Interlog 
Insights
September 2023
The following is an archived collection of our weekly insights through the month of September. Those who had signed up to our Interlog Insights newsletter received each week’s update to their inbox on the original release date. If you like what you see below, please feel free to sign up yourself to get these updates right as they come!
This month's insights
- Consumer Spending
- Decarbonization
- Bill of Ladings, eBLs
Week 4 - Originally released September 29
Recap: Innovative Industry Pursuits, from Electronic Bill of Ladings to Nuclear-Power
Over the course of September’s issues of Interlog Insights, the industry’s willing spirit to explore new, innovative, frontiers was surfaced. Week 1: Digitalization of Global Trade, eBLs Five industry associations emphatically declared their shared commitment to digitalizing global trade through electronic bill of ladings (eBLs). Currently, this crucial shipping document (essentially a receipt for shipped goods) is printed in paper form for virtually all transactions – representing the millions and millions of container shipments that occur every year through global trade. While support from key stakeholders, which includes major steamship lines, carry a degree of momentum towards this digital revolution, only 2.1 percent of all BLs were electronic last year. This signals a lot of headwind to break from the eBL to become the new standard of BLs. Week 2: Decarbonization, Wind-Powered Tech Appears a Wildcard Global transportation is one of the leading contributors to the world’s rising output of greenhouse gas (GHG) emissions. This puts a target on the industry’s back from regulators and climate organizations to cut down on its heavy carbon footprint. Among a litany of green solutions includes a simple, primordial, technology – wind power. By using sail concepts, innovative ship designs, like “Oceanbird” and “The Phenix Class”, have entered the arena as zero-emission cargo vessels. While wind power is as clean as energy can come, there’s speculation on its competitive viability. Can a souped-up sailboat hold its own against traditional, gas-guzzling, container ships? How will transit times and capacity compare? Are shippers willing to embrace this green alternative if it compromises their present-day service standards? Week 3: Nuclear Power as a Green Alternative Is Worth Considering Nuclear power’s buy-in at the green energy table results from stakeholders realizing the road map to decarbonize the industry will cost a fortune – regardless of the route that’s taken. It’s estimated the investment cost of decarbonizing the industry by 2050 could reach $1 trillion. Whether green fuels (green methanol, LNGs, etc.,) or nuclear, intimidating costs will follow suit. It’s exceedingly rare to encounter a situation when even giant ocean liners cringe at costs, but the decarbonization quest bares the exception. Such a figure demands investment funds that threaten current levels of profitmaking no matter the route that’s taken. On one hand, ramping up production and delivering green fuels for their fleets will tether carriers to a recurring series of high energy costs. This will likely shift the industry into a new energy age completely, one that is defined with increased operating costs. On the other hand, nuclear power requires an astronomical upfront cost, but the alternative also suggest potential savings in the big picture. While experts estimate an unfathomable $1 billion in startup for a single nuclear-powered ship, the very same vessel could operate for 40 years without refueling. Interest groups and proponents emphasize nuclear durability and justify the upfront investment of the source. |
NEW Podcast Episode: Golden Week coverage!
Interlog’s Emily and Rachel sit down and discuss China’s holidays of Golden Week and Mid-Autumn Festival, while also checking the pulse of the transpacific market.
Insight: How Much Are Consumers Planning to Spend this Year?
Total Halloween spending is expected to reach a record $12.2 billion which would surpass last year’s record of $10.6 billion, according to an NRF annual survey, conducted by Prosper Insights.
This survey was conducted on September 1st-6th and 8,084 consumers were asked about their shopping plans.
Taking a look at the graph above you can see the growth in consumer spending. From $3.3 billion back in 2005, all the way to a record high of $12.2 billion expected this year.
As you can see in the graph above, things have fluctuated since 2005 but continue on the up and up ever since 2021.
How consumers are celebrating Halloween this year
Consumers celebrating Halloween can be viewed in a few different ways: handing out candy; decorating their home and yards; dressing up in costumes; throwing or attending parties; or going trick-or-treating.
In the graph below, you can see that 73 percent of people are expected to participate in Halloween-related activities this year, up slightly from last year (69 percent).
You can also notice that from 2021 the percentage of people celebrating Halloween continues to increase every year.
Week 3 - Originally released September 22
Insight: Unclear Nuclear - Another Green Alternative Gaining Attention
Last week’s appraisal of sail technology as a green alternative may have seemed a bit too idealistic – at least for now.
Wind-powered containerships would emit virtually no emissions, but there are tradeoff concerns with obtuse operating results – whether that’s slower transit times or less capacity per service.
If these theoretical downsides turn off major players from deploying it, this doesn’t mean its fossil fuels or bust in return.
Perhaps, there are other ways to maritime industry can tiptoe arounds its carbon footprint.
Nuclear power has presented itself as a potential, albeit intimidating, solution for decarbonizing industry, especially as green fuel alternatives, like liquefied natural gas and green methanol, reveal intimidating costs if their supply and production are scaled to the level of power that international shipping requires.
The road map to decarbonization will cost a fortune, no matter the route taken
Energy expert circles all come to the same conclusion: it’ll cost a crap ton of money and resources for the industry to decarbonize.
It’s estimated the investment cost of decarbonizing the industry by 2050 could reach north of $1 trillion, with more liberal guesses putting the number closer to $2.5 trillion.
Whether the road map follows green fuels, nuclear power, or even wind, one way or the other there’s going to be a monster price tag. It’s just a matter of how it’ll add up over time and where the industry will opt to invest its time and money.
It’s exceedingly rare to encounter a situation when even giant ocean liners cringe at costs, but the decarbonization quest bares the exception. Such a figure demands investment funds that threaten current levels of profitmaking no matter the route that’s taken.
On one hand, ramping up production and delivering green fuels for their fleets will tether carriers to a recurring series of high energy costs. This will likely shift the industry into a new energy age completely, one that is defined with increased operating costs.
On the other hand, nuclear power requires an astronomical upfront cost, but the alternative also suggests potential savings in the big picture.
While experts estimate an unfathomable $1 billion in startup for a single nuclear-powered ship, the very same vessel could operate for 40 years without refueling. Interest groups and proponents emphasize nuclear durability and justify the upfront investment of the source.
They attribute long-term savings when compared to green fuels, which over time will mount onto operating costs, eventually exceeding those of nuclear-powered fleets.
The cost of nuclear suggests it’s a one time hit to the stomach. But, when its upfront costs are in the ballpark of a billion dollars, it isn’t any love tap – it’s a lightning jab only Muhammad Ali could deliver.
If an ocean line was to replace even one fleet with nuclear technology, it would be looking at quite the bill. And, from an insurance standpoint, nuclear doesn’t have commercial footing yet.
Final Thoughts
The point about insurance is not moot – this outstanding hurdle has stymied the technology’s viability of entering the maritime industry.
In other words, it’s not the high upfront cost of nuclear power that is repelling the industry away, it’s the fact that it can’t be properly insured at this time.
S&P Global reports nearly half of ordered containership capacity will be capable of running on either LNG or green methanol. None of the ships are nuclear-powered.
The orderbook suggests that green fuels are the roadmap moving forward – for now.
Insight: Top Five U.S. Consumer Spending Events (2019-2023)
The graph below shows the top five U.S. consumer spending events for this year as well from 2019 through 2022. Each bar on the graph below shows what the average person was expected to spend.
The top five consumer spending events that the National Retail Federation determined were: back-to-college, back-to-school, winter holidays/gifts/celebrations (thought this year has not occurred yet, hence no data for it in the draft), Mother’s Day, and Father’s Day.
For the most part, every year in each category saw an increase or stayed pretty neutral ( no change, or very minimal).
Let’s take a look at the back-to-college category. As you can see, every year – minus 2022 which saw a less than a dollar decrease from the year before – saw an increase.
This year, back-to-college sales saw their highest increase in the last four years.
Other U.S. Consumer Spending Events (2019 vs. 2023)
Of course, there’s other consumer spending events that are quite popular including the Super Bowl (I have hope that one day the Minnesota Vikings will win one!), Halloween, Valentine’s Day, and more.
Taking a look at Valentine’s Day, the years 2020 and 2023 saw the highest numbers. You could speculate that the years 2021 and 2022 were lower due to the pandemic and places not being as open.
For some of the other holidays on the chart – for example, Halloween and St. Patrick’s Day – the seasonal trend remained fairly unchanged.
Looking ahead to this year’s winder holiday season fast approaching, retailers seem pretty “set in stone” at their stores/nearby warehouses for the holiday-related goods they plan to sell, as discussed in week one of September Insights.
We will continue to keep an eye on the latest holiday forecasts/predictions, and share our thoughts and analysis when applicable.
Week 2 – Originally released September 15
Insight: Consumer Confidence Levels, August Shopping Habits, and September Forecasts
Taking a look at consumer shopping habits in the last couple of months, as we approach the winter holiday months, consumer spending growth levels outpaced income growth during the month of July.
Per data from the National Retail Federation, personal spending increased 0.8 percent month-over-month, while July’s overall consumer spending was up 6.4 percent year-over-year.
What is the import forecast for the remaining months of the year?
Where are customer confidence levels at?
“The consumer is still alive and well, but clearly more price conscious this year than last,” Art Hogan, Chief Market Strategist at B Riley Wealth.
Holiday sales this year are predicted to grow at their slowest in five years as rising interest rates, increased essential expenses, and student loan payments restarting in October are playing a role in how consumers are spending.
Thus, it may have a negative impact on the looming holiday season.
LIVE CONTENT: September webinar featuring Interlog's Vietnam partner
Interlog’s band of experts were joined by overseas forwarding partner Le Trans to talk all things Vietnam-U.S. trade, loan interest rates, and future buying patterns!
Insight: As The Shipping Industry Looks to Decarbonize, Wind-Powered Technology Appears a Wildcard
Last week, we warped into cyberspace and explored the digitization of global trade through electronic bill of ladings.
The technology of turning this crucial shipping document from paper to paperless has captivated top industry groups, from shippers to carriers.
Among a host of benefits this conceivably can bring to international shipping, eBLs are thought to save upwards of 28,000 trees per year while also lowering carbon emissions that come from transporting physical copies of this document.
While innovative technologies typically come to fruition once improved efficiencies or lower costs are realized by stakeholders, a heightened catalyst for change has also been consideration of humankind’s impact on the environment.
International shipping’s track towards decarbonization
It’s no secret that transportation is one of the leading contributors to the world’s rising greenhouse gas (GHG) emissions.
The industry, whether passenger or commercial, by truck, ship, or plane, is a gas guzzling giant.
International ocean freight shipping has been especially pressured by regulators and climate organizations to decarbonize.
While some have come at the industry with an iron fist, others have incentivized it to accelerate its track to decarbonize.
Recently, an alliance of global cargo owners called on shipping lines to submit bids to transport 600,000 (twenty-foot-equivalent) containers over a three-year period on ships powered by zero-emission fuels.
This collation of shippers agreed to pay a “green premium” on transport costs to whichever carrier steps up to the plate.
At this rate, major shipping lines, who still largely deploy traditional and gas-reliant fleets, can’t exactly stay anchored to their old ways of operating. They need to align a sustainable trajectory.
In fact, by in large, most of them are already jockeying for greener alternatives to satiate growing desire from customers for a cleaner transit of cargo.
Among a foundry of innovative applications, one is particularly interesting and, ironically, its technology points to the past as a means for a greener future.
Zero-emission transits by way of sail technology
Sails. Yes, this ancient technology, used by merchants as early as 3000 B.C., is now a source of decarbonization imagination.
Wind-powered cargo ships have entered the arena as potential suitors to carry freight emission-free.
“Oceanbird”, Wallenius Marine
Spearheaded by Swedish shipping company Wallenius Marine, Oceanbird is the ethereal title to a cargo ship powered by retractable wing-like sails. The first vessel from this Oceanbird concept will be a roro (roll on roll off) carrier with the space to transport reportedly 7,000 cars.
As anything with the word bird in it would suggest, the vessel’s main energy force comes from wind. The wing sails have more in common with airplane wings than traditional sails which renders aerodynamics as important player in its design. The wing consists of a main sail and a flap, optimizing aerodynamic forces.
For example, if the graceful Oceanbird were to pass under a bridge when entering a harbor, the smaller segment folds into the other before the whole wing sail is tilted.
Wallenius reports its first vessel with this full-scale wing design will set sail in 2024.
“The Phenix Class”, Transport A La Voile
Developed by French company Transport A La Voile (TOWT), the Phenix Class concept of cargo ships is set to launch soon in June 2023.
Like the Oceanbird, the Phenix Class relies on wind force to deliver its promise of navigating the seven seas carbon-free. From its website, the Phenix Class may decarbonize up to 90 percent per ton per And ilometer compared to a traditional containership.
From a capacity standpoint, the sail-powered vessel is slotted to hold 1,100 tons of freight. For reference, a “conventional” container ship (as defined by TWOT) carries 38,000 tons.
When considering transit time, the Phenix Class is projected to reach New York from Le Havre (a seaport on France’s northwest coast) in 13 days. While theoretical at this time, that transit would be competitive in today’s industry.
Week 1 – Originally released September 8
Insight: Supply Chain Groups, Major Shipping Lines Onboard with Electronic Bill of Ladings
Supply chain industry groups have rallied together to launch the “declaration of the electronic Bill of Lading” (eBL).
Just as NBA legends, like Jordan, Magic, and Bird, forming the Dream Team to win Olympic Gold, this collation of supply chain pros cements its support to the digitalization of global trade.
The emphatic declaration was inked this past Tuesday by five industry associations: BIMCO, the Digital Container Shipping Association (DCSA), the International Chamber of Commerce (ICC), the FIT Alliance and the International Federation of Freight Forwarders Association (FIATA).
A bill of lading is an essential document in container shipping and arguably the most critical of them all. It presumes several functions: document of title, receipt for shipped goods and a record of agreed terms and conditions on a shipment.
For the millions and millions of containers that circulate across the world’s oceans to and from faraway ports, an unimaginable number of BLs are produced as relics of these countless transactions.
Similarly, to a printed receipt one receives at a supermarket or department store, BLs are virtually always printed in paper form. In fact, only 2.1 percent of these documents were otherwise electronic last year.
The paper footprint of these could probably wrap around the world a couple times and that’s why these industry groups are trying to make the eBL the new BL.
Potential benefits of a new digital age
The push towards adopting industry-wide allegiance to the eBL isn’t just to save the trees (although it’s estimated the move could save 28,000 per year).
Digitalization has potential to streamline the movement of goods by eliminating what folks in the business call trade friction.
A microcosm of this digital liberty is like using Spotify for music-streaming instead of a physical CD player. At the touch of a button you can sift through and play varying genres and artists as opposed to rummaging through different discs to play just one album.
Of course, what it means for international trade is the possibility of unlocking trade growth through this technology.
Aside from it being lauded as sustainable, eBLs are theorized to make trading more efficient, reliable, and secure.
Several major shipping lines also made their own commitment to eBLs back in February MSC, Maersk, CMA CGM, Hapag-Lloyd, ONE, Evergreen, Yang Ming, HMM, and ZIM (all members of the DCSA) committed to use only eBLs by 2030.
The great migration from paper to electronic appears to be accelerating as influential stakeholders in global trade are onboard with the switch.
At this time, however, paper is still king. As the miniscule 2.1 percent figure suggests, eBLs remain significantly underused industry wide.
While this number may rise every year, a massive industry overhaul cannot be expected overnight.
And, while this titan collective of shipping lines, forwarders, and shippers are on the same page a vision of world trade archived with eBLs, the execution of this ideal will be another story.
For example, many electronic users, whether shipping line or forwarder, use their own third-party eBL vendors.
The theorized efficiency of this digital trade system will likely have its own kinks.
Insight: Retailers Figuring Out the Right Strategies for the Right Amount of Inventory
Significant inventory cuts have been occurring, largely in part to a more ‘normalized’ supply chain.
One retailer, for example, Abercrombie & Fitch has been seeing shipping times improve and customers chasing more product, which had the company reduce inventories by 30 percent year-over-year in quarter 2.
“There’s capacity out there in the factories, which is nice for us to be able to run a lean inventory business,” Scott Lipesky, Chief Financial Officer at Abercrombie & Fitch told analysts.
Additionally, the company has been seeing a “significant improvement” in operating margins – 9.6 percent in Q2 – from a year ago, mainly due to falling costs for freight and raw materials, the company says.
“With clean current inventory, we controlled the promotional calendar and reduced discounts in the second quarter, further supporting gross profit rate expansion from last year,” Fran Horowitz, Abercrombie & Fitch Chief Executive Officer said in the call with analysts.
Approaching the holiday season
Most of the holiday related goods that retailers plan to sell are already set in stone at the stores or in nearby warehouses, which cuts into freight demand.
“As the consumer now has become a little bit more careful around some other choices, we have to continue to refine what we do,” Jared Briskin Executive Vice President of Merchandising at Hibbett said in an earnings call with analysts.
These consumer changes have some retailers cutting back on products they believe are not on trend, or lacking interest.
What did you think?
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