Freight Market Update – May 2024

Global freight market continues to encounter hurdles due to ongoing conflicts, with recent incidents in the Middle East prompting MSC to halt its shipping services in the Persian Gulf.

Developments in the persistent conflict in the Red Sea area, along with the Israel-Palestine issue, are predicted to create ripple effects on shipping in the Gulf region and beyond. This includes potential impacts on local supply chains
in Dubai and Abu Dhabi. Notably, Dubai is a crucial port for the Arabian Gulf region, catering to domestic imports and exports.

In addition to disruption due to global conflict, drought continues to impact passage through the Panama Canal, and the bridge collapse in Baltimore still impacts US east-coast port rotations.

While you may not have trade on these routes, their impacts are being felt across the global shipping industry.

Pricing

Drewry’s composite World Container Index (WCI) has decreased steadily in the past 13 consecutive weeks to a 31.7% low since its peak on 25 January 2024 after eight previous consecutive weekly gains. However, the rate is up 55% compared
to last year.

Rates have started to show signs of stabilising over the past few weeks with a slowing rate of decline overall. The slowing is mainly due to the increase in ex-China rates in specific markets (including Australia).

Rate Restorations

On 16 April, ANL announced a rate restoration program starting 1 May 2024 for all shipments from North-East Asia to Australia’s East Coast and NZ and again on 22 April for all ships from 15 May 2024.

On 18 April, GSL/ZIM announced a North-East Asia to Australia Rate Restoration Program for shipments from North-East Asia to Australia’s East Coast, effective 30 April 2024.

Purchasing Manager’s Index (PMI)

The global Purchasing Manager’s Index (PMI) indicates stability, hovering around 50. In March, global manufacturing production accelerated to its fastest rate since June 2022.

Supply / Demand

According to the International Monetary Fund (IMF), the world economy will grow slightly faster in 2024 and 2025 than in 2023, even though economies in the US, China, Japan and India will grow slower.

Equipment

Equipment availability has reportedly recovered at all major ports since earlier this year due to the DP World / MUA-protected industrial action.

Enterprise Agreements

The Fair Work Commission (FWC) approved the DP World Enterprise Agreement 2024 in April, which will run through January 2028 for all DP World’s terminals. The FWC approval ends the protracted dealings between DP World and the
Construction, Forestry, and Maritime Employees Union—MUA Division.

Global Air Freight Market

The latest market data shows rates have increased by 5% in the past month to an average of USD$2.50 per kg. The rate remains significantly above pre-Covid levels, up 39% compared to April 2019.

Global air cargo demand continues to rise 6% year-on-year compared to last year. This is primarily due to a surge in e-commerce activities driven by the fashion and consumer sectors.

Panama Canal

The Panama Canal Authority (ACP) plans to increase the number of daily transits to 31 starting from 16 May and 32 starting from 1 June. This adjustment means the canal will function at approximately 90% of its total capacity.
Furthermore, the ACP anticipates the canal will resume operational capacity by early 2025.

Red Sea Crisis

Houthi militants resumed targeting commercial vessels on 24 April, striking the Maersk Yorktown and MSC Veracruz following recent threats. US Central Command intercepted an anti-ship missile and neutralised several drones. The security
situation in the Red Sea and surrounding areas remains tense, with continued threats to maritime navigation.

Linked to the ongoing Red Sea crisis, containership MSC Aries, along with 25 crew, was hijacked by Iran’s Revolutionary Guards on 13 April in the Strait of Hormuz, occurring just before Tehran launched missiles at Israel. The MSC Aries
and three other detained ships are currently anchored near Iran.

MSC is rerouting ships from the Persian Gulf following Iranian forces’ 13 April seizure of MSC Aries. These changes involve skipping ports in the Persian Gulf, with some vessels being redeployed to transpacific services or other routes.

Baltimore – Francis Scott Key Bridge Collapse

On 26 March, the vessel Dali, chartered by Maersk, impacted the Francis Scott Key Bridge, bringing down the bridge, killing six people and cutting off the port from all sea traffic. The US Army Corps of Engineers expects to reopen the
main shipping channel by the end of May. In the meantime, carriers continue omitting Baltimore and offloading through Norfolk, VA, New Jersey & New York instead of Baltimore.

Schedule Reliability and Cancellations

Global schedule reliability has finally shown signs of improvement since the start of the Red Sea Crisis. With schedules normalising, reliability has improved by 1.7% month-on-month up to 53.3%. Schedule reliability was 6.9% lower than
the previous year on a year-on-year basis.

With the freight market adapting to the new schedules, the average delay for late vessel arrivals has also started to improve, decreasing to 5.46 days from 6.01 days last month).

Between week 18 (29 Apr-5 May) and week 22 (27 May-2 Jun), 47 cancelled sailings were announced out of 643 scheduled sailings, representing a 7% cancellation rate. During this period, 49% of the blank sailings will occur on the
Transpacific Eastbound, 34% on the Asia-North Europe and Med, and 17% on the Transatlantic Westbound trade.

Based on April schedule data on China to Australia trade, six cancelled sailings have been announced out of a total of 96 scheduled sailings, representing a 6% cancellation rate.

Sustainability

Ammonia as an alternative fuel was in focus at the Singapore Maritime Week in April, with the trial of the vessel Fortescue Green Pioneer (owned by mining group Fortescue) highlighting ammonia’s potential as a zero-carbon fuel. Despite
its increasing prominence, significant safety concerns due to its toxicity continue to loom, with fully effective safety practices and technologies still in development.

Sustainable Aviation Fuel (SAF)
The persistent blank sailings have influenced the schedule’s integrity. Nonetheless, operations on land, from factories to terminals, are functioning smoothly.

We anticipate that the blank sailings will persist as carriers strive to uphold high freight costs during the customary off-peak season. An additional GRI is expected to commence on 15 May with a quantum ranging between USD 200 and USD
300 per TEU.

Airfreight originating from South China remains steady, and rates have improved.

South East Asia

The freight market remains steady. No General Rate Increase (GRI) was declared last month, and neither is one expected for May. We anticipate the rates staying consistent throughout this relatively quiet period, with no evidence of a
surge until the peak season starts in Q3.

Landside operations are running smoothly, with no significant disruptions at the ports and no blank sailings announced. The integrity of the sailing schedule has seen improvement. In general, the trade lane has ample capacity. The only
noteworthy issue is some unresolved equipment problems out of Thailand. Airfreight is stable and has no space-related issues except for ex-India, where space is currently somewhat constrained. Rates continue to remain steady.

North America

Following the extended period of disruption in the Panama Canal, there is renewed hope amongst canal operators as signs of impending rain suggest a potential increase in the canal’s capacity for vessel transit in the forthcoming months.

With the ongoing conflict in the Red Sea rendering that route impassable, cargo carriers and shippers have had to endure the additional time and expense of rerouting cargo via the Cape of Good Hope.

Additional factors still impacting the US market include the enduring aftermath of the Baltimore Bridge calamity. Consequently, these carriers are now compelled to consider alternative ports and a change in shipping routes.