Months after our Annual General Meeting, we found an occasion for our growing network to meet and greet each other. Under the circumstances, a virtual meeting turned out to be the best possible option to bring our members and partners together, and what could be a better time than spring!
Spring Social, our first virtual networking session, was hosted on the 18th and 19th of this month. Apart from networking sessions, the event also consisted of three discussion groups that formed a significant aspect of the event. The motivation behind hosting our virtual networking session was to bring together our new members who joined us after the Annual General Meeting to begin forming acquaintances before our next meeting.
On Day 1, the event began with the first discussion group covering rail-freight development along the New Silk Road. Followed by another discussion group looking at the problem of equipment and space shortage. These discussions were followed by a free networking session, where the companies had the opportunity to either meet in groups or continue the conversation one on one. The event on the second day began with a discussion group on the effects of Brexit on the logistics industry, followed by another networking session. Spring Social was successfully concluded on Friday afternoon after the last participant had their fill of networking.
As our discussion sessions were conducted within closed groups, the following are the summaries of the discussions within the groups.
1. Conducting Rail Freight Along the New Silk Road: The Know-How
Tomasz Langowski, CEO of Langowski Logistics and a founding member of the New Silk Road Network, began the presentation. Langowski Logistics has its own dedicated rail freight department, with a team working on rail forwarding, sales, agent service and managing rail projects and container depot. At the moment, Langowski Logistics is more commonly using routes from Europe to China either via Trans China route (8-14 days) and Trans-Siberian Route (10-15 days).
Mr. Langowski shared technical information about the maximum train length, track clearance and so on in various route countries, which was followed by a progression of train quantities and routes in the last ten years. It was also very interesting to hear from a rail freight veteran, how the prices have significantly changed since they ventured into rail freight, which was as early as 2012. At the time the first rates from (Free On Rail) FOR Shanghai to FOR Warsaw were ca. $7,100 USD for a 40’ HC, but with transit time up to 24 days, based on the group of wagons service and not block train service. This transit time and rates have drastically reduced now. He also presented why rail freight has the significant potential over other modes of transport, especially when it came to conducting trade along the New Silk Road. Apart from economic benefits, rail freight also presents climate benefits, making it a greener alternative.
The discussion began with how rail can be integrated with other modes of transport such as sea freight, how the market behaves and who fixes the rates. Subsidies offered by various Chinese provinces govern the market at the moment, and the supply and demand do not impact this as much at the moment. However, the subsidies have reduced the price of rail freight and helped rail freight become more competitive. Through the discussion, we also learnt about the various expansions taking place in the Malaszewicze terminal, allowing longer trains and increasing axel load.
2. Tackling the Equipment and Space Shortage
The pandemic year also brought in troubles with the lack of space, and equipment began to affect logistics companies. The speaker for this session was the CEO of CHS Containers Handel, a founding partner of New Silk Road Network, Christian Leopold. Mr. Leopold’s expertise on anything related to container came through the presentation and discussion. After a brief introduction of CHS’s activities, Mr. Leopold dived right into addressing the causes of the container crisis, which began taking shape in early 2020, partly caused by the pandemic. He compared container availability over the last two years to show the drastic difference in the ports. However, the situation seems to be stabilizing slowly.
Simultaneously with container unavailability, there was an increase in sea freight rates. The freight prices drastically increased five to six times higher than the average during the last few months of 2020, continuing into the early months of 2021. The demand for export cargo in China was so massive that carriers were unable to provide the services to move the export cargo. Mr Leopold suggested rail as an alternative and viable option for cargo movement to and from Europe to Asia. The second suggestion was to undertake partial/full charter vessels. Finally, with regards to the container shortage, Mr Leopold suggested SOCs over COCs, as they provided multiple benefits.
During the discussion, forwarders expressed their concerns on how they tackled this situation. Phil Lerias, from Arian Maritime, a member of New Silk Road Network, described how his company offered three or four options to those clients that needed to ship their cargo. But with export, it was more problematic due to the lack of containers. Similarly, Nadezhda Nikova of Mireks Shipping, expressed her concerns over delays caused in shipments due to this crisis, especially in the Southern ports of Europe, and how carriers gave preferential treatment to COCs over SOCs. Tomasz Langowski of Langowski Logistics initiated a discussion on the new foldable containers that take lesser space and how they might be a possible solution to the crisis. Mr Leopold expressed that though they are a good step into the future, many container yards are still unequipped to handle them and need to optimise their resources.
3. Brexit and Impact on Logistics So Far
The year 2020 has been significantly tricky for global trade and logistics. In all the upheaval, the formalization of Brexit began this year, causing distress to an already burdened industry. In the presentation, Cetin Celik, Managing Director of M&F/ Huettemann Group, a member of the New Silk Road Network, spoke about the effects of Brexit in the first three months since initiation. Huettemann Group has a strong business with the UK since the foundation of their company in 1956.
After a brief overview of the company’s capabilities, Mr Celik explained how the progression of Brexit took place after the referendum voting swayed in favour of the United Kingdom leaving the European Union (EU). After all the extensions through 2019, the 31st of December 2020 was set as the final date for Brexit. Despite a trade-deal, shipments from the EU to the UK needed to be cleared as a complete customs process is required for import and export goods. This meant that 240 million files for imports and exports need to be processed by border agencies per year. The impact already is noticeable as 30% of imports from the EU have dropped, however, that is also because many companies finished moving cargo before the Brexit came into action.
One of the biggest problems is the increased hiring of customs employees at borders, as they lacked experience and were unequipped to deal with the procedures brought forth by Brexit. 85% of the UK paperwork is incorrectly administered or wrong, cause problems to companies like Huettemann. This has caused considerable delays for trucks at the border and reduced the number of trucks going to the UK. Moreover, the turnover rate of trucks has also dropped with the congestions, as twice a week return trips are no longer possible.
During the discussion, the group agreed on how complex the situation has been, especially for truckers and drivers. The group also speculated that even though the easement has taken place, to reduce the traffic at the border by giving one year time to clear the shipment, it would still be a problem, as it takes a long time to make clearances. This means that next year, the industry will face hardships if companies are not active and prepared, as well as a huge backlog of administrations to be completed for those who leveraged the easement deal. Huettemann also explained how their company had to conduct hiring to support their activities in the UK. Huettemann directed that they are simultaneously clearing cargo at the border without claiming easement at the moment. One of the biggest challenges is to clear the customs properly without any mistakes, which is a strenuous task due to Brexit.
With a successful conclusion to NSRN’s Spring Social, we are excitedly looking forward to opportunities this year to meet our members and partner through another virtual networking event in June and finally at our Annual General Meeting, which will be hosted at the exquisite W – The Palm Hotel in Dubai from the 17th to 20th of October, 2021.