The Impact of China’s terrestrial AIS ban

The Impact of China’s terrestrial AIS ban

The passing of China’s terrestrial AIS ban is a huge blow to the shipping industry that tries to evolve forward in terms of shipment visibility and sustainability. With the country’s two stringent data protection laws, the Data Security Law (DSL) and Personal Information Protection Law (PIPL) which was passed in recent months, collecting Chinese onshore data needs government intervention now more than ever before! The manufacturing hub is the second-largest economy and home to six out of ten of the world’s largest shipping ports. This definitely has an impact on everyday Chinese goods that we import.

About China's Personal Information Protection Law 

Personal Information Protection Law (PIPL) was passed on November 1st and comes with some pretty strict rules about how companies process your personal data, as well as what they can do once it leaves Chinese soil. The law does not specifically state anything on the lines of shipping data but still Chinese data providers are withholding terrestrial AIS data as a precaution which was visible in the drop of these data reducing from 300,000 terrestrial positions to almost 90% from the period of Oct 28th to Nov 15th.

Data Security Law 

Under Data Security Law (DSL) which was passed on Dec 1st, the Chinese government has ordered a data classification system that dictates which information is considered important and requires closer scrutiny. While both the laws do not have any mentions on how shipping data can be processed, why do companies hesitate to provide these Chinese data points? Any breach of the above laws has penalities that could potentially cost millions of USD which both the Chinese data providers and US companies that handle these data are afraid of, until a clear vision on how these laws are implemented on shipping data.

The Impact of China’s terrestrial AIS ban and the way forward.

Not all data is good data!

It is important to understand that China did not go on a complete blackout of AIS data as the assertion from news headlines claims them to be. It can be misleading at its best. In fact, we receive AIS data for the same amount of vessels that we received even before the new law came into effect. What has changed is the precision of data that we receive.

Terrestrial vs Satellite AIS 

For maritime traffic monitoring, AIS is an essential tool that provides collision avoidance between ships by real-time tracking of their locations. The system can be used by companies in order to predict the movements of vessels with the signals that are received from AIS transponders installed onboard. What China has blocked is the data sharing of AIS reports received via terrestrial receiver stations located on-shore. Still, Satellite AIS is available for the public that can fill this missing puzzle to an extend. Terrestrial AIS reports have accurate real-time visibility for vessels that are near anchorage and ports with signals processed every 30-45 seconds against satellite signals that can range from minutes to hours depending upon the multiple macro factors.

What is the Impact of this missing data?

Port congestion: AIS data providers that solely depend on AIS information to forecast and pinpoint port congestion will have challenges in providing real-time visibility over the time at port and anchorage data. Port congestion is a dynamic dataset that needs real-time visibility backed by multiple data sources and not just solely satellite AIS, in this case.

Green shipping:  From a sustainability standpoint now that countries and major carriers are partnering to promote green shipping, the lack of such real-time data can be a hindrance to promoting these sustainable efforts.

ETA calculation: Real-time ETA calculation can be a hurdle which can have a domino effect on how the rail and truck planning happens with respect to container discharge. The current systems that are alternatively based on historical routes can’t keep up with current traffic patterns and will cost us inefficiency.

How can we overcome these Challenges?

Reducing dependency on a single source: End of the day, the problem is not whether we have terrestrial AIS data but rather it is about the inadequacy of relevant data and intelligent data crunching systems to make any data-backed decision. For an instance to calculate port congestion and ETAs, here at GoComet we use multiple data sources and variations such as geo-fence signals from ports backed by data from server integration with more than 250 carriers and 50,000 containers that are tracked on monthly basis to calculate accurate port delay and milestones till vessel discharge.

With the intelligent combination of available resources, strategic partnership with carrier lines, and proper data crunching of existing data shippers can always take actions to streamline any shipment planning from point A to point B.

Shipping Giants on a buying spree : Aim to offer total logistics

Shipping Giants on a buying spree :  Aim to offer total logistics

The pandemic and related challenges have benefitted the shipping industry. U.S Government support especially payments/cheques to U.S. households, fuelled a consumer spending spree. Freight rates have soared. In September 2021, a container from China to New York cost $22,000, eight times its 2019 price. That has boosted shipping firms’ bottom lines. Market leader Maersk’s EBITDA will nearly treble in 2021 to over $23 billion. The firm, which the market valued at $59 billion in mid-December, is likely to be carrying over $17 billion of net cash in 2022.

A Smart Move  

The normal response for CEOs like Maersk’s Soren Skou would be to buy ever bigger ships. Yet March’s blockage of the Suez Canal shows the dangers of excessive bulk. And the arrival of lots of new vessels in 3 or 4 years may create an excess supply of container space, sending freight prices downwards and also the shipping company margins.

A smarter move may be to invest in getting containers seamlessly from port to customer. Danish shipping and freight specialist DSV bought the logistics unit of Kuwait’s Agility Public Warehousing in April for $4.1 billion for just such a reason. France’s CMA CGM and Maersk both pulled similar moves in December. At $51 billion, DSV is too big even for Maersk. Switzerland’s Kuehne und Nagel, at $34 billion, would also be a challenge. However, its shares shed 25% in September and October as freight rates eased. If those trends continue, the company could come into play in 2022. U.S. land-transport specialist CH Robinson Worldwide, now worth $13 billion, would be another option.

Bringing sea and land services under one roof would allow for cost savings. It would also make it easier for operators to plot a course through future supply-chain bottlenecks and charge a premium for speedier delivery. Danish wind turbine giant Vestas Wind Systems, which has struggled to get parts throughout 2021, signed just such a deal with Maersk in November.  

 

Maersk is on a buying spree

Maersk owns more container ships and containers than anyone on earth, but it would be a mistake to think of the company as just a cargo shipping line. It’s also an airline, a trucking company, a port terminal operator, and a freight forwarder. Maersk has been steadily purchasing a piece of virtually every stage of the global supply chain as part of its ambition to become a one-stop shop for logistics.

Maersk struck a deal that offers a glimpse at the future of its business—and the future of global shipping. Starting next year, Maersk will effectively run the logistics operations of Unilever, one of the world’s largest consumer goods companies. Maersk announced in a press release that it “will be providing operational management of international ocean and air transport” for Unilever from 2022 to 2026.

International Control Tower Solution  

Come 2o22, Maersk will develop and help run a piece of in-house software, dubbed the “International Control Tower Solution,” to manage Unilever’s supply chains. “It’s a strong indicator that Maersk’s expertise extends well beyond sailing ships,” said Eytan Buchman, CMO at the cargo booking platform Freightos, who has written about Maersk’s acquisitions and expansion. “Combined with their other assets and what they’ve been building towards, it’s not a stretch to assume that this is another rung in the ladder towards full end-to-end global supply chain ownership.”

 Other developments in context

A.P. Moller-Maersk and wind turbine maker Vestas Wind Systems said on Nov. 10 that they had signed a long-term strategic partnership, including door-to-door transport from Vestas’s suppliers to its factories.

French shipping group CMA CGM said on Dec. 8 that it had agreed to pay $3 billion for the logistics arm of privately owned U.S. services firm Ingram Micro’s Commerce  & Lifecycle Services.

Maersk’s well-publicised acquisition of Senator, two 777Fs and leases on three 767-300Fs for its Star Air subsidiary, as well as its move into forwarding, could well disrupt the market. Then, of course, there is CMA CGM’s decision to set up its own airline, having acquired four A350Fs, two 777Fs and four A330Fs. As owner of Ceva Logistics, like Maersk, the line is looking to become a one-stop shop.

India’s Rice Exports Jump 33% On Year In FY22

In the first seven months of the current financial year (2021-22), India’s rice exports rose by more than 33 per cent to 11.79 MT from 8.91 MT achieved during April-October, 2020-21. It is anticipated that India’s rice exports in 2021-22 would likely surpass the record feet of 17.72 MT achieved in 2020-21.

In 2020-21, India shipped non-basmati rice to nine countries – Timor-Leste, Puerto Rico, Brazil, Papua New Guinea, Zimbabwe, Burundi, Eswatini, Myanmar and Nicaragua, where exports were carried out for the first time or earlier the shipment was smaller in volume. India’s Non-Basmati rice exports was valued at USD 4796 million (Rs 35448 crore) in 2020- 21, with Basmati Rice exports a close second at USD 4018 million (Rs 29,849 crore). In terms of volume of Basmati rice exports in 2020-21, top ten countries – Saudi Arabia, Iran, Iraq, Yemen, United Arab Emirates, United States of America, Kuwait, United Kingdom, Qatar and Oman have a share of close to 80 per cent in total shipments of aromatic long grained rice from India.

“India continues to supply rice to the global market thus ensuring food security in many countries while many countries are stockpiling in anticipation of logistical disruption because of Covid-19 pandemic,” said M Angamuthu, Chairman, Agricultural and Processed Food Products Exports Development Authority (APEDA).

Four key disrupters to the supply chain guaranteeing another challenging year for shippers

Four key disrupters to the supply chain 

1. The changing relationship between Shipping Line and NVOCCC. forwarders

Carriers are withdrawing from NVOCC relationships and others making it difficult for NVOs to offer carrier-like fixed-contract rates to shippers under preferential ‘named account’ terms agreed in advance with ocean carriers,” it said.

Several forwarding contacts have NOT been able to secure rate agreements from the lines for January on the Asia-North Europe and transatlantic routes. “Our account manager seems to have gone to ground – 18 months ago we couldn’t get rid of him, now he’s constantly unavailable and doesn’t reply to our e-mails,” said a director of one UK-based NVOCC.

Another forwarder said all he got back from his account manager was “excuses” for not quoting January rates, and that the stock answer from carriers was: “Let’s wait until after CNY.” As a consequence, small, and even some mid-sized, forwarders and NVOCCs are unable to offer any guidance on next year’s freight charges to their shipper customers.

The fear from this situation is that it will force many smaller shippers to, at best, defer their orders or, in some cases, abandon their product orderbooks altogether, given the uncertainty in the market and the risk that lower-value imports will become unsustainable.

2. Risk of contract disputes involving bigger shippers 

A ‘second threat’ to the supply chain in 2022, Drewry also sees the risk of contract disputes involving bigger shippers that have sufficient volume to negotiate long-term deals with carriers.

“More BCOs – even the largest ones – will have to accept the new reality of the market: you cannot expect to ship 10 containers one week, 50 containers the next and hope to get 100% capacity for both weekly volumes,” said Drewry.

“Carriers are already telling BOs that their capacity in 2022 will be the contractual MQC [minimum quantity commitment] a year ‘divided by 52’,” said the consultant.

As a result, disputes about carrier ‘dead freight’ charges for slots not used – more often only seen on the charter market – will arise, as they will when weekly volumes are in excess of the MQC.

“Disputes will spread in 2022 about how to deal with excess volume above weekly MQC, and deficit volume below weekly MQC, and about associated penalty clauses,” said Drewry.

3. Disruptions around the longshoremen contract renewal negotiations in the Q1 2022.

Meanwhile, the consultant warned shippers on the transpacific using US west coast ports, to be prepared for possible supply chain disruptions around the longshoremen contract renewal negotiations in the first quarter.

“For BCOs with long memories of earlier disputes, now is the time to look at alternative routes to avoid US west coast ports,” said Drewry.

4. Uncertainty caused by COVID : Possible lockdowns and disruptions in terminals and shipping operations 

The fourth – and constant – threat to the supply chain next year listed by the consultant is, of course, the pandemic.

“China’s current zero-tolerance Covid policy makes it particularly likely to shut down – and without prior warning – more secondary ports, more barge operations and more feeder operations, as new cases arise,” said Drewry.

“Further lockdown measures in other countries, triggered by new Covid variants cannot be ruled out!

Realising the true potential of a fast growing Bangladesh automobile market

 

Realising the true potential of a fast growing Bangladesh automobile market  

 

Even though the affluent middle-class in Bangladesh is growing rapidly and increasing its purchasing power, the demand for passenger cars are still low compared to India and Thailand.

According to a LightCastle study, the size of the country's automobile industry, in particular the passenger vehicle segment, remains modest compared to other Asian peers with only 2.5 cars per 1,000 population.

The market has grown multiple fold over the years and has become an industry worth USD 1 billion. However, the industry experts believe that the market size of passenger cars is not bigger than Tk 5000 crore. According to the Bangladesh Road Transport Authority (BRTA), only 20,093 passenger vehicles were registered in 2020, covering a mere 5.3 percent of the automobile industry volume.

Passenger vehicles include sedans or private cars, sport utility vehicles (SUVs), and microbus or multi-purpose vehicles (MPVs). Within the passenger vehicle segment, sedans (also referred to as private cars) accounted for almost 55 percent of vehicles, with 12,403 units registered in 2020.  The remainder of the passenger vehicles segment was captured by SUVs and microbuses with 4,911 units and 2,779 units respectively. These numbers have also changed over the last few years, where SUVs and MPVs have mostly recorded a gradual increase in demand, while the registration of sedans have at times been stagnant or even decreased.

  

The fast growing automobile market in Bangladesh

The automobile market in Bangladesh has seen significant growth in the last decade, especially between 2015 and 2017. At the peak of its trajectory, BRTA had reported 32,942 registered passenger vehicles in 2017 that has since been in decline. Between 2018 and 2020, the number of registered passenger vehicles has declined by almost 39 percent.

Moreover, the automobile industry is still heavily import dependent. Currently, Pragoti locally assembles cars made by Japan's Mitsubishi Motors while PHP Motors, a sister concern of the PHP Family based in Chattogram, assembles cars designed by Malaysia's Proton Holdings Berhad.

 

Tata Motors, Mahindra & Mahindra keen on setting units in Bangladesh 

Indian automotive giants Tata Motors and Mahindra & Mahindra recently showed interest in setting up similar partnerships with local manufacturers to grab a bigger slice of the growing Bangladesh automobile market. At present, about 60 to 65 vehicles are sold across the country each day.

When the market had just started to take off in 2012, the daily figure was 29, indicating a 117 percent increase in the last eight years according to Bangladesh Reconditioned Vehicles Importers and Dealers Association (BARVIDA). In 2019, car sales amounted to Tk 5,000 crore, which was more or less the same the year before.

 

Automobile Industry Development Policy 2021 to boost the four-wheeler industry

Bangladesh's thriving automobile sector has grown 8 percent on average annually since 2012, according to industry insiders. According to the Automobile Industry Development Policy 2021, the local automobile industry has been considered a potentially major industrial sector for the last two decades as it has registered impressive annual compound growth and contributes greatly to the national economy.

Bangladesh will cut its over-reliance on imported vehicles, switch to electric modes of transportation and become a regional hub for automobile manufacturing by 2030 as the government unveiled the country's first-ever policy to develop the sector.  The policy promises to offer tax and export incentives to encourage entrepreneurs to establish automobile plants in the country.

The market is growing annually at a rate of 8 percent with an increasing purchasing capacity of the growing middle class of the country. The middle class are the main customers for passenger cars. As per the policy, investors will get the opportunity to import capital machinery and equipment to make cars at zero duty.

Besides, commercial vehicle manufacturers will get duty-free access for the import of auto parts for four years. Investors will get concessional loans to market locally manufactured commercial vehicles, according to the policy issued by the industry's ministry on Tuesday.

A 15 percent cash incentive will be given for the exports of locally assembled or CKD (completely knocked down) cars. The local automobile industry is nearing critical mass thanks to its ability to adopt new technologies and increased efficiency in human resource management.

"Bangladesh's automobile industry could even become a part of the global supply chain in the future," the policy states. Growing demand for cars and motorcycles is a result of the rise in purchasing power among the general public, it added.  The policy aims to provide a clear roadmap on how to take the country's evolving automotive ecosystem forward.

On the other hand, the policy discourages the import of completely built-up units of used vehicles as locally assembled cars are more affordable than the imported ones.

The government will attract both local and foreign investment, the policy said. The authorities will set standards for locally manufactured vehicles in keeping with global benchmarks, and help local manufacturers to enter new markets.

"Progressive leasing policy will be pursued to help locally-made automobiles expand their markets," said the policy.

Abdul Matlub Ahmad, chairman of Nitol-Niloy Group, said the policy would help Bangladesh become an automobile manufacturing nation. "Customers will benefit as they will get vehicles at affordable prices," he said.

Thanks to the policy, local manufacturers will be able to sell a sedan car within Tk 10 lakh as customers would not have to pay import duties, according to the entrepreneur.

The government will draw up a reconditioned car management guideline to support the firms involved in running reconditioned car businesses and local manufacturers.  An automobile scrapping policy will also be formulated. The government will impose anti-dumping taxes to prevent dumping and unfair trade practices.

A one-time 100 percent duty and tax waiver will be extended for the imports of machinery to set up CKD factories.

The total tax incidence will be 25 to 35 percent for CKD level manufacturers for imports of parts. It will not be more than 10 percent if parts are sourced locally, the policy mentioned.

Factories will be entitled to a 1 percent tax rebate if they spend 1 percent of their annual income on research and development. The policy will look to transform a majority of the vehicles, particularly passenger cars, buses, trucks and three-wheelers, into electric vehicles (EVs) by 2030. A 10-year tax holiday will be provided to EV assemblers or manufacturers.

In order to ensure higher production of EVs and keep the emission levels to a minimum level, the government will offer financial incentives, waiver of road tax and reduced registration fee for a certain period.

  

Challenges of automobile sector in Bangladesh

According to the market players, the market size of passenger cars is still infant.

Mannan Khan, chairman of Bangladesh Auto Industries Ltd (BAIL), said, "In our country, the lower-middle and middle class dream of buying vehicles but they cannot afford it as the prices are excessive."'

Industry insiders said the government imposed the duty on import of car in early nineties when only the rich would buy cars for their own use or commercial purposes.

However, after 30 years, the economy of the country has changed a lot –so now the car has become necessary for the urban-middle and higher-middle class. Due to high tax, the price of a car is very costly in Bangladesh, and for this reason, the market for four wheelers is yet to boom like India and Thailand.

According to car importers, when a car is imported at USD 5,000 from Japan, the retail price becomes around Tk 22 lakh in Bangladesh due to high tax. The middle-class citizen cannot afford a car of his own due to the high price of car. And the market size will not increase without reducing tax on local manufacture.

All about The Ocean Shipping Reform Act

The House of Representatives in Washington DC passed legislation on 8th December providing for the first major update of U.S. International ocean-shipping laws in more than two decades. That comes as the nation continues to grapple with bottlenecks at its ports that are crippling supply chains.

The bipartisan bill designed to strengthen shipping supply chains. The Ocean Shipping Reform Act (OSRA) was passed in the house in a 364-60 vote. The bill requires shipping companies to adhere to “minimum service standards that meet the public interest” and blocks them from unreasonably declining cargo.

Improved data collection and reporting practices will also be put in place under the bill, through the creation of a shipping exchange registry. It will also increase Federal Maritime Commission (FMC) funding by 10% and directs the FMC to release an annual report on shipping operators and marine terminal operators filing false certifications.

OSRA21 will reduce or eliminate carrier price gouging, epic freight costs, record delays.

“This legislation works to address unfair shipping practices by tackling the worst instances of abuse from bad actors in the shipping industry in an effort to boost our country’s global competitiveness,” Democrat representative Kurt Schrader said in a statement.

The Ocean Shipping Reform Act of 2021 was introduced by U.S. Congressmen John Garamendi (D-CA) and Dusty Johnson (R-SD) and was approved by the House with a vote of 364 to 60. The bill now goes before the Senate for further consideration.

The Act would help agricultural exporters by improving the Federal Maritime Commission’s ability to enforce its interpretive rule on predatory detention and demurrage fees as well as prohibiting ocean carriers from continuing to unreasonably decline export bookings.  The bill would help place guardrails on the ocean carriers’ actions. 

Other parts of the American supply chain welcomed the bill’s passing. It now needs to get the approval by the Senate to pass into law.

“Once passed, OSRA21 will reduce or eliminate carrier price gouging, epic freight costs, record delays – and other unfair and excessive punitive fees that only fuel inflationary pressures,” said Steve Lamar, president and CEO of the American Apparel & Footwear Association.

John Butler, president and CEO of the World Shipping Council, a liner lobbying group, said he was disappointed the bill had been passed without proper debate or committee process. “The bill is a political statement of frustration with supply chain challenges – frustrations that ocean carriers share. The problem is that the bill is not designed to fix the end-to-end supply chain congestion that the world is experiencing, and it will not and cannot fix that congestion,” Butler said.