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Global Port Congestion, High Shipping Rates to Last Into 2023 – Execs

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(C) Reuters. FILE PHOTO: Containers are seen on a shipping dock, as the global outbreak of the coronavirus disease (COVID-19) continues, in the Port of Los Angeles, California, U.S., April 16, 2020. REUTERS/Lucy Nicholson/File Photo

By Jeslyn Lerh

SINGAPORE (Reuters) – Global port congestion is set to continue until at least early 2023 and keep spot freight rates elevated, logistics executives said on Wednesday, urging charterers to switch to long-term contracts to manage shipping costs.

The COVID-19 outbreak has lengthened ship delivery times since 2020, pushing up freight costs, while the Russia-Ukraine conflict and lockdowns in Shanghai have added to supply chain disruptions this year.

“We believe the current congestions, not only the ports but also the landside infrastructure, will be there at least till Q1 2023,” said Peter Sundara, head of global ocean freight product for the global logistics division at Visy Industries.

While more vessels could be added to the global fleet next year, this does not mean that freight rates will drop broadly as it depends on how ship carriers allocate increased vessel capacities, he told the S&P Global (NYSE:SPGI) Platts Bunker and Shipping Summit.

Eric Jin, head of investment support at industrial equipment supplier BMT Asia Pacific, said rising shipping costs, longer transit times and higher uncertainty will be the “new normal” for the shipping industry.

Spot chartering rates have held firm so far this year, with supply chain disruptions and port congestion affecting ships globally, particularly in the United States and China.

The executives recommended charterers sign longer-term contracts with shipowners to overcome issues of volatile cost and availability.

It’s “no longer a case of going for three months or six months, one month, not even one year, but two to three years … because we want certainty in cost and certainty in space,” said Sundara.

BMT’s Jin said more than 60% or 65% of shippers were remaining on spot rates.

“This means they are not taking measures to deal with the new situation, this means they are prone to full supply chain risks,” he added.

Global port congestion, high shipping rates to last into 2023 – execs

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Oil Extends Losses As Recession Fears Mount

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(C) Reuters. FILE PHOTO: Sticker reads crude oil on the side of a storage tank in the Permian Basin in Mentone, Loving County, Texas, U.S. November 22, 2019. REUTERS/Angus Mordant/

By Yuka Obayashi

TOKYO (Reuters) – Oil prices fell 2% in early trade on Thursday, extending losses from the previous day, as investors worried that aggressive U.S. interest rate hikes could trigger a recession and dent fuel demand.

U.S. West Texas Intermediate (WTI) crude futures fell $2.39, or 2.3%, to $103.80 a barrel by 0031 GMT. Brent crude futures dropped $2.24, or 2.0%, to $109.50 a barrel.

Both benchmarks tumbled around 3% on Wednesday to hit their lowest levels since mid-May.

Investors are continuing to assess how worried they need to be about central banks potentially pushing the world economy into recession as they attempt to curb inflation with interest rate increases.

“Oil markets remained under pressure as investors were concerned that U.S. rate hikes would stall an economic recovery and dampen fuel demand,” said Kazuhiko Saito, chief analyst at Fujitomi Securities Co Ltd.

“The U.S. and European hedge funds have been selling off their positions ahead of the end of the second quarter, which is also cooling investor sentiment,” he said, predicting the WTI could fall below $100 a barrel before the July 4 holiday in the United States.

The Federal Reserve is not trying to engineer a recession to stop inflation but is fully committed to bringing prices under control even if doing so risks an economic downturn, U.S. central bank chief Jerome Powell said on Wednesday.

U.S. President Joe Biden, meanwhile, called on Congress to pass a three-month suspension of the federal gasoline tax to help combat record pump prices and provide temporary relief for American families this summer.

“The news temporarily boosted the oil product prices, but it was later viewed that even if the gasoline tax was suspended, retail prices would remain high, making it difficult to stimulate demand,” Fujitomi’s Saito said.

The U.S. Energy Information Administration said its weekly oil data, which was scheduled for release on Thursday, will be delayed due to systems issues until at least next week.

Oil extends losses as recession fears mount

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BMW Starts Production at New $2.2 Billion China Plant to Ramp up EV Output

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(C) Reuters. FILE PHOTO: A BMW iX electric vehicle (EV) is seen displayed at the BMW booth during a media day for the Auto Shanghai show in Shanghai, China April 19, 2021. REUTERS/Aly Song

SHANGHAI (Reuters) – Germany’s BMW said on Thursday that production has formally begun at a new plant in China with an investment of 15 billion yuan ($2.24 billion) as the carmaker accelerates electric vehicle (EV) production.

The Lydia plant, BMW’s third car assembly facility in China, located in the northeastern city of Shenyang, Liaoning province, will increase BMW’s annual output in the world’s biggest auto market to 830,000 vehicles from 700,0000 in 2021, the company said.

The plant is designed to be capable of producing battery-powered electric cars only according to market demand on its flexible manufacturing lines, BMW said.

The first model that will roll off the Lydia plant’s production lines is the i3, a pure electric mid-sized sports sedan, BMW said, increasing the range of its EV models for Chinese customers to 13 next year.

Tesla (NASDAQ:TSLA) and Chinese automakers such as BYD dominate the booming EV market in China, with sales more than doubling from a year ago. Meanwhile kings of the internal combustion engine age such as General Motors (NYSE:GM) and Volkswagen (ETR:VOWG_p) are falling behind.

Nearly a quarter of the cars sold in China in the first five months of this year were powered by batteries, according to data from China Association of Automotive Manufactures.

Meanwhile BMW sold 208,507 vehicles in China, its biggest market, in the first quarter, marking a 9.2% drop from a year ago, according to a company filing.

($1 = 6.6983 Chinese yuan renminbi)

BMW starts production at new $2.2 billion China plant to ramp up EV output

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Asian Stocks Down After Fed Chair Acknowledges the Risk of a Recession

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(C) Reuters

By Zhang Mengying

Investing.com – Asia Pacific stocks were mostly down on Thursday morning as investors assessed the monetary policy outlook after U.S. Federal Reserve Chair Jerome Powell acknowledged the risk of a recession.

Japan’s Nikkei 225 stabalized by 8:45 PM ET (1:45 AM GMT).

South Korea’s KOSPI edged down 0.10%.

In Australia, the ASX 200 rose 0.30%.

Hong Kong’s Hang Seng was up 0.62%.

China’s Shanghai Composite was up 0.39% while the Shenzhen Component was down 0.49%.

U.S. 10-year Treasuries yields declined two basis points to 3.13%.

Investors’ concerns grew as Fed Chair Jerome Powell acknowledged the risk of a recession. Powell said that an aggressive interest rate hike could lead to an economic contraction and called a soft landing “very challenging” in his testimony to the Senate Wednesday.

“We are still in an era where uncertainty is elevated and is expected to remain so for quite a while,” Advisors Capital Management portfolio manager JoAnne Feeney told Bloomberg.

“It’s risky right now in terms of the forward outlook for the global economy. Recession risk has clearly risen.”

Powell “has acknowledged that rates will continue to increase, but the FOMC committee is cognizant of watching incoming data, suggesting the Fed will not be exclusively on autopilot with tightening,” Integrity Asset Management portfolio manager Joe Gilbert told Bloomberg.

Powell will continue his testimony to the House later in the day.

On the data front, U.S. initial jobless claims is due on Thursday while U.S. University of Michigan consumer sentiment will be released on Friday.

Asian Stocks Down after Fed Chair Acknowledges the Risk of a Recession

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