Magazine.