In this international freight market update, the ongoing global economic constraint is driving a slowdown in volume, flowing through to downward pressure on rates. As a consequence, shipping lines are beginning to implement blank sailings, GRIs, rate restoration and other charges throughout parts of the globe.
Freight market update
- A-UKFTA commenced on 31 May 2023.
- Australia has imposed fresh sanctions against Russia and Russian entities and an export ban on machinery and related parts.
- Outbound flights increased by 9.6% (of which widebody increased by 6%) in Q2. Global air freight pricing showed marginal improvements in March, reducing by 4% since February to an average rate of US$2.62/kg.
- ANL announced a ‘Temporary Service Suspension’ until further notice of A3X service, which operates an express loop between China and Australia calling Shanghai, Shekou, Brisbane and Sydney. The service operates 3700 TEU capacity vessels on a 35-day round trip. ANL advises it will continue to review the market conditions and bring the service back as soon as the demand improves.
- ANL commenced a rate restoration program on 21 May 2023 for shipments from North-East Asia to Australia’s East Coast ports.
- Shipping Line Q1 Financial Reports show all carriers trending down.
- Container vessels have reduced their average speed significantly as freight demand has dropped after the busy Covid years, shows a new analysis from Bimco. The average sailing speed reduced by 4% compared to last year. When ships lower their speed, it also reduces container capacity. In the first quarter of 2023, teu capacity fell by 6% compared to last year.
- According to UBS, the shipping industry, representing around 3% of global CO2 emissions, will have to pay up to USD 300bn to realise the green energy transition in 2050.
- Current sailing cancellations between 15 May and 18 June 2023 are at 3%, a significant decrease from recent months and the lowest level observed since the pandemic began.
- Global average vessel delays have also decreased to 5.03 days, 2.41 days lower year on year.
- Global sea freight schedule reliability increased to 62.6% in March 2023. Congestion is less of a concern, and global sea freight schedule reliability of all 14 of the largest carriers vastly improved compared to 2022, with Maersk remaining the most reliable in March.
Asia to Asia Pacific
Carriers still report 80-90% utilisation, with some implementing GRIs. China to South-East Asia and vice versa rates are relatively stable compared to other sectors.
Despite increasing export volume, carriers continue with blank sailings to balance the demand and space. FAK space is tight. Advance bookings of 3-4 weeks are recommended.
China / North Asia
A mid-May rate restoration was implemented in North China ports where booking demand is relatively high.
Air freight is improving, with more flights returning to the trade lane, services becoming more regular, and rates continuing to improve.
South East Asia
Similar to shipping ex North Asia, in SE Asia, the carriers implement regular blank sailings to manage reduced demand and prevent freight rates from slipping. No GRIs have been announced for this market before the end of June. Rates are expected to remain low due to slow bookings.
North America
Capacity is up, and carriers are actively looking for freight. No changes in rates, and it is very stable.
Pakistan
Pakistan has experienced several problems. Schedules are unreliable, with many vessels arriving late and last-minute vessel changes or routing.
There is also an equipment shortage, mainly empty 20/40 equipment for some shipping lines in North Pakistan, less so in the South.
Freight volumes are rising again, and ocean rates increased for Pakistan in May. However, air freight rates remain flat. Airfreight schedules are mainly reliable, with no delays at the hub.
Bangladesh
Lousy weather and Cyclone Mocha caused sea and air freight delays throughout May. Port operations and container handling were suspended, and airports closed.
Australia Ports
Landside port charges across Australia’s five major container ports have grown significantly from 2022 to 2023.
Patrick terminals
- Brisbane: Working with minimal delays, approx. 0-0.5 day
- Fremantle: Working with minimal delays, approx. 0-0.5 day
- Sydney: Working with minimal delays, approx. 0-0.5 day
DP World Terminals
- Brisbane: Working with minimal delays, approx. 0-0.5 day – severely hampered by equipment and IT outages of late, therefore may see a drop in this number and an increase in costs due to delays.
- Fremantle: Working with minimal delays, approx. 0-0.5 day
- Sydney: Working with minimal delays, approx. 0-0.5 day
- Melbourne: Working with minimal delays, approx. 0-0.5 day
VICT
- VICT announced the implementation of the VGM Weight Discrepancy Fee and Reefer Temperature Discrepancy Fee effective 1 June.
- VICT is also increasing their landside charges and infrastructure surcharges.
- Working with an average delay of 0.5 day
AAT
- The Port of Brisbane and Port Kembla were affected by severe congestion in May due to contamination. This is expected to clear by early June.
Economic outlook
Europe
In Western Europe, a strong services sector is balancing a weakness in manufacturing. High inflation remains, and tightening financial conditions restrain investment. Banking sector turbulence, falling house prices, and rising corporate insolvencies are growing concerns.
Western Europe’s real GDP growth is projected to slow from 3.6% in 2022 to 0.7% in 2023.
Americas
Banking stress and a federal budget deficit are the critical features of the US economic outlook. This month’s US real GDP growth forecast is down from 1.4% to 1.2% for 2023. The US unemployment rate is projected to rise from 3.4% in April to 4.8% in 2025, putting downward pressure on wages and prices.
Asia Pacific
Asia-Pacific leads the world in economic growth. Sparked by mainland China and India, Asia-Pacific’s real GDP growth should strengthen from 3.2% in 2022 to 4.3% in 2023 and 4.5% in 2024. Where India leads all major economies, Taiwan, South Korea, and Australia have slowed considerably. Vietnam, the Philippines, and Indonesia remain strong.
China’s services and retail sales have rebounded strongly since lifting zero-COVID policies, outpacing exports. China’s real GDP is projected to increase by 5.5% in 2023.
Magellan Logistics provides freight and logistics services to all industries, including sea freight, air freight, customs clearance and the all-important digital freight portal providing 24/7 visibility of all your shipments. Keeping customers abreast of changing market conditions is critical in what we do. Our dedicated and professional team would love an opportunity to assist your business. If you have questions about the Freight Market Update, please get in touch on 1300 651 888.
Sources:
With thanks to the FTA for their Market Update
