Congestion and delays faced by truck drivers in the Black Sea Economic Cooperation (BSEC) region are being exacerbated by increased traffic from geopolitical diversions, according to the International Road Transport Union (IRU).

According to the organisation, freight volumes along the middle corridor from China to Europe surpassed 1.6m tonnes between January and August last year. This was an 84% increase on the same period in 2022.

Since then, east-west trade has further been affected by the Red Sea crisis and required transport companies to yet again seek alternative routes.

“New routes have emerged. But they need our support,” urged the IRU.

Its president, Radu Dinescu, explained: “The drastic re-direction of cargo flows has put a lot of pressure on borders in the BSEC region. In 2024, corridors crossing the region became even more important for international goods transport.”

He highlighted that border crossing issues experienced by hauliers in the BSEC region had become particularly prevalent, adding: “Congestion and long waiting times cause economic losses to the road transport industry.”

At the 43rd meeting of the BSEC Union of Road Transport Associations (URTA) general assembly in Albania, Mr Dinescu outlined key steps to combat border issues and optimise trade in the region.

“Investment in both hard infrastructure and soft procedures, services and tools are needed to keep up with increasing transit traffic. To ease border delays and reduce costs, we need to accelerate digitalisation – especially with eTIR, but also e-CMR, ePermits and eVisas,” he said.

The IRU and the UN Economic Commission for Europe (UNECE) said they were working together to find the fastest way to implement eTIR along key corridors this year.

Some BSEC countries, such as Georgia and Azerbaijan, have completed their eTIR integration procedures.Turkey is in the latter stages and expected to complete integration this year.

“I invite all BSEC-URTA countries to start integrating eTIR as soon as possible to start benefiting from it,” said Mr Dinescu.

“Azerbaijan, Bulgaria and Greece are still not part of the BSEC permit system. They should join as quickly as possible. Uzbekistan and Turkey have successfully tested electronic road permits. IRU supports the digitalisation of the BSEC permit and all other permit quota systems,” he added.

The Albanian deputy minister of foreign affairs, Beşar Kadia, added: “We should further strengthen our work aimed at facilitating border crossings in the region in view of the serious problems truck drivers are facing at borders, such as long queues and the absence of secure truck parking areas with even the most elementary facilities along key transit routes.”

Albania is one of the countries that has implemented the Single Window Project (SWP) to streamline and accelerate border crossings by simplifying transit procedures.

SWP allows an international trader to submit information to a single agency, rather than having to deal with multiple agencies in multiple locations, to obtain the necessary papers, permits and clearances to complete import or export processes.

Iran’s seizure of the 15,000 teu MSC Aries over the weekend is a cause for grave concern for pretty much anyone involved in global supply chains.

Footage of Houthi rebels storming a car-carrier in the Red Sea is one thing, it is quite another to witness Iranian national forces seizing an MSC-chartered vessel in the Straits of Hormuz on the basis of its links to Israel – the vessel’s owner is Zodiac Maritime, which although UK-based is controlled by Israel’s Ofer family.

It means carriers of all types – container, tanker and bulker – will have to rethink their Arabian Gulf networks and which vessels they deploy to the region. According to vesselsvalue.com, Zodiac Maritime’s fleet is 140 vessels: 36 bulkers, 50 containerships, 40 tankers, five LPG carriers and eight ro-ro car-carriers.

More worrying for the wider trade is the terrifying prospect that Iran could decide to effectively cut-off Dubai, as well as Arabian/Persian Gulf gateway ports such as Dammam in Saudi, Qatar’s Hamad and Iraq’s Umm Qasr, all of which had recent calls from the MSC Aries before it was seized.

Since the onset of the Red Sea crisis, Dubai has played a hugely important role as a pressure release valve for Asia-Europe and Middle East/India-Europe supply chains, particularly the latter, with Indian exporters to Europe hit especially hard by the increased freight rates due to Cape of Good Hope diversions, and shutting that off could have wide-ranging implications.

In this context, it also takes on a multimodal dimension, as Xeneta chief analyst Peter Sand explains: “Any widening of the conflict which has already resulted in huge disruption to ocean freight services in the Red Sea region would be extremely concerning.

“For example, Dubai is a regional hub for imports as well as sea-air corridors, with containers arriving by ocean via the Strait of Hormuz for onward travel by air to Europe and North America.

“If ships are impacted from sailing into the Arabian Gulf then the disruption would be considerable,” he adds.

There are few other regional transhipment options for carriers – If Dubai was cut off, so too would Abu Dhabi; APM Terminals-operated Salalah; Oman, is outside Hormuz but close to Yemen and Houthi forces; and Sri Lanka’s Colombo is currently struggling with congestion issues of its own.

However, many regional sources are adamant it will not come to this, arguing that a full-scale closure of Hormuz would be too detrimental to Iran’s economy; not to mention the profound shock it would put on global fuel prices, given that it is the chief export route for Middle East oil exports and the subsequent threat to Saudi and UAE economies.

Meanwhile, and the presence of US naval bases at several locations in the Gulf would suggest that there are only a few, small steps from closing Hormuz to dangerously escalating the conflict.

In the immediate future, however, it is almost a certainty that insurance costs will rise with war-risk premiums implemented, and most likely accompanied by rising freight rates.

Not for the first time the parcel market appears like a battleground to expand or shrink margins, and predictions of an end to free delivery may get a boost from a new round of surcharges by FedEx and UPS in their home market.

This month they are introducing delivery surcharges in 82 postal codes, although they already apply to many zipcodes in the US – for the most part areas with lower population density, which affect yields for the parcel carriers.

Now the integrators are extending the surcharges to more densely populated regions, with many of the zipcodes affected in major urban population centres, including New York, Boston, Chicago, Los Angeles and San Francisco.

Depending on mode (air or ground), and residential vs commercial delivery, the surcharges range from $3.95 to $5.85, but can be higher in areas categorised as ‘extended’ or ‘remote’.

UPS implemented its surcharge on Monday, and FedEx is set to follow suit a week later.

According to one report, the integrators have now extended the delivery surcharge to cover more than half of all zipcodes in the US.

With the additional surcharge on sectors where they see higher yields owing to better traffic density, FedEx and UPS stand to enjoy a nice boost to their bottom lines. While they are engaged in huge cost reduction efforts, the pair are increasingly using accessorial charges to raise yields.

As the latest TD Cowen/AFS Freight Index (published yesterday) points out, they have raised fuel surcharges more than once and boosted demand surcharges since the announcement of their general rate increase for 2024. Historically, updates of accessorial charges were communicated with annual price changes, but now shippers are faced with price fluctuations at other times in the year.

Given the higher density and volume of shipments to the new areas where delivery surcharges apply, shippers are bound to see a significantly stronger increase in costs than those with lower population density. They may be able to mitigate this by consolidating shipments or encouraging customers to collect parcels from less-expensive commercial points, but the associated tweaks to their system may raise internal costs.

According to the TD Cowen/AFS Index, in the express parcel segment the combined effect of the general annual rate increase, fuel surcharge adjustments, a shift to more premium services and higher average billed weight more than offset carrier discounting, resulting in a significant net increase in cost per package in in the first quarter, jumping from 0.9% above the January 2018 baseline in Q4 23, to 3.9%.

The upward push on pricing from parcel carriers is playing out in an environment where observers have speculated about the demise of the free shipping concept. This has been predicted many times over the past few years, but some analysts argue that this time it may happen.

In November, retail research firm First Insight suggested one-third of consumers were willing to spend at least $10 for shipping.

“The days of high consumer expectation for free and fast shipping may be in the rear-view mirror, and retailers may no longer have to automatically offer free shipping simply to remain competitive,” commented First Insight CEO Greg Petro.

Consumers appear to have swallowed the emergence of charges for product returns.

But Rick Watson, founder and CEO of e-commerce consulting firm RMW, has misgivings. From an affordability point of view for merchants, free shipping should not be around any more, but sellers are afraid of how much business they could lose if they ceased to offer it, he said.

He pointed to a recent survey by PYMNTS and Adobe, which found that 66% of consumers considered free shipping key to customer loyalty.

“Retailers must figure out a way to subsidise free shipping if they want to grow,” he commented, adding that the best strategy toward that end may be loyalty programmes.

“Consumers are still willing to pay for loyalty, at least when there is a wide assortment and fast delivery involved.”

This suggests free shipping will likely survive a few more predictions of its imminent demise, but the pressure on shippers from rising fulfilment costs may force a growing number of them out of the game.

A Maersk-operated 2M Alliance container vessel with two pilots onboard crashed into a support pylon of the Francis Scott Key Bridge in Baltimore, Maryland, in the early hours of this morning, demolishing the 1.6 mile bridge and plunging at least 20 people into the Patapsco River.

Authorities described the collision as a “mass-casualty incident” and said emergency services were still searching the river for seven people.

You can see the bridge collapsing here on YouTube.

The 2015-built 9,962 teu Dali was less than 30 minutes into its backhaul voyage to Asia, after completing two days of cargo operations at the Seagirt Marine Terminal, when the incident happened.

According to eeSea data, the vessel is deployed on Maersk’s Asia-US east coast TP12 loop and MSC’s Empire service, with the 2M partners also having a slot charter agreement with Zim which the Israeli carrier has dubbed its ZBA service.

Marine cargo insurers, WK Webster, warned Maersk’s customers that delays or loss would be inevitable.

“There is likely to be significant cargo loss and damage as a result of this very serious incident, including to a number of containers which are reported to be hanging from the bridge. It also seems almost certain that the vessel will not be proceeding with the voyage in the near future resulting in serious delays to all cargo on board.”

Vespucci Maritime’s Lars Jensen said the collapse of the bridge would effectively cut off the container terminals and its other cargo facilities.

 

Baltimore handles around 21,000 teu a week, which will now have to be routed via other ports in the region.

“Additionally, this means that the cargo already gated into the Baltimore terminals would either have to wait an unknown period for the sealane to reopen, or be gated out and shifted to a different port,” said Mr Jensen.

This is the second incident within 10 days of a large container vessel seemingly losing control of its steering.

On 16 March, the 2015-built 14,000 teu YM Witness, with pilots onboard and tugs in attendance, crashed into the quay while attempting to berth at Turkey’s Evyapport, destroying three ship-to-shore gantry cranes.

Maersk said this morning: “We are horrified by what has happened in Baltimore, and our thoughts are with all of those affected.

“We can confirm that the container vessel Dali, operated by charter vessel company Synergy Group, is time-chartered by Maersk and is carrying Maersk customers’ cargo. No Maersk crew and personnel were onboard.

“We are closely following the investigations conducted by authorities and Synergy, and we will do our utmost to keep our customers informed.”

The Dali‘s headhaul itinerary was via the Panama Canal, but the service is currently routed via the Cape of Good Hope on the backhaul voyage. Prior to Baltimore, the Dali called at New York and Norfolk, Virginia, with Colombo, Sri Lanka, the next scheduled call.

Maersk agreed a five-year extension to the vessel’s time charter in April 2020 with Singapore-based shipowners Grace Ocean Investment with the daily hire rate not disclosed. However according to Vesselsvalue data Maersk was paying a rate of $40,600 per day for the five-year prior period.

According to the ship’s manager, Synergy Marine Corp, there are no reports of any injuries to the Dali’s crew or the pilots as a result of the incident.

In July 2016 the ship was involved in a collision in the port of Antwerp during unmooring manoeuvres when leaving the berth in good weather, causing significant damage to the ship and the quay with the blame attributed to errors by the Master and pilot onboard.