mdstransmodal

Global trade finds new channels as US tariffs reshape flows

Thu, 12 Mar 2026 10:32:59 GMT

Global containerised trade (including maritime and overland flows) continued its expansion in 2025, reaching 324.3 million TEU, up 3.4% on 2024. Growth was led by exports from the Far East, which rose by more than 7%. North America, by contrast, was the only region to experience a contraction in exports, down by 2% reflecting the ongoing effects of US tariffs on key trading partners. The long-term view from 2006 to 2025 shows that such shifts are not unusual: trade flows often reroute temporarily in response to shocks, but overall volumes continue to grow, highlighting the resilience of global logistics networks.

US trade flows illustrate these adaptive patterns. Exports fell slightly by 2.3% in 2025, with declines to North America (-4.7%) and the Far East (-6.9%) offset by growth to Europe (+5.9%), Latin America (+4.2%), the Gulf & ISC (+2.2%). Imports were broadly stable (-0.7%), though the Far East contracted slightly (-1.4%) while the Gulf & ISC grew by over 10%. These figures suggest that while US–China trade is under pressure, overall flows are adjusting rather than disappearing, and alternative suppliers are stepping in.

At the country level, US imports from China fell sharply by 18%, yet total Far East imports declined by only 1.4%, as Vietnam (+23.7%), Thailand (+31%), and Malaysia (+32.9%) counterbalanced the drop. On the export side, US shipments to China also fell 18%, but exports to Vietnam (+48.6%), India (+9.7%), and South Korea (+4.3%) increased. This diversification demonstrates a strategic shift within the Far East, as the US reduces dependence on China while engaging more actively with other regional partners.

China’s broader trade patterns reinforce this trend. Exports to the US dropped 18%, but flows to Europe rose 11%, to Sub-Saharan Africa 25%, and to regional Far East partners 10%. Imports into China declined modestly (-1.2%) but showed shifts in origin markets. These movements illustrate the adaptive nature of global trade: when one corridor contracts, others expand to maintain overall flow, demonstrating that trade is like water: it will find new channels to continue moving.

Europe and the Gulf are emerging as beneficiaries of these rerouted flows. EU exports increased 2.1% in 2025, driven by strong intra-European trade and Germany’s growth (+8.1%), while imports rose 4%, led by the Far East (+11.6%) and Gulf (+12.1%). This demonstrates the flexibility of global networks: when US–China trade slows, Europe captures displaced flows, maintaining balance in logistics and reinforcing its strategic importance.

Historically, similar rerouting has been observed during previous US–China tensions or after systemic shocks like the 2008 financial crisis. Typically, flows rebalance once tariffs or disruptions subside. However, the scale of adjustments in 2025 is notable, suggesting some realignment could be longer-lasting, especially if supply chains permanently shift to alternative suppliers.

The overarching lesson is clear: trade adapts. Even under pressure from tariffs or geopolitical shocks, goods continue to move, finding new pathways and alternative partners. For industry stakeholders and decision-makers, the imperative is to monitor not only the total volume of trade but also the changing routes and relationships that define the future of global commerce. The patterns emerging in 2025 offer both challenges and opportunities for infrastructure planning, supply chain resilience, and strategic engagement with emerging markets.

WEBINAR: City logistics for historic cities - lessons from Chester on Wednesday 25th March @ 1pm

Thu, 12 Mar 2026 09:37:11 GMT

City logistics is vital for local economies, yet unmanaged deliveries lead to congestion, additional emissions, inefficiencies for logistics operators and complaints from residents.

This 30-minute lunchtime webinar provides data-driven insights and practical, low-cost recommendations from a study on city logistics in the heritage city of Chester in Northwest England. It shows how the public and private sectors can work together to balance the economic vitality of their towns and cities with sustainability objectives and quality of place.

The webinar will be hosted by Chris Rowland , who has 30 years' experience working as a freight transport economist specialising in the impact of policy on freight transport operations. He has a particular interest in city logistics, having completed projects on 'last mile' logistics for the European Commission, the Urban Transport Group, a range of English city regions and the National Transport Authority in Ireland.

Strengthening our commercial & operational offer

Thu, 12 Mar 2026 09:25:20 GMT

We’re very pleased to announce that MDS Transmodal has teamed up with Mark Grimshaw Smith and Geoff Lippitt as Associates, further strengthening the depth, breadth and delivery capability of our services to commercial clients in the freight and logistics sector both in the UK and globally.

Mark and Geoff bring an exceptional combination of strategic, operational and commercial leadership experience across the road- and rail-based logistics and maritime transport sectors. Their experience at board and executive level in major organisations adds operational and commercial insight to MDS Transmodal’s independent, evidence based advice.

Together, we can support commercial clients with:

Rail, maritime and intermodal market and feasibility studies, business cases and investment appraisals
Development and execution of decarbonisation strategies
Modal shift solutions delivering cost efficiency, resilience and sustainability
Commercial and operational optimisation across supply chains and terminals
Support with market entry, service development and growth strategies
Expert input on safety, governance and best practice within logistics environments

This expanded associate team enables us to seamlessly combine commercial analysis, policy and modelling expertise with practical commercial leadership and delivery experience – ensuring our advice is both robust and actionable.

We’re excited about what this means for existing and new clients, and we look forward to working with businesses seeking future proofed, sustainable and commercially effective freight and logistics solutions.

If you’d like to discuss how we can support your organisation, please get in touch.

Scotland-Continent Ferry Service

Wed, 11 Mar 2026 15:28:28 GMT

A potential freight and passenger ferry service directly linking Scotland to the Continent is being planned for later in 2026. While MDS Transmodal worked with Scottish Enterprise at the turn of the century to launch the first service, it is now 8 years since a freight-only service stopped and some 16 years since passenger and freight services ceased. While the Scottish port would, as before, be Rosyth, the continental ports is planned to be Dunkirk in France.

Scotland is pretty well unique in the UK as a net exporter of goods to the EU and so it is not surprising that Scottish exporters and their hauliers would welcome a direct ferry connection to the European continental mainland, as it provides another option and additional capacity in the market.

As the service would be for both passengers and freight, the choice of port is always going to be a compromise – with freight mainly heading east towards Germany and Poland and Scottish passengers mainly wanting to drive south. Zeebrugge – the continental port for the original service - might be a better compromise than Dunkirk, but there may not be space for another service at the Belgian port. And DFDS, which seems to be the front runner to operate the service, already has a terminal at the French port.

The quay-to-quay crossing time of 20 hours is a long time to be on a ferry. Road hauliers do not usually want to incur the cost of a driver and tractor unit being unproductive and passenger demand is likely to be highly seasonal. This means that the service will therefore be reliant on freight on a year-round basis and Scotland is already reasonably well-served – at least for slower-moving unitised freight.

One of the traditional arguments for the service is that it reduces lorry miles and therefore generates environmental benefits. Data from the MDS Transmodal Containership Databank suggest there are five weekly container services to the Near Continent from Grangemouth and an additional three services each week from Greenock. The Central Belt is also served by a near daily direct rail freight service from the Central Belt to Teesport, with a connection to a thrice weekly RORO service to Zeebrugge. 43% of Scottish whisky exports, for example, are already routed via Teesport, and a further 3% via Liverpool (with both ports linked by rail to the Central Belt), with a further 27% via Grangemouth and Greenock. 73% of whisky exports are therefore already exported directly from Scotland or through English ports with good rail connections to Scotland.

DFDS seems to be planning to deploy only a single vessel during the launch phase, which is likely to be a prudent strategy. While a single ship would only be able to offer a departure in each direction every other day, it significantly reduces the risk for the operator, while demonstrating to its haulier customers that the service will be there for the long-term. Subject to demand, DFDS could in due course add a second vessel.

Mapping 20 years of change in the global liner shipping network

Wed, 11 Mar 2026 14:57:37 GMT

Connections to global markets and supplies are a precondition for trade driven development, investments, and jobs. Here, we analyze how the global shipping network has evolved and the impact on countries position in the network over the last two decades.

Two snapshots of the global liner shipping network: Moving towards more hub-and-spoke connections

The data reviewed here describe scheduled container shipping services between pairs of countries, capturing both the presence of a direct connection and the number of shipping lines operating on each bilateral link. We benefit from a unique dataset, the MDST Containership Databank[1] , which comprehensively captures all regular container shipping services, globally, for two full decades. The period has been characterized by a process of consolidation among shipping lines, while also seeing a continued growth of containerized trade.

The analysis compares two snapshots of the network, one from early 2006 and one from early 2026, redrawn using identical methods to permit visual comparison.[2] The third chart displays the distribution of the number of direct partners per country in each year.

The dataset enables an examination of the number of bilateral connections, and the intensity of those connections, expressed through shipping line counts. It also allows a comparison of how direct connectivity is distributed, and how the network’s structure has shifted.

Network characteristics: What has changed over the last 20 years

The total number of countries included in the global liner shipping network rises from 174 in 2006 to 178 in 2026. Yet the number of direct bilateral connections falls from 2,444 to 2,243. A larger network with fewer direct links results in a lower density: the percentage of country pairs with a direct link decreased from 16.2% to 14.2%.

The main consequence is that trade between more than four out of five pairs of countries depends on transshipment, and this reliance becomes more pronounced over the two decades, as direct links thin out. For many smaller developing economies and small island states, which already sit at the lower end of the connectivity distribution, this shift heightens their dependence on intermediary hubs for access to global markets.

The average number of direct partners per country falls from 28.1 to 25.2, and the median declines from 22 to 17. These shifts are also visible in the histogram of degree distributions, where the 2026 curve sits to the left of the 2006 curve. More countries have fewer direct partners than they did twenty years earlier.

The long tail of highly connected countries also shortens. In 2006, the United Kingdom had 117 direct partners, followed by Belgium and the United States . By 2026, the top position is held by Spain with 97, followed closely by the United States , China , and the Netherlands . The underlying cause for these trends is the process of consolidation in liner shipping, including mergers and acquisitions, which, combined with larger vessel sizes, encourages hub-and-spoke operations.

The range between the best and worst connected countries remains high. In both years the least connected countries have only one or two direct partners—these are mostly small island states. For these economies, direct maritime access is limited, and the decline in average connectivity globally is particular concern, as investments and new jobs require access to markets and to supplies.

Competing and connecting: Countries served by the shipping lines

Two different metrics are useful to describe service intensity in the network.

First, at the global level (across all bilateral links), the number of shipping lines per edge captures how intensively each country pair is served. The median remains unchanged at four liner companies, while the global average declines from 9.76 to 8.32 between 2006 and 2026. This combination indicates that the “typical” link is stable, but heavily served routes have lost choice over time, making the overall distribution more uneven.

Second, at the country level, we look at the average number of lines per direct connection for each country. In 2006, a typical country had 6.7 companies per link, with a median of five, but the range was wide: from countries averaging only two operators per route to a few with averages approaching twenty‑four. This reflected large differences in competitive conditions across countries, particularly disadvantaging many small developing economies and small island states. By 2026, this country‑level pattern largely persists, though with lower averages across much of the distribution. Some countries continue to enjoy routes served by many companies, while many others remain reliant on a small number of operators. The persistence of low per‑country averages for less connected economies underscores the continued unevenness of service availability in the global network.

Improving connectivity

A country’s position in the global liner shipping network depends on three key determinants[3].

1. Its domestic cargo base and hinterland : Carriers are more likely to call in a port if there is demand for import and export cargo.
2. Its geographical position: The closer a country is to the main shipping routes, the less costly it is for the shipping line to deviate and call in an additional port.
3. Port performance: The time ships and their cargo spend in port is a key consideration for shipping lines to choose a port. Shippers, i.e. the carriers’ clients, have also an interest in short cargo dwell times.

Shipping lines may not only choose to call in a port, but also potentially invest through vertically integrated terminal operators. Once a terminal is operated by a shipping line-associated operator, it is more likely that its sister shipping line or alliance chooses this port – with the collateral that competitors my prefer not to call elsewhere.

The World Bank Group is supporting its clients to improve their position in the global shipping network to ensure that trade-driven development creates the necessary jobs. Performance indicators such as the Container Port Performance Index (CPPI) or the Logistics Performance Indicators (LPI) help identify potential improvements in the time ships and containers spend in port. The Global Supply Chain Stress Index (GSCSI) tracks supply chain stress, including port congestion. And the Port Reform Toolkit (PRT) helps governments and private investors identify options for public-private-partnerships and potential investments in partnership with the World Bank Group.

First published on World Bank Blogs .

^[1] ^{The “Containership Databank” provided by MDS Transmodal covers the world’s container carrying fleet of over 6,000 vessels based on known service deployment. Every vessel in service has multiple fields of information including operator, service, route, TEU capacity, service frequency, port rotation and much more. The Containership Databank also includes information about vessels on order and vessels removed from the commissioned fleet. Service deployment of individual vessels in the fleet frequently changes - the Containership Databank tracks these changes and is continually updated. Analyses that are regularly produced to provide advice for clients include: Capacity by operator, route and trade lane; Trends on a consistent quarterly basis since 2006; and Fleet analysis by operator, size, configuration of ships and fuel type.}

^{The Containership Databank is among the sources for global indicators such as the Logistics Performance Indicators (LPI) developed by the World Bank; the Liner Shipping Connectivity Index (LSCI) developed in partnership with UNCTAD; and the Maritime Trade Connectivity Indicator (MTCI) developed in partnership with OECD/ITF.}

^{The data reviewed here describe scheduled container shipping services between pairs of countries, capturing both the presence of a direct connection and the number of shipping lines operating on each bilateral link.}

^{[2]

The liner shipping network is modelled as a weighted, undirected graph. Nodes represent countries (ISO‑3 codes). An edge exists between two countries if at least one liner shipping company operates a direct bilateral service; edge weight reflects the number of distinct shipping lines serving that pair.}

^{Layout is generated using a force‑directed spring layout (NetworkX spring_layout) with parameters: k = 4.0, iterations = 500, random seed = 42, node_size = log(degree+1) × 75, weighted_degree = ∑ companies on all adjacent edges. Distances are weighted inversely to edge weights, so country pairs connected by many shipping lines are drawn closer together.}

^{Images generated with Microsoft Copilot Analyst World Bank Group license.}

[3] Wang and Cullinane 2016; Fugazza and Hoffmann 2017; UNCTAD 2017; Jouili 2019; Ducruet 2020; Hoffmann and Hoffmann 2020; Guerrero et al. 2021; Mishra et al. 2021; Hoffmann and Hoffmann 2021; Wang, Dou, and Haralambides 2022; Hoffmann et al. 2024; Faure and Ducruet 2025; Canbay et al. 2026; Tsantis et al. 2026.

Taxing times: Is road pricing the future for freight taxation?

Mon, 05 Jan 2026 12:03:12 GMT

While the Chancellor of the Exchequer introduced a distance-based tax for electric cars – but not for HGVs or LGVs – in the 2025 Budget, the freight industry regards the eventual introduction of a road pricing scheme for HGVs as being inevitable. Based on modelling of freight transport flows in Great Britain, what could the impact of such a scheme be?

In the 2025 Budget the Chancellor announced a proposal to introduce a crude form of distance-based taxation for electric and hybrid cars, with the introduction of an Electric Vehicle Excise Duty (eVED) of 3p per mile for electric vehicles and 1.5p per mile for plug-in hybrids from April 2028. Taxation of HGVs was left unchanged, probably because electric HGVs represent only 0.02% of the total registered fleet.

In our pre-Budget article on the taxation of road haulage we explained how the transition to road pricing is not just a fiscal necessity—it’s a strategic imperative. As we move towards net zero, the UK must rethink how it funds its road infrastructure and this cannot ignore freight. We also explained how a politically viable route to full-scale road pricing - reflecting the type of road, the level of congestion and even the time of day – could start with freight. The road haulage industry already sees road pricing as inevitable—and freight doesn’t vote.

An initial freight-focused road pricing model could serve as a blueprint, balancing fiscal sustainability with environmental goals. But careful design and modelling will be essential to avoid unintended consequences.

Modelling road pricing for freight: the scenarios

MDS Transmodal has developed scenarios for the implementation of road pricing for freight using its Great Britain Freight Model, the “best in class” freight transport demand simulation model. This Road Pricing Scenario assumed that the price per HGV mile was based on internalising all the net external costs. These costs - such as the congestion imposed on other road users, the cost of emissions and the cost of accidents – are encapsulated monetarily in what the UK Department for Transport calls Modal Shift Benefits (MSBs); these are the values per mile that are used by the DfT to justify subsidies to the rail freight industry for the removal of HGVs from the highways network.

Such a system of road pricing would be essentially distance-based, but the price per mile would vary significantly according to the type and location of the road as the prices per mile, as defined by the DfT, were heavily weighted towards the costs of congestion. An HGV on the M25 London Orbital motorway would have to pay a much higher price per mile than the same HGV on the M6 through Cumbria.

The Road Pricing Scenario was then compared with a counterfactual called the Policy Neutral Scenario, where the same aggregate demand for freight was moving between the same origins and destinations within the model, but with the taxation of (diesel) HGVs remaining unchanged.

Modelling road pricing in Great Britain: the results

The results of the modelling suggest that such a system of road pricing would secure some environmental benefits, but there would also be some unintended consequences.

On the positive side, there was a significant shift away from road to rail freight, with an 80% increase in tonne kilometres transported by rail in terms f tonne kilometres. This was partly due to some of the assumptions which favoured rail in any case, such as the availability of additional capacity at rail-connected distribution parks, but was mainly due to road freight being required to pay for its full net external costs. This extent of modal switch is, as it happens, very similar to the Government’s published rail freight target of 75% growth by 2050.

There was also a switch of international road freight through ports away from the shorter ferry routes - principally across the Short Straits between Dover and Calais or Dunkirk - to longer distance RORO routes via the major east coast estuaries; this was due to a proportion of the market choosing to take a longer crossing of the North Sea to avoid congested (and therefore relatively costly) sections of the motorway network in the south of England.

There was also the unintended consequence of a diversion of road freight away from congested roads to less congested sections of the highways network to such an extent that the total road freight tonne kilometres actually increased by 2.5% from 27.6 billion HGV km in the Policy Scenario to 28.3 billion HGV kilometres in the Road Pricing Scenario. This rather perverse result is due to HGVs choosing to divert to longer routes on the highways infrastructure network to minimise door-to-door costs, so that total HGV kilometres increased.

The way forward

The results of the modelling, and lessons from the Maut in Germany, suggest that a system of road pricing for HGVs in Great Britain should be:

Comprehensive, encompassing the whole highways network to avoid diversion of traffic onto secondary A roads;
Distance-based, to reflect use of the network;
Equitable and differentiated, so that it applies to all HGVs operating on the British road network and replaces existing taxation of HGVs with charges per mile that reflect the up-to-date net externalities of each propulsion type and size of vehicle;
Transparent, with clear charges for the use of different roads by network link and type of vehicle; and
Signalled well in advance, so that hauliers can plan their investment in new vehicles to minimise their overall capital and operating costs.

While road pricing for HGVs is not seen as a high priority by the Chancellor of the Exchequer at the moment, the logistics industry regards it as inevitable and is likely to accept its introduction if a scheme was designed to incentivise the switch to zero emission vehicles up to 2040 and HGVs were then charged for use of the highways infrastructure network on a comprehensive, consistent and transparent basis over the longer term. As freight doesn’t vote, the introduction of road pricing for freight road could be achieved with relatively little political risk.

Will any of the parties find the political courage to take up the challenge?

Strategic outlook for UK rail freight: 2040 and 2050 forecast scenarios

Thu, 20 Nov 2025 10:11:08 GMT

To support long-term strategic planning and investment in the UK rail freight sector, the Great British Railways Transition Team (GBR-TT) commissioned MDS Transmodal to produce detailed forecasts of future rail freight demand for the years 2040/41 and 2050/51. This analysis provides a scenario-based outlook on how evolving market conditions and policy decisions could shape the trajectory of rail freight over the coming decades.

Scenario-based modelling

The report presents four distinct scenarios for each forecast year, reflecting varying degrees of policy support and infrastructure investment:

Scenario 1: A road-centric future with minimal rail investment.
Scenario 2: Continuation of current government transport policies.
Scenario 3: A rail-prioritised strategy led by infrastructure managers.
Scenario 4: A pro-rail policy environment with strong public and private sector backing.

Each scenario incorporates assumptions about fuel costs, driver wages, carbon pricing, and network access charges, which collectively influence the competitiveness of rail versus road freight.

Market focus and methodology

The main growth is focused on two principal market segments:

Intermodal container traffic, including domestic and international flows to and from ports and the Channel Tunnel.
Construction materials, particularly aggregates.

The modelling approach is unconstrained by current network capacity, offering a view of potential demand under each scenario without such infrastructure constraints.

Key findings

A summary of the results for each scenario is as follows:

The least favourable scenario projects modest growth, whereas in high-growth scenarios rail freight could more than triple, driven by expanded intermodal services, urban freight terminals, and decarbonisation initiatives.

The demand forecasts are assigned to the rail network. The map below shows the assignment for 2050/51 scenario 2 in terms of freight trains per weekday.

These forecasts provide a robust evidence base for setting strategic targets and prioritising infrastructure development in the Long Term Strategy for Rail. They reinforce the impact of transport policy and infrastructure development, as well as market-oriented development in Strategic Rail Freight Interchanges on the future potential of rail freight.

For more information on the rail freight forecasts, please contact: web.enquiries@mdst.co.uk .

City logistics: Chester City Centre Logistics Report

Wed, 19 Nov 2025 12:04:18 GMT

This major study, carried out on a pro bono basis for MDST’s home city, used primary research techniques to establish any issues related to delivering goods into the historic city centre of Chester. The city has a very well-established pedestrianised zone, which means that deliveries of freight are banned in the city centre for most of the working day. The research highlighted some of the key issues that emerged, which mainly related to a lack of flexibility for logistics operators in making deliveries and a lack of choice for city centre residents for the collection of parcels using active modes of transport. The Report suggests some potential solutions and these are most likely to be a combination of minor, low-cost enhancements to the infrastructure for deliveries – such as well-designed loading bays and improved signage – allied with appropriate enforcement and more options for convenient parcel collections by city centre residents on foot or bicycle.

Pedestrianisation in Chester

The Chester City Centre Logistics Report was completed in 2025, which marks the 50th anniversary of the pedestrianisation of Chester city centre. The pedestrianisation of the city centre is therefore very well-established but it does continue to pose particular issues for the delivery and collection of freight as it closes much of the historic centre to freight traffic for most of the working day.

The work programme

One of the main objectives of the project was to establish the nature and extent of any issues related to freight deliveries and collections in Chester city centre based on primary research. Three research tasks were completed:

An observational survey of movements of freight vehicles in and out of the centre of Chester;
A survey of businesses located in Chester city centre; and
A survey of residents living in the city centre.

The research therefore established some facts about the size and nature of freight vehicle movements in and out of the city and then sought the views of two key stakeholders - businesses and residents – located in the city. The results of the research could then be used as the basis for determining what ‘problems’ exist before developing some potential solutions.

The issues

The evidence obtained during this project did not overall highlight many significant issues related to the delivery and collection of goods in Chester city centre, despite it being closed to vehicles during much of the working day and into the evening at some times of the year. This may be due to the pedestrianised area being so well established, which means that city centre businesses and many of their logistics providers have adapted their operations to allow for deliveries and collections before 10:30 in the morning. This does, however, lead to some knock-on impacts on the logistics operators’ efficiency.

In addition, some parcels operators need or choose to make deliveries when the city centre is closed to vehicular traffic, which generates some issues for residents in streets close to the city centre. It highlights that many of issues relate to the lack flexibility of the timing of deliveries and how some logistics operators seeks to find workarounds.

Potential solutions

The Report offers potential solutions, which would require the local highways authority to intervene. In MDST’s view any interventions should be a combination of minor, low-cost enhancements to the infrastructure for deliveries – such as well-designed loading bays and improved signage – allied with appropriate enforcement and more options for convenient parcel collections by city centre residents on foot or bicycle.

Acknowledgements

The study was part-funded by the European Union’s Horizon 2020 Research & Technical Development Programme while MDS Transmodal was working as a partner in the SENATOR project between 2021 and 2024. Additional resources were then provided by MDS Transmodal on a pro bono basis. The study was completed with the kind support of Chester Business Investment District (BID), Chester Residents Association Group (CRAG) and Chester West and Chester Council (CW&C), although the opinions expressed, and conclusions reached, remain those of the authors.

More information

For more information on the Report and how MDST can help your town or city to find the most appropriate balance between the needs of its residents, businesses and the environment, please contact: web.enquiries@mdst.co.uk

Fuel Duty for diesel

Tue, 18 Nov 2025 16:54:01 GMT

During the 2000s, fuel duty for road vehicles increased annually by the rate of inflation. While this policy has never officially been abandoned, between 2011 and 2022 the rate of duty was frozen, and then further reduced by 5p per litre in 2022 following the invasion of Ukraine. What has been the impact in terms of tax revenue and costs to the logistics industry?

While the price of diesel and petrol is heavily influenced by world energy markets, in particular the cost of crude oil, a substantial proportion of the ‘pump price’ paid by road users consists of taxes levied by Government. The table below shows the different cost elements which together comprise the current price of a litre of diesel, with fuel duty accounting for 37% of the total (noting that a VAT registered commercial operator will effectively reclaim the VAT element).

Cost Components of a litre of Diesel

Source: HMRC and MDST calculations, based on average 'pump price' in week commencing 20 Oct 2025 as quoted in the DfT weekly price survey

During the 2000s, the Government pursued a policy of increasing fuel duty for road vehicles annually by the rate of inflation. This ensured the overall price of road fuel broadly maintained its value in real terms at a time when the cost of crude oil was relatively stable. While this policy has never officially been abandoned, each budget statement since 2011 has announced a freeze to the rate of duty for both diesel and petrol. Supporting household finances and the road haulage sector has often been cited as justification for the freeze. There was also a cut of 5p per litre in 2022 following the invasion of Ukraine. A spike in the cost of crude oil was given as the reason for the duty cut, albeit it has never been reversed as world prices have subsequently fallen.

Unlike VAT and other taxes (e.g. income tax) which are calculated on a percentage basis, excise duties such as that levied on road fuel are valued at a fixed cost per unit sold, in this case pence per litre of fuel. In economic terms, therefore, freezing duty rates has the effect of eroding its overall ‘purchasing power’ value over time due to inflation.

This is demonstrated by the graph below, where the green line shows the rate of diesel fuel duty for road vehicles since 2010 in nominal prices i.e. the cost at the time and not adjusted for inflation. The red line subsequently re-bases these rates into 2025 prices (using the HM Treasury GDP Deflator), clearly illustrating its declining value in real terms over the past 14 years. The blue line illustrates what would have happened to the rate of diesel fuel duty had the policy of increasing it by CPI inflation annually since 2010 continued. Diesel fuel duty on this basis would be valued at £0.8870 per litre today, rather than the £0.5295 currently levied i.e. just under 36p higher.

At the micro-economic level, the decision to freeze fuel duty suggests that the road haulage sector is currently paying substantially less for diesel than it otherwise would have done, given the previous policy of an annual rise in-line with the rate of inflation. It could be argued that this has been beneficial, particularly for domestic households; the resultant lower transport costs will be reflected in a lower price for food and consumer goods.

However, at the macro-economic level this position has had a major impact on the national finances. The eroding value over time due to inflation means that the total amount of taxation collected from fuel duty has ultimately declined. The table below shows that in 2024, around 28.2 billion litres of diesel for road use was consumed, generating circa £14.9 billion in excise duty revenue for the Treasury. However, if the rate of diesel fuel duty in 2010 had subsequently increased annually by CPI inflation (to £0.8870 per litre, as per the graph above), the amount of revenue it would now generate is estimated to be around £25 billion. This effectively represents circa £10.1 billion in ‘lost’ fuel duty. When the equivalent excise duty from petrol sales is considered alongside the VAT charged subsequently (VAT is calculated on the combined cost of fuel plus duty), the lost revenue to the exchequer will be significantly higher.

*Source: HMRC

Consultants calculations

By way of a comparison, Network Rail’s regulated track access charges paid by the rail freight operators (so called variable user charges or VUCs) have increased in value over the past six years. These charges are effectively a proxy for fuel duty in that the amount paid is proportional to distance travelled (fuel consumption also being distance related). This is illustrated in the graph below. The red line is taken from the previous graph, showing diesel fuel duty rates since 2014 re-based into 2025 prices and illustrating its declining value in real terms. In contrast, the blue line shows the VUCs for a FEA-B intermodal platform wagon since 2014 (in £ per thousand gross tonne-km). Having been broadly flat during Control Period 5 (CP5, April 2014 to March 2019), they have since been increasing in value during CP6 (April 2019 to March 2024) and into CP7 (since April 2024).

For more information on how public policy can impact the freight and logistics sector, contact us at web.enquiries@mdst.co.uk .

UK Budget 2025: Taxing times

Tue, 18 Nov 2025 11:35:06 GMT

As the UK edges closer to the 2025 Budget, the fiscal landscape is dominated by a looming £25 billion deficit. With Fuel Duty forecast to decline in relative and absolute importance over the next 10-15 years, could road pricing for road freight transport be a potential new source of tax revenue for the Treasury?

The decline of Fuel Duty

Rachel Reeves is receiving lots of advice in the run up to the Budget on 26th November on how to reduce the UK’s ‘fiscal black hole’ of perhaps £25 billion, following retreats on proposed spending cuts over the summer and against a background of sluggish economic growth and poor productivity. The question is where will the tax funds come from?

An increase in Fuel Duty should in theory be on the cards as it’s been frozen by successive governments at 57.95p per litre since 2011-12 and was subject to a 5p cut after Russia’s invasion of Ukraine; it remains government policy to both reverse the 5p reduction and introduce an index-based Fuel Duty escalator which could, according to our estimates, raise an additional £10bn per annum. However, a Government which is focused on “delivering for working people, by prioritising renewal and growth through investment and reform” is unlikely to add to the on-going cost of living crisis by increasing a tax which already costs the average household £850 a year.

In any event, the gradual decline in the relative value of Fuel Duty as a source of tax income is merely acknowledging that, in the longer term, it’s doomed.

As consumers increasingly purchase electric cars, and road hauliers gradually decarbonise their fleets by purchasing battery electric HGVs, tax revenues from Fuel Duty will inevitably decline in any case.

How will the Treasury fill that long-term fiscal gap?

Road pricing: a logical but politically fraught solution

The UK freight transport industry thinks some form of road pricing – where hauliers would be charged for their use of the highways network instead of a tax on the fuel it purchases - is inevitable.

Logistics UK published a document called Unleashing the power of logistics to drive growth across the whole economy in January 2024. At the end of the chapter on the theme of a Fair transition to a green economy , it included a request for, “The government to work with our sector on plans for road pricing”.

When asked whether its members regard road pricing as inevitable by the Chair of the House of Commons Transport Committee in October 2021, a representative of the Road Haulage Association replied simply, “Yes, I think so”.

Without a change in approach, policies to deliver net zero emissions will inevitably result in a calamitous reduction in tax revenue for the Government from motoring taxation by 2040, given that Fuel Duty provided 77% of motoring tax revenue in 2022-23 and, on its own, is the equivalent of 1% of the UK’s Gross Domestic Product. That pays for a lot of new hospitals – or new transport infrastructure.

When it comes to introducing road pricing, however, there is a distinct lack of political courage.

In early 2007, during the second Blair administration, an online petition against road pricing appeared on the 10 Downing Street website after the Department for Transport (DfT) dared to suggest pilots should be carried out on the concept. It rapidly attracted 1.8 million digital signatures and Number 10 told the DfT to drop the pilots.

In February 2022 the Transport Select Committee recommended the Treasury and DfT should, as a matter of urgency, set up an arm’s length body to recommend a new road charging mechanism. The Chancellor of the Exchequer at the time replied, “The Government is focused on delivering its core priorities, as set out in the 2019 manifesto. As such, the government does not currently have plans to consider road pricing.”

As Professor Stephen Glaister pointed out in 2014, “It has become a standing joke that even if any UK politician is unable to deny the logic of the case for some form of road pricing, they are never willing to implement it within the next ten years—by which time they will be long gone.”

Freight first: a pragmatic path forward

Despite politicians’ understandable lack of courage on the subject after the debacle in 2007, the option remains to implement road pricing – if only for road freight movements. The road haulage industry itself regards road pricing as inevitable. And, we should always remember that freight doesn’t vote.

Picking on freight for the roll-out of road pricing has been implemented successfully elsewhere. In 2005 the Maut distance-based toll system was introduced for HGVs in Germany and the scope of the charge has gradually been increased from only larger HGVs to include all trucks, and also varies the charges according to their emissions. The German government originally intended to extend the system to include vehicles driven by the voting public, but finally abandoned that idea in 2019.

Much would depend on the design of the system of road pricing on road freight and it’d be essential to avoid any unintended consequences. A UK freight-focused road pricing model could serve as a blueprint, balancing fiscal sustainability with environmental goals. But careful design and modelling will be essential to avoid unintended consequences. Modelling the impact of road pricing will be the subject of my next article.

What comes next?

The transition to road pricing is not just a fiscal necessity—it’s a strategic imperative. As we move toward net zero, the UK must rethink how it funds its roads and infrastructure. Freight may be the first step, but the journey will eventually involve all road users.

For more information on how public policy can impact the freight and logistics sector, contact us at web.enquiries@mdst.co.uk .

Red Sea disruption drives new routes and regional opportunities

Fri, 14 Nov 2025 15:54:16 GMT

Global container shipping networks are showing renewed momentum, with developing markets emerging as key beneficiaries of shifting trade patterns. Data derived from the MDS Transmodal Containership Databank shows how new direct connections are reshaping the geography of maritime access as carriers adapt to post-pandemic flows and ongoing disruptions in the Red Sea.

Connectivity Gains Across Regions

Out of 179 countries tracked, 63 increased their direct maritime connectivity between Q4 2024 and Q4 2025, while 51 saw declines and 65 remained unchanged. The largest gains were observed in Sub-Saharan Africa and the Europe and Mediterranean region, which together account for nearly 60% of all countries with higher connectivity.

Namibia and Mauritania led globally, adding 12 new direct country connections each, followed by Cote d’Ivoire and Senegal (+10). These trends reflect a strengthening of West African liner networks, where carriers are adding direct calls to meet rising demand, diversify transshipment dependencies, and respond to the ongoing Red Sea rerouting.

Outside Africa, Gulf and South Asian markets (including Oman, Sri Lanka, India, and the UAE) recorded steady improvements, consolidating their role as key regional and intercontinental hubs. In the Europe and Mediterranean region, Egypt, Lebanon, and Russia stand out, reflecting service shifts linked to Suez Canal traffic and evolving geopolitical trade routes.

Global Connectivity Reaches Post-Pandemic High

By Q4 2025, global direct connectivity reached 2,263 country pairs (direct container shipping links between two countries), the highest level since Q3 2023, following the start of the Red Sea crisis. While still below the all-time peak of 2,598 pairs in 2016, the rebound signals renewed expansion after years of consolidation.

Environmental Regulation and Ship Deployment

Environmental rules increasingly influence vessel deployment. Under the EU Emissions Trading System (ETS), the carbon cost for a ship calling at an EU port is calculated based on the voyage from its last qualifying port outside the EU (or the previous EU port) to the EU destination. This encourages operators to consider non-EU hubs, such as African ports, to optimise emissions costs, shaping route choices and the durability of newly established connections.

Looking Ahead: Red Sea Disruption and Global Maritime Networks

The 2025 the data highlights a more resilient and distributed liner network, with new direct connections emerging in developing markets and mid-tier gateways. The Red Sea disruption is not expected to be fully resolved soon, as major carriers continue to adjust deployments to mitigate risk, reflecting a cautious approach to the region. Even if the Red Sea eventually reopens for regular navigation, carriers are likely to maintain alternative routings and hubs, particularly in Sub-Saharan Africa and South Asia, where they aim to manage overcapacity and maintain operational efficiency. Ship rotations are being adjusted where possible to better align with demand.

Even as security in the Red Sea gradually stabilises, it is unlikely that major carriers will fully abandon the alternative routings they established during the disruption. Both corridors – the traditional Red Sea/Suez route and the southern/secondary routes via Sub-Saharan and South Asian hubs – are likely to coexist, serving complementary purposes. The Suez route offers shorter transit times and established infrastructure, ideal for high-priority or time-sensitive cargo, while the alternative routes provide risk diversification, access to emerging markets, and operational flexibility. Carriers can dynamically allocate vessels based on demand, transit times, and cost considerations, while ports along both corridors continue to develop specialised roles. This dual-routing approach not only enhances network resilience but also allows carriers to optimise fleet deployment, manage overcapacity, and respond to environmental and regulatory pressures, suggesting that many of the new connections forged during the Red Sea crisis may persist long-term.

These strategic adjustments, combined with evolving demand patterns, suggest that many of the new routes and connections established during the crisis may persist, creating long-term growth opportunities for ports and regions that gained prominence during this period.

Stay ahead of shipping lines' evolving strategies with insights from our Containership Databank. Reach us at web.enquiries@mdst.co.uk .

Global steel trade 1996–2024: Trends, shocks, and UK exposure

Fri, 14 Nov 2025 14:32:46 GMT

Following the USA’s decision to increase the tariff on almost all steel imports from 25% to 50% (except from the UK, for which the 25% rate still applies), the EU has now responded by threatening to increase its own tariffs on imported steel – including from the UK – to 50% in order to protect its industry from ‘dumping’ of surplus steel by exporters such as China and India. As about 76% of its exports are to the EU, this could be devastating for the UK steel industry which is in the process of restructuring from carbon intensive blast furnaces to electric arc technology. How have past trends in global steel trade affected the current position and what do they mean for the UK?

Introduction

Global trade in steel has evolved dramatically over the past three decades, moving from a landscape in 1996 where China was only a minor exporter and global steel trade was far less integrated than today, to the current era characterised by massive overcapacity, protectionist measures, and intense strategic competition. Over this period, global trade more than doubled from 242 million tonnes in 1996 to 523 million tonnes in 2024, reflecting profound shifts in industrial demand, trade policy, and supply chain complexity. China’s rise to export dominance, the rapid growth of Southeast Asian imports, and the persistent strategic influence of the US and EU have reshaped traditional trade flows. For the UK, these global dynamics translate into both risks and opportunities, highlighting the need for careful policy and industrial strategy development to maintain competitiveness in an increasingly contested market.

Global trade volume: Growth and shocks

Over the past three decades, global steel trade has experienced strong long-term growth, rising from 242 million tonnes in 1996 to 523 million tonnes in 2024. This expansion, however, has not been linear. Significant disruptions punctuated the growth trajectory, including the 2008 global financial crisis, which caused a sharp contraction in trade, and the COVID-19 pandemic, which temporarily reduced production, shipping, and demand. Amid these shocks, structural shifts in global supply emerged, most notably China’s surge in exports. This expansion not only transformed China into the world’s largest steel exporter but also reshaped the competitive dynamics of the global market, forcing other exporters to diversify markets and adapt to an increasingly concentrated production base.

Top exporters: China’s dominance

China’s impact on global steel trade is striking. In 2007, China accounted for 15% of global exports; by 2024, this had increased to 22%. Meanwhile, traditional exporters such as Japan, Russia, and Germany experienced a gradual decline in relative share, reflecting the combined pressures of China’s expansion, regional industrial shifts, and competitive overcapacity. Other markets, particularly South Korea, Vietnam, and Indonesia, have grown in importance, indicating a diversification of export origins beyond the traditional European and Far Eastern hubs. India has also emerged as a significant exporter, doubling its shipments from 7.46 million tonnes in 2007 to 14.74 million tonnes in 2024. The Gulf and Indian Sub-Continent region receives the largest share of Indian exports, followed by the EU27 and the Far East, highlighting India’s growing influence in key strategic markets. Even shipments to the UK have increased substantially over the period, reflecting India’s expanding production capacity and integration into global steel supply chains. These developments illustrate how structural changes in production and industrial strategy can reconfigure global trade patterns over relatively short periods.

Top importers: Shifting demand

The composition of global steel importers has evolved alongside export patterns. The United States remains one of the largest importers, though its share has fallen from 9% in 2007 to 7% in 2024, reflecting both increased domestic production and changing industrial demand. European countries, particularly Germany and Italy, continue to be major destinations, underpinning the continent’s industrial base. At the same time, Southeast Asian markets have emerged as significant growth regions. Countries such as Vietnam, Thailand, and Indonesia have experienced rapid import growth, driven by industrial expansion, infrastructure development, and deeper integration into global supply chains. This rebalancing of demand underscores the increasing importance of emerging economies in shaping global trade flows and highlights the strategic need for exporters to diversify beyond traditional Western markets.

Regional trade flows: the UK and EU perspective

Regional trade flows further illuminate the strategic dynamics for the UK and EU. Bilateral trade between the UK and EU27 has become asymmetrical in the post-Brexit era. UK exports to the EU fell to 2.2 million tonnes in 2024, while imports from the EU rose to 4.1 million tonnes, reflecting a growing trade imbalance. Despite this asymmetry, the EU27 remains the UK’s largest export market, accounting for approximately 76% of total UK exports in 2024. Meanwhile, as blast furnaces in the UK have closed, imports from the Far East, particularly China and Southeast Asia, have surged for both the UK and EU, increasing exposure to volatile external supply conditions. This highlights the strategic importance of maintaining diversified trade relationships to mitigate reliance on any single market or region.

India’s growing role in global steel trade further exemplifies the changing supply landscape. Indian exports have increased across multiple regions, with the Gulf & ISC region receiving the largest share, but substantial shipments also reaching the EU27 and Far East markets. Exports to the UK have quadrupled since 2007, demonstrating India’s integration into established industrial markets and Tata Steel’s ownership of the rolling mills at Port Talbot and Llanwern in South Wales. Alongside China, India’s rise as a key supplier strengthens the diversification of global supply, while simultaneously increasing the competitive pressure on traditional exporters.

Strategic implications for the UK

The evolving global steel trade carries significant strategic implications for the UK. Heavy reliance on EU27 markets for exports exposes the UK to shifts in EU industrial demand, trade policies, and regulatory alignment. Simultaneously, rising import penetration from China, India, and Southeast Asia introduces both competitive pressure and potential supply chain risk. The export asymmetry with the EU27 underscores a structural trade imbalance that may influence domestic industrial strategy, pricing, and market positioning. For policymakers and industry leaders, these dynamics necessitate a proactive approach, balancing trade policy, investment in domestic capacity, and diversification of both suppliers and export destinations - exemplified by the UK Government’s direct action in spring 2025 to ensure the UK’s last remaining blast furnaces in Scunthorpe remain open.

Conclusion

Over the past three decades, global steel trade has transitioned from a relatively liberalized and steadily growing market to one characterised by intense strategic competition, protectionist measures, and structural realignments in production and consumption. China now dominates exports, India has emerged as a rising key supplier, and Southeast Asia has become a major importer, reflecting shifts in global industrial geography. US and EU trade measures continue to reshape flows, creating both risks and opportunities for UK businesses. For the UK, the combination of export asymmetry with the EU27 and growing exposure to the Far East underscores the need for a proactive, strategic approach to trade and industrial policy. Maintaining competitiveness will require careful navigation of international supply chains, continued engagement with European partners, and forward-looking industrial strategies that embrace resilience, diversification, and opportunity.

Stay ahead of global trade dynamics, contact us for tailored analysis at web.enquiries@mdst.co.uk .

Forecasting the need for port development in Britain

Thu, 24 Jul 2025 13:56:58 GMT

The draft National Policy Statement for Ports (NPSP), published for consultation in June 2025, outlines the UK Government’s updated strategic framework for port development in England and - as the only reserved trust port in Wales - Milford Haven. A key component of this draft NPS is the port traffic forecasts, which aim to guide long-term infrastructure planning through to 2050.

The NPSP's objective

The objective of the recently published draft National Policy Statement for Ports (NPSP) is to streamline planning for new port infrastructure by setting out the government’s position on the need for such developments. The draft replaces the original NPSP which was published some 13 years ago; the revised NPS seeks to take into account major shifts in trade patterns, environmental policy, and energy strategy since that time and reflect the UK’s decarbonisation and biodiversity goals and the need for resilience in supply chains.

The NPSP is also designed to support market-led development, given that the UK ports sector is largely commercially-driven. It treats commercial investment as evidence of need—provided environmental standards are met. It also favours some over-capacity in the market to encourage inter-port competition and efficiency.

Port traffic forecasts to 2050

In order to quantify likely need for port infrastructure up to 2050, the DfT has developed a port traffic forecasting model based on a total of 14 cargo categories, grouped into four broad types: unitised freight, liquid bulk, dry bulk, and general cargo. These forecasts are national-level projections and assume unconstrained growth. The forecasts are intended as a benchmark, not a cap, on development and are designed to support the NPSP’s market-led approach, where commercial investment decisions—rather than central planning—drive port expansion, provided environmental standards are met.

In order to take account of inherent uncertainty in forecasting demand over a 27 year period, the forecasts include central, high, and low scenarios based on varying assumptions about GDP, population, and energy transition pathways to Net Zero by 2050. Just as MDS Transmodal did for the first port traffic forecasts for a generation - developed in 2005-07 - the forecasts used baseline data from the DfT’s Port Freight Statistics and then sought to find suitable economic drivers to forecast forward to 2050. A summary of the central forecasts is provided below.

Total port traffic is expected to grow from 421 million tonnes in 2023 to 454 million tonnes by 2050, an 8% increase over a 27 year period (at an implied compound average growth rate, CAGR, of 0.3%). This is despite total UK port traffic (including minor ports) having declined by 24% (or -1.2% per annum) over the 23 year period since 2000 and 10% (-2.6% per annum) since 2019. Of course, the historic trend does not necessarily need to determine the future, so a more detailed look at the economic drivers behind the forecasts is needed.

Port traffic forecasts

Ro-ro traffic (excluding import/export vehicles) is forecast to increase by 70% (+2.0% per annum), from 91M to 155M tonnes between 2023 and 2050. The overall forecasts (driven by assumed increased GDP per capita) seem high given that this traffic is mainly to/from the European continental mainland and Ireland and these traffics have, at best, stagnated since Brexit. Since 2019 the DfT’s own data suggests RoRo traffic declined by 1.9% per annum between 2019 and 2023; this is due to stagnant economic growth and some switch of traffic to short sea LoLo services.

Container traffic (excluding transhipment) is forecast to increase by 37% (or +1.2% per annum), from 61M to 83M tonnes. Since 2019 the DfT’s historic data suggests that this traffic declined by 2.2% per annum and only grew by 0.7% per annum over the whole period since 2000.

Dry bulk traffic is projected to grow by 62% (+1.8% per annum), from 84M to 136M tonnes. It is not clear where this growth will come from, but the closure of blast furnaces (affecting imported iron ore and coal) should be reflected in the numbers. ‘Other dry bulks’ have grown very rapidly, which DfT has assumed follows the historic trend and it is not clear why. Specifically, the forecast appears to be based on a linear extrapolation of the historical trend from 1994 to 2007. This suggests there is little to no connection between the forecasts and broader economic developments or structural trends influencing port traffic and to use such a historical growth rate to forecasts from 2023 to 2050 should be questioned. Since 2000 the DfT’s historic data suggests that total dry bulk traffic has declined by 19% (-0.9% per annum) and by 9% (-2.2% per annum) between 2019 and 2023 alone; this overall reduction in traffic has been driven by the decline of coal as a source of power station coal and the decline of the UK’s steel industry. Additional biomass traffic for electricity generation and some agricultural bulk imports (the latter driven by population growth) is unlikely to provide sufficient growth to justify long term growth rates of 1.8% per annum; however, the scale of sea-dredged aggregates required for the construction industry (not apparently included in the DfT’s forecasting exercise) may provide additional volumes as quarried aggregates become less available.

General cargo traffic (mainly packaged forestry products and steel and other non-unitised goods such as project cargoes) sees a smaller increase of 12%, attributed to a forecast decline in packaged forestry products and increased transport of such products in unitloads. Traffic related to the development of offshore wind farms (anticipated by Government in the NPSP) should be included in this category, but DfT has not explicitly produced forecasts for this demand because there is “no available data”. This is despite Government being responsible for licensing offshore wind farms that have already been commissioned in the past and for forecasts of new capacity up to 2050.

Liquid bulk traffic (crude oil, petroleum products, chemicals, liquefied gas and other liquid bulk traffics) is forecast to decline sharply by 63.3% (-3.6% per annum), from 169M to 62M tonnes, largely due to the transition to net zero and a forecast decline in the production of North Sea oil and gas. Traffic related to the manufacture and use of hydrogen as a fuel (which might allow for the continuing import of crude oil) has not explicitly been forecast because there is “no available data”. This sector may provide an opportunity for a potential upside for imports of liquid bulk traffics, although demand is relatively uncertain at this point.

Conclusion to DfT Port Traffic Forecasts

The DfT’s conclusion on need is that, “Against this background, the Government believes that there is a compelling need for substantial additional port capacity over the next 30 years, to be met by a combination of development already consented and development for which applications have yet to be received”.

While it is not surprising therefore that publication of the draft NPSP, with its associated demand forecasts, was accompanied by messages of support from bodies representing the UK ports industry, the commercially-driven UK ports will, in reality, only develop new infrastructure based on an assessment of the potential to make a return for their investors while operating in a competitive market environment.

From decline to recovery: UK agri-food exports to the EU show growth in 2025

nour.farid@mdst.co.uk (Nour Farid ) — Wed, 23 Jul 2025 09:22:53 GMT

Data comparing UK food and agricultural exports in 2017 and 2024 highlights a significant shift in trade dynamics between the European Union (EU) and non-EU markets, reflecting the impact of Brexit on the UK’s trade relationships. More recently, however, year-on-year figures suggest that a recovery in EU exports may be taking shape. This raises questions about the future of the UK’s agricultural and food sectors, and more broadly, its economic ties with Europe.

The chart above shows the notable decline in UK agri-food exports to the EU, which dropped from over 7.9 million tonnes in 2017 to around 5.9 million tonnes in 2024, a reduction of over 25%. This decrease spans nearly all commodities:

Cereals and cereal preparations (-37%), along with vegetables and fruit (-35%), which previously represented substantial volumes, saw marked reductions.
Dairy products & eggs (-6%) and meat & meat preparations (-28%) —sensitive sectors post-Brexit—also experienced noticeable declines. These drops may reflect increased sanitary and phytosanitary (SPS) checks and customs requirements post-Brexit.
Only minimal changes are seen in less significant categories in terms of volume such as tea, coffee, cocoa, spices.

These figures underline effects of Brexit-related friction at the border, including new customs checks and regulatory divergence. For many sectors—particularly fish and meat—the EU became a harder market to access, leading to reduced competitiveness and lost market share.

This chart provides context by comparing UK agri-food exports to non-EU countries from 2017 to 2024. Unlike the EU trend, non-EU exports (from a much lower base) declined only slightly, from 1.9 to 1.8 million tonnes—a drop of 9%.
Key trends include:

Animal feedstuffs doubled from 184to 379 thousand tonnes
Dairy, fish, and meat exports saw modest growth
Cereals and vegetables & fruit declined by similar percentages to the EU market

While non-EU exports have declined slightly since 2017, they have proven more stable than trade with the EU, suggesting a degree of resilience amid broader disruption. As access to the EU became more difficult, some UK exporters turned toward markets in Asia, the Middle East, and the Americas.

Monthly data comparing May 2024 to May 2025 reveals a potential turnaround. In just 12 months, total exports to the EU jumped across nearly all categories:

Cereals & cereal preparations saw the most significant year-on-year increase of 50%
Animal feedingstuffs also rose considerably by 27%
Meat, vegetables & fruits, tea, coffee, cocoa, and spices experienced moderate gains, signalling a broader trend rather than a commodity-specific shift

This improvement may indicate that UK exporters are adapting more effectively to the post-Brexit trading environment. A renegotiated EU relationship, which would remove the need for SPS checks, might yield an even greater improvement in trade with the EU.

The sanctions loophole: Kyrgyzstan’s role in Russia’s machinery supply chain

Tue, 22 Jul 2025 09:50:40 GMT

Following Russia's 2022 invasion of Ukraine and subsequent Western sanctions, Kyrgyzstan appears to have emerged as a key intermediary in the potential evasion of sanctions on Russia. Analysis of international trade data from the MDS Transmodal World Cargo Database reveals Kyrgyzstan had the fastest growth in imports of three key types of machinery of any country in the world between 2019–2024.

Since the onset of Russia’s full-scale invasion of Ukraine in 2022, Western nations have imposed sweeping sanctions targeting Moscow’s access to military and industrial goods. Yet, despite these restrictions, Russia’s war machine continues to receive critical equipment—often through indirect routes. One such route appears to run through Kyrgyzstan, a small Central Asian nation whose trade statistics have raised eyebrows across the global sanctions enforcement community.

Kyrgyzstan’s imports of machinery and equipment skyrocketed after 2022 and MDST’s analysis of global trade in such commodity groups based on data from its World Cargo Database (WCD) suggests that the country’s imports of specialised machinery, metal working machinery and general industrial machinery have grown faster than any other country’s over the period 2019-24.

Top 5 fastest growing global import markets by value, 2019-24

Source: MDS Transmodal World Cargo Database

The rate of growth of imports over the period 2019-24 suggests this is a classic case of re-exporting: goods are imported into Kyrgyzstan, cleared through customs, and then swiftly shipped to Russia. This is facilitated by Kyrgyzstan’s membership of the Eurasian Economic Union (EAEU), a regional trading bloc that also includes Russia, Belarus, Kazakhstan, and Armenia and which provides tariff-free access to members’ markets.

The Strait of Hormuz - a strategically vital waterway

Mon, 21 Jul 2025 14:26:06 GMT

The recent armed conflict between Israel and Iran between 13th and 24th June 2025 led to fears that Iran could seek to close the Strait of Hormuz. This article considers the strategic importance of the Strait as a gateway for global trade and the shipping markets and supply chains that would be most affected.

Energy goods

The Strait of Hormuz connects the Persian Gulf with the Gulf of Oman and the Arabian Sea, making it one of the most strategically important maritime routes in the world, particularly for global energy exports. An estimated 20% of the world’s petroleum and a substantial share of liquefied natural gas (LNG) transit through this narrow passage. While the exact percentage may vary, what matters most is the strategic importance of the Strait; its closure would signal a major escalation of geopolitical instability in the Middle East. As a critical chokepoint, any disruption would suggest that regional tensions have reached a breaking point, severely impairing the region’s ability to function economically and politically. A closure would not only hinder the outward flow of key energy commodities (especially crude oil and LNG vital to global markets) but also disrupt the importation of essential goods into Gulf countries. The resulting impact would reverberate far beyond the region, straining global supply chains, driving up energy prices, and threatening international energy security.

Iran controls the northern shore of the Strait of Hormuz, which places it in a strategically dominant position over one of the world’s most important maritime chokepoints. This geographic advantage allows Iran to exert significant influence on regional maritime traffic, especially energy exports. During the recent Israel-Iran conflict, Iran threatened to close the Strait and this threat has been used over the years as a tool of geopolitical leverage, particularly during times of heightened tension with the West or regional rivals. Such threats serve as a warning that any escalation in conflict could disrupt global energy supplies.

Containerised goods

A closure of the Strait of Hormuz (on top of the already-disrupted Red Sea corridor) would deliver a double blow to regional and global shipping networks, forcing carriers into a complex reconfiguration of Gulf services. Mainline container services to the Gulf would likely be suspended or rerouted, with a possible pivot to feeder-based strategies via alternative hubs - though even these would be constrained by the elevated security risks across both chokepoints. The position of Jebel Ali as the region’s primary transhipment and logistics hub would come under significant pressure. With both Hormuz and the Red Sea compromised, its connectivity to Asia, Africa, and Europe would deteriorate - raising questions about the port’s resilience and long-term role. Reorientation of regional trade flows toward the Red Sea and East Mediterranean would no longer be a viable contingency. Ports like Jeddah, Aqaba, or Damietta, which previously offered alternatives to Gulf gateways, are themselves facing reduced reliability and heightened risk due to attacks and delays on the Red Sea route. This overlapping chokepoint crisis would likely accelerate investment in overland connectivity, such as the Gulf Railway, inland distribution networks, and multimodal corridors linking Gulf states to the Levant, Turkey and even Central Asia. However, these long-term solutions will not resolve the acute short-term supply chain disruptions.

So, while the headline risk remains to oil and gas, the deeper vulnerability is the region’s dependence on a narrow set of maritime corridors for its entire economic model. A simultaneous disruption of the Strait of Hormuz and Red Sea trade lanes would isolate the Arabian Gulf from global container trade, halting the movement of everything from consumer goods and machinery to industrial components and humanitarian supplies. This scenario would expose the fragility of the Gulf’s port-centric supply chains and may prompt a fundamental reassessment of logistics strategies, diversification of routes and the geopolitical risks embedded in maritime trade.

Conclusion

The Strait of Hormuz is one of the world’s most critical maritime chokepoints, carrying around a third of global oil trade by volume and nearly a fifth of global gas exports. Its closure would severely disrupt global energy markets, with the Gulf region - particularly Saudi Arabia, the UAE, Qatar, and Kuwait - most exposed. Major importers such as China, India, Japan and South Korea would face supply shortages and price volatility, impacting industrial output and economic stability.

While containerised cargo flows are less dependent on the Strait, a simultaneous closure alongside the Red Sea crisis would compound supply chain risks, isolate Gulf ports and force carriers to reroute or suspend services. This would expose the region’s reliance on a narrow set of maritime corridors for both exports and essential imports, highlighting the fragility of its port-centric economic model.

For the UK, the direct share of imports from the Gulf is relatively small (around 4% by weight), but this includes critical energy supplies, meaning indirect impacts through price spikes and supply chain volatility could still be substantial. The strategic importance of ensuring freedom of navigation through the Strait therefore extends beyond regional interests, underpinning broader global energy security and trade stability.

In short, any sustained disruption would ripple far beyond the Gulf, affecting major Asian energy importers, global oil and gas markets, container trade routes and the resilience of Europe’s energy transition - all while exposing the urgency of diversifying supply chains and investing in alternative connectivity routes.

UK Maritime Freight Trends

Wed, 20 Nov 2024 12:35:32 GMT

This article offers an overview of UK maritime freight in a global context across various cargo types since 2018. UK port throughput has generally declined driven by factors such as Brexit, the decline in North Sea oil and decarbonisation of the UK’s energy mix, and global economic disruptions. Container traffic experienced the greatest reduction, while other types of cargo such as dry bulk, liquid bulk, and roll-on/roll-off (RORO) freight also experienced notable declines.

The volume of maritime trade through the UK’s ports is essential to the overall economy; in 2021 about 95% of international freight traded with the UK was moved by sea[1].

The above chart shows changes in UK port traffic by cargo group on an indexed basis over the last six years. The overall trend has been a reduction in port throughput, with the largest decline of 17% in containers. Dry bulk, liquid bulk, and RORO freight had comparable reductions of 10% while other general cargo reduced by 7%.

Volumes in 2024 Q2 are lower than pre-pandemic levels in 2018 Q2 but represent a recovery from the drop in 2020 Q2, which was experienced across all cargo groups. Compared to the same quarter last year, RORO freight and other general cargo had a slight increase, while all other cargo groups decreased in tonnage.

The trend in UK container trade (both deep sea and short sea) by direction sheds further light on the changes in imports and exports.

Container shipping is integral to international trade, moving vast quantities of goods every day. A wide range of goods can be transported in containers; those with high international demand include machinery, textiles, electronics, and perishable goods like fruit and vegetables.

From 2007, total container trade in the UK has fluctuated with major global events that affect both consumption and supply as evidenced by a fall in volumes during the 2008-09 financial crisis and a slight decrease during 2019 and 2020 coinciding with the COVID-19 pandemic as factories were forced to close. A recovery in 2021 was driven by increased imports (with household income being funded in part by the government and consumers unable to purchase many services) but was followed by a fall in volumes until 2023 and is expected to continue in 2024.

By direction, exports dipped between 2018 and 2024 as the economy adapted to an EU Exit environment. On the other hand, imports, which stand at double the volume of exports, recovered to pre-Brexit levels in 2021 but have since slipped.

Roll-on/roll-off (RORO) freight is transported by ships with dedicated ramps designed to carry wheeled cargo. This allows vehicles to be driven on and off the vessel, or containers to be wheeled onto the ships on special trailers.

Various commodities are transported using RORO shipping such as cars, machinery and heavy equipment, but most is general cargo which can be transported in containers and is between Great Britain and the European continental mainland and Ireland.

Since 2007 RORO trade by direction recovered after the financial crisis but is yet to recover fully after the impact of COVID-19 and EU Exit. Growth in 2022 traffic is likely a consequence of restocking after COVID-19. The just-in-time manufacturing model allowed companies to cut excess inventory and achieve efficiency savings by keeping suppliers on short notice and only producing inventory as needed. However, during COVID-19 supply chain disruptions led to shortages and then EU Exit led to additional trade barriers which pushed companies to the just-in-case model instead, whereby a certain inventory level is maintained to avoid running out of stock.

This is a possible explanation for the rise in traffic in 2022, followed by a fall in 2023 as a result of overstocking. Traffic in both directions is expected to remain at a lower level in 2024 than in 2007.

The container and RORO port traffic analysis uses data sourced from the Department for Transport, collected from port operators, shipping lines, and agents. While not a port, Eurotunnel Freight is a significant route for UK trade with the Continent. An examination of Eurotunnel data shows a similar trend to that for RORO via ports, with a decline in the number of units from 2018 followed by an uptick in 2022 and a subsequent decrease in 2023.

Comparing the regional performance of global unitised imports and exports reveals the relative performance of the UK since the pre-Brexit year of 2017. This chart shows the trend in global unitised exports, measured in TEU, across different regions from 2017 Q2 to 2024 Q2. The index is set at 2017 Q2 to allow for a comparison of relative export performance over time.

Since 2017, UK exports show a downward trend, decreasing to 2023 Q2 and levelling out at around a 20% decrease to 2024 Q2, remaining below pre-EU Exit levels. On the other hand, other regions either flatlined or experienced growth since 2017.

The UK’s imports have seen minimal growth from 2017 Q2 to 2024 Q2, remaining close to the 2017 baseline. This is mainly due to changes in the UK’s trading relationships due to the UK’s exit from the EU, resulting in increased import costs and logistical challenges with European trading partners. With the exception of the Far East, imports have increased into all regions and exceeded 2017 levels.

Conclusion

The analysis of UK freight trends up to 2024 Q2 reveals a decline in the UK's share of global unitised trade relative to pre-Brexit levels. This downward trend in port throughput and container trade reflects shifting trade patterns, including Brexit's impact and global supply chain disruptions due to COVID-19. While exports have declined since 2017, mainly due to the introduction of trade barriers with its main trading partners, imports have held up better (due to, in particular, the UK’s need to import food from the EU) but are now falling back to 2017 levels. Overall, these trends suggest that the UK is facing challenges in maintaining its position in global trade in physical goods.

[1] Source: DfT Transport Statistics Great Britain ( link )

Global Shipping Market Overview: Q2 & Q3 2024 Analysis

Wed, 20 Nov 2024 09:51:15 GMT

The global shipping industry continues to show dynamic trends in demand, supply, and profitability as we approach the end of 2024. This report provides an in-depth analysis of the key indicators shaping the market, including global volumes, fleet capacity, utilisation, and environmental impact.

Demand: Global Volumes & Growth Trends

In Q2 2024, global volumes on deepsea routes reached 30.4 million TEUs, surpassing estimates for Q1 2024, Q2 2023, and pre-pandemic levels in Q2 2019. Specifically, volumes were approximately 4% higher than Q1 2024, 6% higher than Q2 2023, and 7% above Q2 2019.

When looking at year-on-year (YoY) performance, the Far East to and from North America emerged as the fastest-growing trade lane, with increases of 11% and 9% respectively. The Far East to Northern Europe and Mediterranean routes also showed strength, with a 4% increase in the eastbound direction, though westbound traffic marginally contracted by 0.2%. Overall, Far East exports were estimated to have grown by 7.8% YoY.

Looking ahead, projections for 2024 suggest global trade see an increase in the region of 6%, with Far East exports expected to grow at a faster pace of 9%.

Supply: Fleet vs Scheduled Capacity

On the supply side, Q3 2024 data reveals an expanding gap between fleet capacity and scheduled capacity. Fleet capacity, which refers to the total available capacity shipping lines have at their disposal, is growing significantly faster than the scheduled capacity they are offering on routes. In Q3, this gap has widened to 17 points, driven largely by rerouting via the Cape of Good Hope and the introduction of more direct services. Looking ahead, MSC has expressed an intention to focus more on direct connections, in contrast to the hub-and-spoke model that will be offered by Gemini.

Utilisation Level: Supply vs Demand

With demand growing faster than scheduled capacity, utilisation levels have been on the rise. For the Far East to Northern Europe and the Mediterranean routes, utilisation levels in Q2 2024 reached 80%, a notable increase of 2.7 points compared to Q1, 2 points higher than Q2 2023, and 6.5 points above Q2 2019 level.

Profitability: Unit Revenue vs Unit Costs

As anticipated in our previous analysis, Q2 2024 marks the point where unit revenues began to exceed unit costs. The revenue-to-cost ratio increased by 10 points compared to Q1, 6 points compared to Q2 2023, and 7.5 points over Q2 2019. The overall industry sentiment is that peak season has passed, but rates are not collapsing – unit revenue is expected to remain above unit cost.

Market Concentration

Despite rising freight rates, the concentration level in the deepsea market remained stable quarter-on-quarter, showing only a slight 0.5-point decrease compared to 2019. This suggests that the end of the Consortia Block Exemption Regulation (CBER) has not led to significant changes in market competition. The forthcoming slot agreements between MSC and the Premium Alliance could introduce more complexity and opacity to the industry, particularly on European routes – i.e., it will become more difficult to assess the level of concentration due to lack of data.

Connectivity: LSCI & MTCI

Shanghai retains its status as the world’s best-connected container port, with its Liner Shipping Connectivity Index (LSCI) improving across year-on-year, quarter-on-quarter, and pre-pandemic comparisons. Growth was particularly driven by an increase in scheduled capacity and the number of services.

The Maritime Trade Connectivity Index (MTCI), which factors in trade flows, shows that Q2 2024 saw no major YoY improvement, with only a 0.2-point gain, while comparing Q2 2024 with Q1 2024 and Q2 2019 we observe a contraction (not significant, but the trend is on the downward trajectory).

Port Call Reliability

Port call reliability (that is ratio between calls made divided by calls scheduled to be made) has been slipping, with a slight decline in Q2 2024 compared to Q1, and more significant reductions when compared to Q2 2023 and Q2 2019. This decline suggests that, despite the level of rerouting becoming more stable, shipping lines continue to struggle with meeting scheduled calls.

Carbon Emissions

On the environmental front, longer journey times have led to increased CO2 emissions per TEU. In Q2 2024, emissions were 6.4% higher than in Q2 2019; a concerning upward trend in the industry’s carbon footprint as supply chains become more complex and rerouting persists.

Conclusion

The global shipping industry is experiencing significant changes in both demand and supply dynamics. While global volumes and profitability are on the rise, challenges remain, particularly around capacity management, port call reliability, and environmental sustainability. As the market evolves and new agreements reshape the level of competition, during 2025 it will be interesting to monitor the quality of service offered by the shipping lines – both in terms of connectivity as well as in terms or reliability.

Future fleet capacity

Fleet capacity is expected to increase by 1.7 million TEU by February next year, from a global total of around 29.9 million TEU to close to 31.6 million TEU. The largest contributor to the 1.7 million TEU is MSC – their share of the orderbook accounting for 24%. Second largest shipping line CMA-CGM (with 10%), followed by Maersk, COSCO and Evergreen (all with 8%). However, when we aggregate the capacity by alliance, Ocean Alliance emerges as the largest player with a global share of 29%.

Nobody knows when the Red Sea crisis will end; Gemini, Premier Alliance and MSC are all presenting two network options, via Suez Canal and the Cape of Good Hope. As the latter is now the ‘new normal’, the new capacity is expected to be absorbed by the re-routing. The ‘big question’ remaining is What shipping lines are going to do with all those new ships when the Red Sea crisis ends?

While the Red Sea crisis persists, we have seen various announcements by the alliances regarding their networks from 2025. MDST and Lloyd’s List have looked at the Asia-Europe trade and highlighted the changes for European ports, with some increasing their call quota, while others will see less calls ( Lloyd's List article ).

From February next year, nine of the 10 largest lines will realign alliances once more on the east-west trades. Ocean Alliance (CMA CGM, Cosco and Evergreen) will remain, the former The Alliance members — Ocean Network Express, HMM and Yang Ming — will continue as the Premier Alliance, minus Hapag-Lloyd, which will link up with European counterpart Maersk under the Gemini Cooperation, while Mediterranean Shipping Company, upon the dissolution of 2M, will go it alone.

The big winner in Northern Europe is Hamburg. The German port will enjoy 6 extra direct alliance calls from next year. Its regional rivals, meanwhile, Rotterdam and Antwerp will also gain 5 and 4 port calls respectively. 4 extra alliance calls are expected for Felixstowe as well.

On the Asia-Mediterranean corridor, the French port of Marseille-Fos and Spain’s Valencia come out well, adding three new alliance calls each. Damietta doubles its alliance quota with a further two calls from next year, while there are two extra alliance calls for Piraeus, Malaga, Gioia Tauro and Yarimca.

Algeciras, having gained two alliance calls, is expected to join Tanger Med as the most popular Asia-Mediterranean destinations from next year.

The Container Shipping Global Performance Report can be downloaded here .

The Midlands – North West Rail Link: The Impact on Rail Freight

Tue, 19 Nov 2024 16:39:11 GMT

In October 2023, the then Prime Minister Rishi Sunak formally announced that the Government were abandoning plans to progress HS2 north of Birmingham, with funding re-allocated to a series of smaller scale schemes (known as ‘Network North’). The decision was criticised by many, including the Greater Manchester and West Midlands combined authority Mayors who subsequently commissioned an independent review of the decision. The review report and recommendations were published in September 2024 and the conclusions have significant implications for the freight sector.

HS2 Phase 1 is currently under construction between Old Oak Common (west London) and a new junction on the West Coast Main Line (WCML) near Lichfield (Handsacre Junction), along with the spur line into the new Birmingham Curzon Street terminus. The second phase of HS2 was to be constructed in two sections. Phase 2a would extend from Handsacre Junction to Crewe. Phase 2b included the eastern leg from Birmingham to Yorkshire (via the East Midlands) and a continuation of Phase 2a from Crewe into an expanded Manchester Piccadilly station. While the eastern leg was previously cancelled in 2021 (due to cost-overruns), up until late Summer 2023 the Government was still officially promoting the full completion of the western leg to Crewe and Manchester. However, Rishi Sunak announced in October 2023 the formal abandonment of Phase 2, along with pausing work on the Old Oak Common to Euston section in order to examine a private sector funded solution.

Many in the railway industry and beyond consider this situation to be unsustainable in the medium to long-term. The planned connection to the WCML at Handsacre Junction is onto the so called ‘slow lines’ (used by freight and stopping passenger trains) as it was only meant to be lightly-used under the full Phase 2 scheme. It will also place a significant number of additional passenger trains onto the two-track section through Shugborough Tunnel and across the ‘at-grade’ Colwich Junction passing towards Stoke-on-Trent; this is already a known bottleneck on the WCML. In addition, the expanded Manchester Piccadilly station was designed with platforms able to accommodate 2 x 200m HS2 train-sets. The existing station will only be able to accommodate a single 200m train-set, which will have around 20% fewer seats when compared with a 265m long Class 390 ‘Pendolino’ train which currently operate on the Euston-Manchester route.

As currently being built, HS2 Phase 1 will release capacity on the existing WCML south of Rugby for other uses, such as additional freight or semi-fast passenger services, which (ultimately) was the principal rationale for constructing the new line. However, due to the truncation of HS2 at Handsacre Junction, it appears that north of Lichfield the opposite will now be the case. Capacity modelling work undertaken by MDS Transmodal indicates that, at best, future capacity for freight to the North West and Scotland will effectively be capped at current levels, thereby restricting growth. It may also be the case that some existing freight services will need to be removed from the timetable in order to accommodate HS2’s planned trains which, as described, are likely to offer fewer seats than current services. This is against a background where the Government has set a long-term target to grow rail freight by 75% up to 2050.

Given this position, the Greater Manchester and West Midlands combined authority Mayors decided to commission an independent review of the decision. Chaired by David Higgins (former CEO of Network Rail and Chair of HS2) and led by consultants Arup, the review considered the implications of the cancellation decision, potential infrastructure options and funding models for delivery. The review’s report and recommendations were published in September 2024.

After concluding that the abandonment decision is likely to have a negative impact in terms of inter-regional connectivity, railway network capacity (passenger and freight), economic growth and productivity, the report then went on to examine various potential infrastructure solutions. This included road-based options, although they were rejected as they would not address the inter-regional capacity gap or solve the rail operational challenges outlined. Three rail-based solutions were considered, covering upgrading the existing WCML infrastructure (Concept A), a combination of upgrades and some new tracks (Concept B) and an entirely new railway line (Concept C).

Concept C would effectively replicate the now abandoned HS2 alignment from Handsacre Junction to north Cheshire via Crewe, albeit with a lower design speed (300km/h rather than 400km/h), using ballasted track (not slab-track) and to British main line loading gauge (rather than UIC gauges). Due to these design changes, the report concludes that this could be achieved for around 60-75% of the capital costs of the original HS2 scheme. Concept C would also offer the highest net benefits, a step-change in capacity and network performance improvements (over Concepts A and B). The report consequently recommends it should be taken forward, but branded as the Midlands-North West Rail Link rather than HS2).

The report suggests that Handsacre Junction to Crewe is delivered first, as the planning powers already exist. The report assumes the continuation of the proposed line from north Cheshire into Manchester is delivered as part of the Northern Powerhouse Rail (NPR) project and the report also acknowledges that Crewe station will require a solution to ‘join up’ the two sections; this is not addressed, noting that further work is required with Network Rail.

Three important questions remain to be answered. Firstly, can the recommended Midlands-North West Rail Link be funded in the current environment? The report suggests a ‘blended’ funding strategy whereby public (Government) borrowing is combined with private sector equity, similar to the way many mainland European infrastructure projects, such as the Tour to Bordeaux LGV extension, are financed . HM Treasury is understood to be examining an updated version of Public-Private Partnership solutions, and the Budget on 30 October proposed a new method of measuring public borrowing when used for funding infrastructure. However, the budget did not mention the Midlands-North West Rail Link or HS2 Phase 2a.

Secondly, will NPR be delivered? The recommended solution from the report is dependent on the northern Mayors’ preferred route alignment for NPR – via Warrington, north Cheshire and Manchester Airport. This alignment is not certain at this stage and it is understood the Department for Transport has been considering alternative options. Both NPR and the Crewe to north Cheshire section of the Midlands-North West Rail Link will require planning powers, most likely via an Act of Parliament. This will require Government time in Parliament and departmental support.

Finally, will the Midlands-North West Rail Link benefit rail freight? The Rail Link, as proposed in the report, will certainly release capacity on the existing WCML between Handsacre Junction and Crewe by diverting HS2 trains away from the Shugborough Tunnel/Colwich Jn bottleneck. This could, in part, be reallocated to freight to allow for growth. However, known constraints on other sections of the WCML, including Crewe to Warrington via Weaver Junction and north of Preston, will remain unresolved, particularly as HS2 trains to Lancaster and Scotland will be routed that way. Further, plans for new intermodal terminals at Parkside (ILP North) and Port Salford on the Chat Moss line will, in all likelihood, be dependent on the northern Mayors’ preferred route alignment for NPR to provide relief in the Earlestown area.

Overall, the independent review recommends a plausible and viable way forward. Part of the suggested alignment has existing planning powers, while the rest of the route could potentially be incorporated into the NPR consent process. The new line could also be used as a ‘test bed’ for a new funding model, with HM Treasury keen on attracting private finance into infrastructure funding. The Budget on 30 October also paved the way for higher borrowing to finance infrastructure. However, much uncertainty remains, particularly with respect to the ultimate delivery of NPR.

Global Shippers Forum tool up for the contracting season

Thu, 26 Sep 2024 13:20:16 GMT

Logistics managers and major shippers are rearming themselves in preparation for the annual contract season negotiations set to begin in Europe later this year and on the Pacific in the spring 2025.

Global Shippers Forum (GSF) Director James Hookham will tell the FIATA World Congress in Panama today about new reports and indices the GSF is comping with MDS Transmodal to improve transparency.

Cargo owners have taken a battering over the past five years as major events, such as Covid and the blocking of the Red Sea route, have sent freight rates to unprecedented levels. And the feeling, among some shippers is that the lines have taken advantage of massive disruptions to bolster their bottom lines.

Following last year’s false dawn, which saw the Middle East war erupt, closing the Suez route, forcing carriers around the Cape of Good Hope absorbing newbuilding capacity that had been expected to rebalance the supply and demand equation, shipper confidence is again growing.

In some senses many shippers have entered previous contract negotiations with little market visibility, but the GSF in partnership with consultant MDS Transmodal have designed a report that is aimed at giving shippers the visibility of what is happening in the market, arming shippers with data that they can use in the upcoming rounds of negotiations.

“The market is too unpredictable at the moment to confidently make projections,” explained Hookham, "but we can look at trends in the current circumstances.”

Those trends will initially take the form of quarterly market reports compiled by MDS Transmodal using publicly available sources and the company’s own algorithms to detect those trends and inform shippers.

According to Hookham, shippers are looking for three things from this data, the numbers to use when they are in discussions with the shipping lines; to understand trade routes more fully, so that when a problem arises they can rapidly assess their options; and when considering re-sourcing to other parts of Asia or closer to the consumer market, what are the available services, what is the quality of those services and can they make a detailed risk assessment before taking major decisions.

As a tool to help shippers answer these questions GSF and MDS Transmodal have put together the Container Shipping Performance Indicators CSPI which has eight indices, three of which, capacity, profitability and connectivity will be presented by Hookham in his Panama speech today. (see below for full indices).

CSPI’s will be available to shippers by region, trade route, or by ports, but the major issue for Hookham at this point is, “how much of the deployed capacity is available to book?”

“The number of slots available are a quarter of the given capacity on the water,” claimed Hookham, “but the amount that can be booked will depend on the speed of the vessel, the frequency of port calls, which ports and how many are skipped and blanked sailings, as lines manage the actual capacity and number of slots.”

Development of the CSPI began during Covid and has now matured with new elements expected to be added to the system in the near future.

In the immediate future, however, shippers will be able to use data supplied by a variety of sources, including capacity and utilisation data, which Antonella Teodoro, the analyst at MDS Transmodal responsible for building the CSPI, says had already had an effect.

“Data from the embryonic CSPI was used to analyse the market and that was presented to the EC leading the commission to end the carriers’ block exemption from the European competition rules,” said Teodoro.

In the latest developments MDST has started by following vessel deployments, through its database, which is updated on a monthly basis and allows the consultant to accurately measure capacity. That data is supplemented with trade flow data to calculate average utilisation for capacity deployed, explained Teodoro.

Latest CSPI data suggests that carriers on the headhaul routes of the three major trade lanes have adequate spare capacity to carry cargo, with Pacific utilisation at 70%, Asia to Europe 80% and utilisation of just 65% on the westbound Atlantic.

“There is likely to be severe over-capacity by February next year with the newbuild capacity being deployed, there will likely be disruption from the US East Coast strike, but I don’t think this will be serious enough, or long enough, to bring similar levels of disruptions as seen during the pandemic,” said Teodoro.

According to MDST standing capacity is expected to increase by 1.7 million teu by February next year, from a global total of around 29.9 million teu to close to 31.6 million teu.

Some of this newbuild capacity will be offset by demolitions, but most scrapping will begin with older tonnage, meaning smaller vessels, while the bulk of the orderbook remains for ships in excess of 15,000 teu.

Teodoro, meanwhile, confirmed: “In 2020 there were virtually no vessels available and utilisation was over 90% this is a major difference between then and today’s market.” Ultimately that lack of available tonnage drove rates to record levels.

All the indications are that barring a major cataclysmic event similar to Covid, a major slump in spot rates is on its way from Q4 onwards and could impact contract negotiations in the Aisa to Europe trades which are due to begin imminently. And if that happens a knock-on effect may be seen on the Pacific, with all three major trades having already seen the market softening.

First published on Seatrade Maritime News.

The General Election and New Government

Tue, 30 Jul 2024 14:46:13 GMT

The UK General Election, held on 4 July 2024, was won by the Labour Party with a substantial (landslide) majority. Despite being criticised by some for its ‘safety first’ election manifesto, a number of the new Government’s early policy proposals covering transport, planning and devolution are set to be radical reforms foretelling significant structural and commercial changes. While many details are yet to be published, MDS Transmodal examines in this article the early changes proposed and any potential impact on the freight transport sector.

The King's Speech

The King’s Speech to Parliament on 17 July 2024 set out the new Labour Government’s legislative agenda for the year ahead, thereby providing insight into its early priorities. A total of 34 Bills are to be brought forward, with five being directly promoted by the Department for Transport (DfT) . Transport sector reforms are clearly an important part of the new Government’s early agenda, despite barely featuring as an issue during the election campaign. Two further Bills covering planning and devolution are also likely to impact on the transport sector.

Railway Bills

The Passenger Railway Services (Public Ownership) Bill , published shortly after the King’s speech, will amend existing legislation to make appointing a public sector train operator the default position, rather than as the ‘operator of last resort’ (under current rules train services have to be tendered to private operators in the first instance). This measure will allow the remaining passenger services that are contracted by the DfT, but operated by the private sector, to revert to public ownership as contracts expire or when performance is poor. All existing private sector contracts can be given termination notices by October 2027.

Longer term, a Railways Bill will legally establish a new integrated railway body, which will bring together the management of the track infrastructure (currently undertaken by the publicly owned Network Rail) alongside the planning and operation of most passenger rail services in England (and those extending into Wales/Scotland). Acting at ‘arms length’ of DfT and as a ‘directing mind’, the new body currently has the working title of Great British Railways (GBR) . This Bill is still being prepared, meaning the contents cannot yet be confirmed, albeit the proposed legislation is expected to reflect the policy proposals set out in the document Getting Britain Moving: Labour’s Plan to Fix the Railways , which was published by the Labour Party before the election in April 2024. Fares simplification is also expected alongside improvements to digital ticket systems.

Getting Britain Moving confirmed that rail freight operations will remain within the private sector. The legislation is likely to place a statutory duty on GBR to promote the use of rail freight, with a long-term rail freight growth target set by the Secretary of State (a long-term target was published by the previous Government in December 2023, informed by forecasts produced by MDS Transmodal ). Legal safeguards will be established in order to ensure that freight operators receive ‘fair access’ to GBR’s track network, with the Office of Rail and Road remaining as the independent access regulator.

While significant reforms are planned for the passenger sector, it would appear that little will change for rail freight. On-rail competition between the private freight operators will remain as the cornerstone of the market. The private sector will continue to invest capital in equipment and terminals (see below). However, freight operators will need to secure access rights (train paths) on GBR’s track network alongside the latter’s own passenger trains (a vertically integrated network, in contrast to the vertically separated arrangements that have existed since the 1990s). The precise details of how that will be delivered contractually and commercially, and how additional capacity will provided to accommodate market growth, remains a watching brief.

The High Speed Rail (Crewe-Manchester) Bill has been carried over from the previous Parliament. It will provide powers to construct new railway infrastructure in the North West related to the Northern Powerhouse Rail (NPR) project, including a new line linking Liverpool to Manchester and new stations. While primarily aimed at improving passenger connectivity across the north of England (related to economic growth and improving productivity), it should over the long-term release capacity on the existing network which could be reallocated to freight operations.

Other Transport Bills

Completing the picture, the Better Buses Bill will provide powers to local authorities allowing them to introduce franchised bus services similar to those operating in London and Greater Manchester (replacing the current deregulated model that has operated since the mid-1980s). The Sustainable Aviation Fuel Bill will support sustainable aviation fuel (SAF) production in the UK by providing revenue certainty to encourage investment in the construction of SAF plants.

Devolution and Planning

Two further Bills being promoted by other departments are likely to have an indirect impact on the freight sector. Getting Britain Moving proposed that the Combined Authority Mayors in England will have a statutory role on the railway network, including the ability to agree local/regional rail services with GBR and powers to integrate local railways with other forms of public transport. This policy could be taken forward through the English Devolution Bill , which proposes to grant local leaders enhanced powers over strategic planning and local transport networks, in addition to any provisions that will be in the Railways Bill . The precise details of how that will be delivered have yet to be published.

Local and regional railway networks play an important role for the freight sector. Many nationally important rail freight services pass through city centres, such as intermodal services from the south east ports needing to access the Trafford Park terminals via Piccadilly station and minerals for construction projects often being delivered into urban distribution centres by rail, thereby removing HGVs from congested city roads. It will therefore be important for the Combined Authority Mayors, when exercising their new statutory powers for passenger railways as described, to fully understand the role rail freight plays in their respective areas. While the role of sub-national transport bodies remains uncertain at this point, the Combined Authority Mayors in England – most likely through their transport delivery arms such as Transport for Greater Manchester and Merseytravel – may assume more significant strategic planning responsibilities.

Finally, the Planning and Infrastructure Bill will reform the planning system, including streamlining the delivery process for nationally critical infrastructure. The primary focus of the Bill is on accelerating house building and the net-zero electricity generation/distribution system, including bringing on-shore windfarms into the Nationally Significant Infrastructure Projects (NSIP) planning system. The Bill is also expected to simplify the consenting process for NSIPs, accelerating their delivery. This includes proposals to bring forward improved National Policy Statements and allow for them to be updated every five years. New rail-connected distribution parks (Strategic Rail Freight Interchanges or SRFIs) are currently examined and consented under this process. It should therefore be simpler and quicker to bring forward plans for new SRFIs which will be crucial for the growth of rail freight. The expansion of both on-shore and off-shore windfarms envisaged by this Bill (alongside the creation of Great British Energy) should also provide new commercial opportunities for the ports sector, which can be expected to handle much of the necessary equipment.

Overall, while many of the early changes planned for the transport sector concern passengers, there are a number of important implications for freight. Despite rail freight remaining in the private sector, the industry will be dependent on gaining access to a new vertically integrated track network. The delivery of new rail-connected distribution parks should, in time, become simpler and quicker and future strategic transport planning is likely to transfer to the Combined Authority Mayors.

UK Trade: Is Kazakhstan a major back door route for UK car exports to Russia?

Tue, 30 Jul 2024 14:13:07 GMT

The analysis of UK exports of cars to Russia and some of its neighbours highlights the huge percentage increases in UK automotive exports since February 2022 to countries such as Kazakhstan following the invasion of Ukraine. Commentators have suggested this represents intermediate trade between the UK and Russia via Kazakhstan to avoid sanctions. Does analysis of the trade by weight and in absolute terms, rather than by value and in relative terms, suggest this is a major potential circumvention of Western sanctions against Russia?

After February 2022 British car manufacturers ceased their operations in Russia, with sales of luxury cars worth more than £42,000 banned under the sanctions introduced after the Russian invasion. UK trade statistics show that no cars at all were exported directly to Russia in 2023 and 2024.

At the same time, however, UK automotive exports to Kazakhstan grew by 3,900% in the period January-April 2023 compared to the same period in 2022 and by 123% in the first four months of 2024 compared to the previous year. The Kazakh economy grew at 5.1% in 2023, a healthy rate in its own right, but there was no sudden increase in per capita wealth to explain such an enormous percentage growth in car imports from the UK. Commentators have suggested that the growth was due to the Russian market for luxury cars being served via intermediaries in countries such as Kazakhstan, which shares a 7,600km land border and a customs union with its northern neighbour.

Analysis of the weight of the cars exported to Kazakhstan suggests that - while some intermediate trade is possible - it in no way makes up for the direct trade lost with Russia. Assuming that cars exported to Russia are 2 tonnes per vehicle (the average weight of a car), the UK’s exports to Russia amounted to about 68,000 vehicles in January to April 2021, but had fallen to 21,000 cars in the first two months of 2022 before sanctions were introduced.

Between January to April 2022 and the same period in 2023, estimated exports to Kazakhstan increased by 3,900% but this represented an increase from only 3 vehicles to 133, with a further increase to 163 in the same period in 2024. These 163 vehicles represent only 0.24% of the UK’s sales to Russia during the same period in 2021 and shows that any intermediate trade is relatively small-scale and probably meeting the requirements of a small number of wealthy Russian citizens who are desperate to drive a particular British marque.

The real story behind the headlines on the massive percentage increase in UK car exports to Kazakhstan is how successful the sanctions have been in stifling the flow of British cars to all but a few very wealthy Russian consumers.

Hub and spoke versus direct services in container shipping: an analysis

Thu, 18 Jul 2024 09:33:48 GMT

The Red Sea crisis has prompted shipping lines to re-consider the hub and spoke strategy and increase their direct services allowing the carriers to absorb excess capacity and reduce their vulnerability to port congestion.

In 2024Q2, global deepsea fleet capacity (that is, capacity available to shipping lines) is estimated to have been 11.5% higher than in 2023Q2, reflecting the arrival of further new vessels into the market. During the same period, capacity scheduled to be deployed by the shipping lines (that is, capacity allocated by the shipping lines to trade lanes) has grown at a much slower rate of 1.8%.

As shown in the following graph, fleet capacity has been continually growing faster than scheduled deployed capacity since around 2022Q4, with the gap between the two enlarging.

Focusing on services that call at three or more ports on deepsea routes, thus excluding two-port rotations that do not typically constitute deepsea services, in this short article we will analyse how shipping lines are deploying their vessels, specifically whether they are pressing the accelerator on the hub-and-spoke model or if they are opting for more direct services. The comparison is drawn from a detailed analysis of our data on scheduled deployed capacity between July 2023 and July 2024.

Fleet capacity vs scheduled deployed capacity

Fleet capacity refers to the total volume that a shipping company can deploy, while scheduled deployed capacity refers to the volume actually in service. The distinction becomes crucial when considering service frequency and routing. For instance, two ships with a combined fleet capacity of 2,000 teu can generate a scheduled deployed capacity of 52,000 teu if they operate on a weekly service. An increase in fleet capacity, such as adding three more ships, raises the fleet capacity to 5,000 teu without necessarily altering the scheduled capacity, highlighting the importance of vessel utilisation efficiency.

One significant trend observed over the past year is the lengthening of journey times (mainly caused by re-routing via the Cape of Good Hope away from the Bab al-Mandeb Strait) alongside a reduction in the number of ports in the rotation. This shift raises the question: is this due to a preference for a hub-and-spoke model or a pivot towards more direct services?

A comparative analysis of capacity deployed by the number of ports in rotation from July 2023 to July 2024 (chart above) reveals some critical changes:

for the rotations calling at 3-7 ports, there was a 17% increase in capacity, rising from 2.4m teu to 2.8m teu, now accounting for 25% of total capacity (up from 22%);
the rotations involving 8-12 ports saw a 6% increase in capacity, from 4.8m teu to 5.1m teu, now accounting for 46% of total capacity (up from 44%);
however, rotations with 13 or more ports experienced an 11% decrease in capacity, from 3.6m teu to 3.2m teu, now accounting for 29% of total capacity (down from 33%).

Drilling down the analysis to the port level, the capacity deployed on 25 key global hubs[1] provides a telling insight: the number of hubs experiencing an increase in capacity is lower than the number of hubs seeing a decline in capacity offered.

Extending the analysis to predominately gateway ports and focusing on ports with a capacity of over 0.5 million teu in July 2024, our data suggests that hub-and-spoke models are not prevailing; instead, there is a shift towards direct services, as they often utilise smaller vessels offering a more resilient option compared to the larger vessels typically associated with hub-and-spoke networks.

Further confirmation of the hub-and-spoke model being 'on pause' can be found in the deployment trends of vessels. Ships under 15,000 TEU are increasingly accounting for a larger proportion of capacity in shorter rotations compared to their larger counterparts. This trend underscores the industry's shift towards servicing non-hub ports[2] more frequently, enhancing the efficiency and directness of their operations.

The data from the past year indicates a trend towards direct services in deepsea shipping, with a notable ‘pause’ on the hub-and-spoke model. The resilience of smaller vessels and the strategic deployment of capacity towards non-hub ports highlights the industry’s adaptive strategies in response to evolving market demands in the context of the ongoing Red Sea crisis.

As the industry continues to navigate these changes, the balance between efficiency, frequency, and direct services will likely remain a focal point for shipping companies worldwide.

Looking ahead, the composition of the ships that MSC has on order is interesting: nearly half of the capacity expected to be delivered to the number one shipping line will comprise ships of under 12,500 teu, reflecting a strategic preference for flexibility and resilience (Figure 5). Looking at the number of ships, the percentage increases to 62%, Figure 6.

[1] Predominantly gateway ports

[2] Predominantly transhipment ports

First published on Seatrade Maritime News.

Reducing carbon emissions from HGVs in Ireland

Fri, 28 Jun 2024 14:11:30 GMT

The project

The Climate Change Advisory Council (CCAC) in Ireland commissioned MDS Transmodal, in partnership with SYSTRA, to carry out research on how Ireland could reduce its carbon emissions by 2030 from the road haulage sector. Road haulage is regarded as one of the more ‘difficult to decarbonise’ sectors of the transport industry.

The policy challenge

Freight transport in Ireland is dominated by road freight transport, which handles 99% of all freight moved within the country.

The EU will gradually require the road haulage sector to switch to zero emission trucks by 2055 by requiring manufacturers of trucks to sell a higher proportion of zero emission vehicles and by the state being required to provide a minimum level of refuelling/recharging infrastructure for these vehicles.

However, this alone is likely to be too slow for the sector to make a significant contribution to Ireland’s target of a 50% reduction in CO2 emissions by 2030 compared to 2018.

Potential policy measures

The research makes suggestions for how a more significant contribution might be made by the freight sector to reducing carbon emissions based on the Avoid-Shift-Improve (ASI) framework which is used by transport planners.

The results of the research suggest it will be difficult to “avoid” freight movements, as this would imply a downturn in economic activity. The main opportunity to secure a “shift” of road freight to an alternative mode of transport for movements within Ireland would be provided by rail, but this mode will struggle to make a meaningful contribution to reducing carbon emissions by 2030.

This means that the focus should be on “improving” road freight movements by incentivising a switch of road haulage from using diesel propulsion to greater use of zero emission trucks through the introduction of a cohesive package of ‘carrot and stick’ measures. This package of policy measures would encourage a rapid take-up of zero emission technology by the market by 2030, particularly for the regional and urban freight segments of the market.

The report

The report has been published by the CCAC and can be found here .

The Rail Reform Bill

Wed, 01 May 2024 11:49:56 GMT

In February 2024, the Government published its draft Rail Reform Bill for pre-legislative scrutiny. When enacted, it will implement those parts of The Plan for Rail which require primary legislation. At the end of April 2024, the Labour Party announced its plans for rail reform should it win the next General Election. Putting aside the political spin, are there any significant differences between the two plans?

The Plan for Rail

In 2018 the Northern and Thameslink rail franchises introduced new timetables which reflected commitments made when bidding for their respective contracts. The changes encountered operational issues from the start, resulting in significant delays and cancellations to services. The separation of infrastructure management (Network Rail) from train service specification and contract awards (Department for Transport) was widely considered one of the underlying causes. At the same time, a number of franchises were struggling to meet their financial commitments, including the inter-city east coast operation run by a Stagecoach/Virgin joint-venture (Virgin Trains East Coast). The Government subsequently asked Keith Williams, the former CEO of British Airways, to chair a review of the railways sector.

Delayed by Covid-19, The Plan for Rail was eventually published in 2021. Proposals included:

A new integrated rail body (IRB), bringing together track infrastructure management and the planning of passenger rail services into one national organisation. The IRB was given the title of Great British Railways (GBR) ;
GBR was to specify passenger train services, draw up timetables and set fares;
Most passenger rail services in England (outside London), while specified by GBR, would be operated by private sector train operators using the ‘concession model’ (i.e. recovery of costs plus a performance related management fee, similar to the way TfL contracts Overground and Elizabeth Line services); and
Train services in Wales, Scotland and London were to remain devolved, albeit they would operate over GBR owned tracks.

Freight services would remain in the private sector. GBR would have a statutory duty to ‘promote freight’, with freight operators granted ‘fair access’, underpinned by legislation, to GBR’s track network. A long-term rail freight growth target would be set and this was subsequently undertaken in December 2023, setting a growth of 75% in freight tonne-km by 2050. A national freight co-ordination team within GBR was also proposed to act as a single point of contact for freight operators and customers.

The Government was keen to stress that GBR would not be an updated version of Network Rail; the network infrastructure provider would be absorbed into GBR, creating a new company with a fresh ethos and working culture. A transition team (the GBRTT ) was subsequently formed to manage implementation of the plans. However, primary legislation is required to deliver some of the proposed reforms, including granting GBR statutory powers to contract passenger rail services, which currently rests with the Secretary of State outside London, Liverpool and Tyneside. The draft Rail Reform Bill is the proposed primary legislation, albeit it is unlikely to become law before the general election.

The draft Rail Reform Bill

The draft Bill more or less reflects the proposals set out in the Plan for Rail. In summary, assuming it becomes an Act of Parliament, Network Rail will be designated as the new IRB (though whether the GBR name will be retained or another branding adopted is not addressed). In addition to its existing infrastructure management role, it will assume responsibility for the planning and contracting of passenger rail services across most of England. It will be required to produce and update a business plan, which will provide the Office of Rail and Road (ORR) a tool against which its performance can be assessed. How this fits with the Plan for Rail’s assertion that GBR will not be an updated version of Network Rail remains to be seen.

Schedule 1 of the draft Bill covers how the IRB’s network licence will in future be granted and amended. For freight, the IRB will as a condition of its network licence be required “to make appropriate provision for services for the carriage of goods by railway” . It is assumed this will satisfy the Plan for Rail’s promise of ‘fair access, underpinned by legislation’.

The Labour Party’s plan

At the end of April, the Labour Party published the reforms it intends to implement should it win the next General Election ( Getting Britain Moving: Labour’s Plan to Fix the Railways ). The plans are actually broadly similar to those proposed by the Government. Labour would also establish GBR as an ‘arms length body’ and a ‘directing mind’. It will have operational independence, being responsible for both track infrastructure management and planning passenger rail services. A Railways Act is promised in the first parliamentary session to enact the plans. Fares would be simplified, with safety and economic regulation remaining with the ORR. Passenger and freight rolling stock would continue to be leased from the private sector.

The role of freight, and the economic and sustainability benefits it generates, is particularly noted. It confirms that freight operations would remain within the private sector under a future Labour Government, with a statutory duty placed on GBR to promote the use of rail freight; the long-term growth target would also be retained. Safeguards would be put in place to ensure freight operators receive fair access to GBR’s network, with the ORR remaining as the independent access regulator.

The key difference is that under Labour’s proposals, GBR would also directly operate passenger rail services, rather than being outsourced to private operators as concessions (as under the current Government’s plans). As the current train service contracts with the private sector operators expire, services will be brought ‘in-house’ to be operated directly by GBR. It is estimated this process will be completed over the next five year parliament. Some open access passenger services will remain where they ‘add value’ and capacity.

Conclusion

Whoever wins the next general election, the railways are going to experience a period of change – almost certainly the most significant changes since privatisation in the 1990s. A new arms-length integrated rail body will be established, combining responsibility for both track infrastructure management and passenger rail services. The Labour version of this body will operate passenger trains directly, whereas the Conservative’s plans will see services continue to be outsourced using the concession model. The freight sector, and the benefits it generates, features prominently in both plans. There is a broad consensus across both plans; it will remain in the private sector with a duty placed on the IRB to support growth, backed by a long-term target. Additionally, both sets of proposals appear to have ‘solved’ the issue of how a vertically integrated railway, which is in effect what the IRB will become, can provide open access to its network for on-rail competition between private sector operators alongside its own services.

Fast fashion: How airfreight shapes retail’s competitive edge

Mon, 29 Apr 2024 08:38:03 GMT

As fast and ultra-fast fashion grows with the rise of Far Eastern brands such as Shein and Temu, so does the pressure on the airfreight market. This puts into question the sustainability of their e-commerce model given the competition for airfreight capacity and its environmental implications.

Global supply chains have been subject to several recent disruptions, most notably the COVID pandemic and hostilities in the Red Sea. A lesser known but equally significant disruptor in the airfreight sector is the rise of e-commerce. Major online e-commerce retailers such as Shein and Temu largely depend on airfreight to transport parcels directly from warehouses in Asia to customers in Europe and North America, buying up short-term empty capacity at discounted rates. However, their growth has increased demand for airfreight capacity at the same time as industries explore alternative options to shipping through the Red Sea. The outcome is a rise in airfreight costs from Asian hubs such as Guangzhou and Hong Kong due to capacity shortages.

Fast fashion

A certain business model has developed with the rise of ‘fast fashion’, a relatively recent phenomenon that gained traction in the late 1990s. Associated with affordable clothing that produces similar designs to luxury brands using lower quality materials and production methods, it allows customers to keep up with changing trends. It is often characterised by poor quality of clothing, unethical working conditions, and excess waste as items are only used a handful of times due to its poor quality and consumers’ desire to keep up with fast-changing trends.

This business model took shape as retailers started exporting production to countries with lower wages which made rapid product turnaround possible. This meant that, while new collections used to be released four times a year, clothing could now be produced at a much faster rate. ‘Ultra-fast fashion’ operates on an extreme version of the model, where stock is resupplied in a matter of days.

Coupled with faster production it ensures that items are available on shelves at the right time. To remain competitive, high-street brands have opted for the use of air freight; the transport mode that provides the fastest door-to-door delivery times from international manufacturers, likely to be located in Asia. Fast fashion retailers such as Zara and H&M aim to renew collections as frequently as every week to match the pace of fashion trends. In the case of ultra-fast fashion, retailers dynamically respond to customer demand by placing production orders only for products that perform well, to be transported using aircrafts to achieve short delivery windows and resupply stock in a few days.

E-commerce distribution models

During the COVID pandemic, e-commerce experienced significant growth. Figure 1 shows that in the UK, the e-commerce shares of retail sales grew from 19% in 2019 to its highest of 31% in 2021 but have fallen back following the resumption of previous trading practices.

In the fashion industry, ultra-fast fashion retailers that operate only online such as Shein and ASOS were able to benefit from increased demand and ship parcels from their warehouses directly to consumers. This contrasts with the standard ‘logistics model’ used by e-commerce retailers which is based around customer fulfilment centres (CFCs). CFCs receive goods from multiple suppliers, principally via sea freight but also using airfreight for higher value and faster moving lines, where they are stored before delivery within the country and to customers in the surrounding region. Recently, their location has focused on mainland Europe; prominent examples include Next or Amazon. For instance, alongside its UK warehouses, Next operates a German hub that processes and packs online orders for 13 countries as well as handling European returns.

By contrast, online retailers such as Shein and Temu process items in their Fast East distribution centres and send them directly to customers in individually addressed packages. Despite operating warehouses in America, Europe, and the Middle East, most stock is in China where orders are split into sub-orders and shipped below the customs threshold where applicable. In the United States, a trade rule known as ‘de minimis’ exempts packages with a value under $800 from customs duties. In the UK, a similar rule is in place for parcels under £135. A report by the U.S. International Trade Commission found that de minimis imports account for 83% of all e-commerce imports in fiscal year 2022, increasing by 88% from 2018. Of the total de minimis imports from 2018 to 2021, approximately two-thirds were from China . These are shipped through the purchase of spare airfreight capacity at discounted rates to quickly deliver parcels to customers.

Environmental implications

Increased use of airfreight inevitably raises environmental issues. As Figure 2 shows, air cargo is the most carbon-intensive mode of freight transport per tonne-kilometre.

Shein reported in 2022 that the growth of its production from the previous year led to a 52% increase in emissions which reached 9.17 million tonnes CO2e. It also announced it would begin implementing decarbonisation programs at the end of fiscal year 2022. It aims to be carbon neutral in its operations and facilities by 2030, which make up less than 1% of its total emissions. Emissions from its supply chain, where most of its emissions lie, are to be addressed by promoting renewable energy use and energy-efficient projects . It was recently reported to be expanding its existing U.S. facility in Indiana and opening a new warehouse in California, and is looking into increasing its volumes shipped using maritime freight. The aim is to ultimately reduce the cost of transport and reduce transport time by storing goods in its global network of warehouses.

Conclusion

The relative affordability of airfreight through the purchase of spare capacity has facilitated the rise of ultra-fast fashion. However, as major e-commerce retailers such as Shein and Temu continue to grow, the longevity of their supply and distribution model is likely to be questioned. Specifically, can there be long-term reliance on airfreight given the competition for capacity leading to upward pressure on rates? In addition, can the increased use of airfreight be justified given the significant GHG emissions emitted compared with other modes?

Expanding locations of regional warehouses to be closer to customers, in addition to switching transport away from airfreight, could suggest ultra-fast fashion retailers are moving towards a more standard logistics model. However, lead times are considered the key drivers of competitive advantage in the industry. Therefore, as long as demand for ultra-fast fashion remains, its distribution will have to find a balance between being timely, cost-efficient and environmentally sustainable.

mdstransmodal

Global trade finds new channels as US tariffs reshape flows

WEBINAR: City logistics for historic cities - lessons from Chester on Wednesday 25th March @ 1pm

Strengthening our commercial & operational offer

Scotland-Continent Ferry Service

Mapping 20 years of change in the global liner shipping network

Two snapshots of the global liner shipping network: Moving towards more hub-and-spoke connections

﻿ Network characteristics: What has changed over the last 20 years

﻿ Competing and connecting: Countries served by the shipping lines

﻿ Improving connectivity

Taxing times: Is road pricing the future for freight taxation?

Modelling road pricing for freight: the scenarios

Modelling road pricing in Great Britain: the results

﻿ The way forward

Strategic outlook for UK rail freight: 2040 and 2050 forecast scenarios

Scenario-based modelling

Market focus and methodology

Key findings ﻿

City logistics: Chester City Centre Logistics Report

Pedestrianisation in Chester

The work programme

The issues

Potential solutions

Acknowledgements

More information

Fuel Duty for diesel

Cost Components of a litre of Diesel

UK Budget 2025: Taxing times

The decline of Fuel Duty

Road pricing: a logical but politically fraught solution

Freight first: a pragmatic path forward

What comes next?

Red Sea disruption drives new routes and regional opportunities

Connectivity Gains Across Regions

Global Connectivity Reaches Post-Pandemic High

Environmental Regulation and Ship Deployment

Looking Ahead: Red Sea Disruption and Global Maritime Networks

Global steel trade 1996–2024: Trends, shocks, and UK exposure

Introduction

Global trade volume: Growth and shocks

Top exporters: China’s dominance

Top importers: Shifting demand

Regional trade flows: the UK and EU perspective

Strategic implications for the UK

Conclusion

Forecasting the need for port development in Britain

The NPSP's objective

Port traffic forecasts to 2050

Port traffic forecasts

Conclusion to DfT Port Traffic Forecasts

From decline to recovery: UK agri-food exports to the EU show growth in 2025

The sanctions loophole: Kyrgyzstan’s role in Russia’s machinery supply chain

Top 5 fastest growing global import markets by value, 2019-24

The Strait of Hormuz - a strategically vital waterway

UK Maritime Freight Trends

Global Shipping Market Overview: Q2 & Q3 2024 Analysis

Demand: Global Volumes & Growth Trends

Supply: Fleet vs Scheduled Capacity

Utilisation Level: Supply vs Demand

Profitability: Unit Revenue vs Unit Costs

Market Concentration

Connectivity: LSCI & MTCI

Port Call Reliability

Carbon Emissions

Future fleet capacity

The Midlands – North West Rail Link: The Impact on Rail Freight

Global Shippers Forum tool up for the contracting season

The General Election and New Government

The King's Speech

Railway Bills

Other Transport Bills

Devolution and Planning

UK Trade: Is Kazakhstan a major back door route for UK car exports to Russia?

Hub and spoke versus direct services in container shipping: an analysis

Reducing carbon emissions from HGVs in Ireland

The project

The policy challenge

Potential policy measures

The report

The Rail Reform Bill

Network characteristics: What has changed over the last 20 years

Competing and connecting: Countries served by the shipping lines

Improving connectivity

The way forward

Key findings