Ethiopian Freight Forwarders and Shipping Agents Association

EFFSAA Weekly Newsletter, Vol. 02, No. 068

Transport Ministry Targets Higher Logistics Performance Ranking

By its own self-assessment, the Ministry of Transport and Logistics (MoTL) projects that the logistics efficiency of Ethiopia will stand at 114th position in the logistics performance index with slight improvements.

On the first general assembly of Ethio Logistics Sectoral Association (ELSA) held on March 4 at Sheraton Addis, Dagmawit Moges, Minister of MoTL, said that despite the sector’s existing challenges, improvements have been recorded.

In the World Bank’s 2016 logistics performance index (LPI), where Ethiopia was last included, saw the country being ranked 126 out of 167 countries, with an average score of 2.38.

With a strategy that pushes for continuous improvement, Ethiopia in its ten year plan targets to become the 40th in rank in the international logistics performance index.

“As a result of what we have accomplished in the previous years, we are expecting ranking improvements,” said the Minister.

ELSA, which was established about three years ago with the guideline of Ethiopian Maritime Authority (EMA) and 176 founding members under public private partnership joint mission, is part of the new interventions on the sector development. ELSA that is already engaged on various activities to support the sector has designed a five year strategy that will be implemented until 2025.

At the general assembly, six new board members were elected, while three existing members have continued to serve in the board of directors. The logistics guru and founding Director General of EMA, Mekonnen Abera, CEO of Ethiopian Shipping and Logistics Services Enterprise, Roba Megersa, Robel Tesfaye of Ethiopian Electronic Single Window, were included on the new board, while Elizabeth, Elias Geneti and Matiwos Ensermu are serving as members re-elected to continue for the coming three years.

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Ethiopia’s Transport Ministry Says 44 Projects are Open to Foreign Investors in Transport and Logistics Sector

Dagmawit Moges, Ethiopia’s Minister of Transport and Logistics, advised newly appointed Ethiopian ambassadors to encourage foreign businesses to invest in Ethiopia’s transportation and logistics sector.

According to her, the Ministry of Transportation and Logistics identified 44 projects in which private investors, including foreigners, would be interested in participating.

Areas that are available for joint investment by domestic and foreign companies include freight forwarding and shipping, domestic air transportation, cross-country public transportation, and urban mass transportation.

For public-private partnerships and foreign direct investments, railway, cable car, cold-chain, and heavy freight transit services are now open for investors. Other areas targeted for foreign investment include port-to-port, dry port, silos development, railway and road infrastructure, pipelines, and aviation services.

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Finance Proves Crucial As Oil Tankers Go Unused

About 100 tankers of Ethio-Djibouti Share company stay unused for their primary purpose for years as construction to connect Awash depot with the Addis Ababa-Djibouti railway remains far from completion owing to lack of finance.

“We have about 100 tankers with a capacity handling of around 70,000 liters, while a single fuel tanker can manage the capacity of two fuel trucks,” stated Ethio-Djibouti Railway General Director Tilahun Sarka as he explained how the tankers have not been used for their primary purpose of transporting oil due to lack of connection with the oil depots including Awash depot. “The lack of finance has halted the project on its tracks,” said Tilahun adding, “Even though Awash depot has been operational for years, the line connecting the railway with Awash depot is yet to be completed. We brought the tankers targeting Awash depot, so we have to patiently wait for its connection.”

The project which is located in Afar regional state at Awash Sebat has a total cost of close to 55 million dollars which is to be covered by the Government of Ethiopia.

Currently, the two ports in Djibouti that serve the multipurpose and containerized cargo have already been connected to the main railway line, while Horizon, which is about 2 km from the main line is not connected. As Tilahun explains, the Djibouti government has shown willingness to connect the railway with the port as soon as Ethiopia completes connecting Awash Depot with the Railway.

“If we connect the line with Awash we could easily transport fuel to the country from the fuel port in Djibouti,” Tilahun emphasized.

If completed the project is said to reduce traffic congestion along the Ethio-Djibouti road by creating an additional option to Ethiopia to use rail transport besides trucks to carry fuel from the port of Djibouti.

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Gov’t in Talks with Prospect Railway Investors

The government has been holding talks with European companies over the privatization of Addis Ababa-Djibouti Railway as part of its plan to privatize state-owned enterprises so as to reform the economy and expand the role of the private sector.

According to the Ministry of Transport and Logistics, the railway needs an additional investment of 800 million dollars in order to be fully operational and efficient.

Ethiopian Railways Corporation is among the major state-owned enterprises that have been announced as slated for partial or full privatization. Specific details on the privatization process of the Ethiopian Rails Corporation are yet to be announced.

“The government will reform the railway infrastructure to enable the private sector to enter the country, which will support the country’s economy by increasing the efficiency, modernization, revenue generation and viability of the sector,” said Dagmawit Moges, Minister of Transport and Logistics, whilst attending the official launching of a new scheme called ‘commuter train’ that the Railway started which is said to offer convenient and cheap transportation services for the residents near the station and along the line.

Ethiopia has 75 percent share on the railway line that is 760km of which 100km is in the Djibouti border. Currently, the Chinese company is managing the Railway; the government pays about 60 million dollars per year to the managing company with the agreement set to stay for the next two years. The management which started in 2016 has gone on to train local employees who will take over when the time is due.

The government plans to expand the Addis Ababa-Djibouti railway line to 4,000 km as per the ten-year development plan by expanding the railway line and connecting it to other neighboring countries’ ports.

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Kenya Woos Landlocked East African Countries to Use Lamu Port to Boost Global Trade

Kenya has announced that it will woo landlocked east African nations to use Lamu port to enable them to boost their international trade.

At a continental forum in Nairobi, the Kenyan capital, Stephen Ikua, the director-general and chief executive officer of the China-built Lamu Port, South Sudan, Ethiopia Transport (LAPSSET) Corridor Development Authority (LCDA), told a continental forum in Nairobi, the Kenyan capital, that Kenya’s second commercial seaport has the capacity to handle larger sea vessels as compared to the existing port of Mombasa due to its deep natural waters.

LCDA said that the berth at Lamu Port can currently handle 400,000 twenty-foot equivalent units (TEUs) per year. Ikua said that Ethiopia has heavily invested in the industrial sector with the emergence of various special economic zones (SEZs), supporting exports of finished products in the textile and manufacturing sectors over and above horticultural, livestock, and mineral exports.

Ikua said the LAPSSET corridor is Kenya’s second strategic transport corridor, with the first being the Northern Corridor that connects Kenya’s Mombasa seaport to Uganda, Rwanda, Burundi, South Sudan and the Democratic Republic of the Congo.

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Containership Orders Zoom in 2021, Says Vesselsvalue

As many as 561 container vessels were ordered in 2021 compared to 114 in 2020 and 107 in 2019, according to the latest report by VesselsValue. “The 2021 boxship orders amounted to $43.39 billion, 47.4 percent of the year’s total and surpassing the entire cargo fleet orderbook value of 2020. Asia accounted for the majority of 2021 containership orders with Taiwan, China, Singapore, South Korea, and Japan ordering 314 vessels between them, 66 percent of the global total,” the report said.

As many as 1,286 cargo vessels analysed by VesselsValue – containers, bulkers, small dry, tankers and gas – were added to the orderbook in 2021, a 33 percent increase from the 969 vessels ordered in 2020. This is paired with an extraordinary growth in price for certain vessels. 2020’s total orderbook was worth $42.83 billion compared to 2021’s $91.61 billion, a staggering 114% increase. Majority of vessels ordered (1,217) are to be constructed in China, South Korea and Japan; 682 in China, 391 in South Korea and 144 in Japan. “2021’s unprecedented box demand led to owners investing heavily, attempting to plug the supply gap,” the report said.

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Suez Canal Authority Hikes Toll, Charge May Hit Shippers

The Suez Canal Authority (SCA) has decided to increase the canal tolls by up to 10 percent for both laden and ballast vessels transiting in north or southbound direction.

The hike was made “in line with the significant growth in global trade, the improvement of ships’ economics, the Suez Canal waterway development and the enhancement of the transit service,” SCA said in its circular. While no carrier has mentioned about hiking rates, it kind of becomes obvious due to various other developments including geopolitical worries and increasing oil prices.

Suez Canal, owned and operated by Egypt, reported 1,776 transits in January 2022, a decline of 35 from last month but an increase of 183 compared to the same period last year.

Daily average thus worked out to around 57 transits, marginally up from last year. Bulk (491), Container (470) and Tank (346) accounted for 74 percent of the transits in January 2022. SCA had reported record-breaking revenue of $6.3 billion in 2021 compared to $5.6 billion in 2020. Over 1.27 billion tonnes of cargo were shipped through the canal, SCA chief Osama Rabie told news agencies earlier this week.

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Russia’s war on Ukraine could triple ocean shipping rates to $30,000 per container, expert says

Russia's war on Ukraine could triple ocean shipping rates to $30,000 per container, expert says

Russia’s invasion into Ukraine is likely to send ocean and air shipping rates skyrocketing at a time when the global supply chain is still reeling from the pandemic.

Ocean rates could double or triple due to the invasion, according to Glenn Koepke, the general manager of network collaboration at the supply chain consultancy firm FourKites. Koepke told The New York Times that shipping rates could surge from $10,000 per 40-foot container to $30,000, while air freight rates could jump even higher.

Since the pandemic started, ocean shipping rates have hit all-time highs. Koepke warned the war could be yet another blow to the global supply chain. He noted that while the shipping industry hasn’t hit its peak season “companies are ramping up for summer volume, and that’s going to have a major impact on our supply chain.”

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