The current freight market can be described as a perfect storm. In the shipping sector, such disruptions are common, even expected. Rising rates, carrier pressures, cyclones, and strained worker-employer relationships are all coming together across the globe to make for heavy weather .
Rates
Drewry’s composite World Container Index (WCI) decreased for the fifth consecutive week to $5,319 per 40-ft container as of 22 August 2024, but rates are still up 201% from last year. The year-to-date average is $4,077, higher than the 10-year average of $2,803. Despite the WCI drop, Australian market rates continue to rise.
Rate Restoration
To manage the ongoing volatility of the freight market. Several shipping companies have announced rate restorations and surcharges effective August and September 2024, impacting cargo from various Asian countries to Australia and New Zealand. Additionally, MSC has cancelled certain transhipment services from Europe to Australia.
Supply / Demand Dynamics
The Red Sea conflict heavily impacts the global shipping industry, causing ships to reroute around the Cape of Good Hope, increasing TEU miles and port congestion. This crisis has shifted freight market power to carriers benefiting from the situation. Macroeconomic factors and changing global trade patterns, especially with China, also influence demand. The Indian sub-continent faces significant space issues, complicating bookings from AU. Despite a slight monthly decline, demand remains high, with record TEU shipments in May 2024. Sea Cargo in July 2024 was nearly the same as 2023, but Air Cargo demand rose by 28% YoY.
Red Sea Crisis
The Red Sea faces significant environmental threats due to a series of attacks, including one on the Greek-flagged tanker “Sounion” on 21 August 2024. This incident, part of a broader pattern of attacks by Houthi forces, has caused severe damage and poses a high risk of an environmental disaster, as the tanker carries over a million barrels of crude oil. The region has seen eight attacks on merchant vessels in August alone, highlighting the ecological vulnerability of the Red Sea. Despite these dangers, the CMA CGM Jules Verne successfully navigated the Suez Canal and Bab al-Mandab Strait without incident, marking a notable achievement amidst ongoing security concerns.
Schedule Reliability
Schedule reliability has dropped to 54.4%, a 1.2% decrease month-on-month and 9.8% lower year-on-year. Average delays for late vessel arrivals have worsened to 5.19 days. Hapag Lloyd was the most reliable carrier in June 2024 at 55.4%, while ZIM was the least reliable at 44.4%. MSC, which led last year with over 70% reliability, has seen an 18.5% decline in performance year-on-year.
Cancellations – Blank Sailings Increasing
Global: Between week 35 and week 39, there were 54 cancelled sailings out of 697 scheduled, an 8% cancellation rate. Most cancellations occurred on the Transpacific Eastbound, followed by the Transatlantic Westbound, and Asia-North Europe and Med. THE Alliance announced 14.5 cancellations, Ocean Alliance & 2M had 12.5 and 4, respectively, and non-Alliance services had 23.
Australia: Only 1 out of 73 scheduled sailings from China to Australia was cancelled in September, a 1.37% cancellation rate.
China/North Asia
China, Vietnam, the Philippines, and Hong Kong recently experienced Super Typhoon Yagi, causing fatalities and temporary disruptions in shipping and logistics. Recovery is progressing well. Meanwhile, carriers are increasing rates with several hikes in August and September, driven by blank sailings and peak season demand. Congestion at Singapore is causing schedule changes, and air freight rates are rising due to high demand from e-commerce and new Apple product releases.
South East Asia
Prices in South East Asia are rising, though not as quickly as in the Northern region. Carriers implemented two rate increases in August, with partial success. Factors like competition for space, Red Sea diversions, reduced capacity, and congestion at Singapore are impacting space availability. Two more rate increases are planned for September, with expectations of partial success. From 1 September, rates to Australia and New Zealand will rise, and further increases are set for 15 September. Despite some easing of congestion, carriers are still blanking sailings to control pricing, especially with the peak season approaching.
Bangladesh
Bangladesh has faced a series of challenges recently, including supply chain shutdowns due to protests, severe flooding disrupting logistics, and air freight capacity issues. Cargo airlines are pushing for better services and infrastructure to meet demand. Meanwhile, Indian manufacturers and exporters are looking to capitalise on these difficulties.
India
The export of goods from India is on the rise. Virgin Atlantic Cargo announced it will boost its belly freight from India to the UK and US by approximately 40% next year, recognising significant opportunities in perishables, pharmaceuticals, and textile products, including garments.
North America
A GRI has been announced for all container types from the USA and Canada to Australia and New Zealand starting 15 September, with rates set at USD 250 for 20’GP and USD 500 for 40’GP/HC.
The US freight sector faces ongoing industrial unrest, with potential strikes at East and Gulf Coast ports in October due to unresolved contract demands by the International Longshoremen’s Association.
Rail strikes remain a threat in Canada despite government intervention in August, which mandated Canadian Pacific Kansas City and Canadian National to resume operations and enter binding arbitration with the Teamsters Union.
Peak Season
In the Northern Hemisphere, peak season is expected to be highly competitive for space, with most widebody freights already booked through Q4. Shippers are advised to consider various shipping options from Asia, including land links via rail or truck to alternative ports.
Due to Panama Canal restrictions and the Red Sea conflict, importers and exporters have already used these tactics.
Australia and New Zealand importers should start planning now and discuss options with their Client Service Specialist or Client Success Manager to prepare for the final quarter of 2024 and the holiday season.
Global Port Congestion Hotspots
While Singapore’s congestion has improved, significant delays persist in North Asia and South America, particularly at Chinese ports like Ningbo and Shanghai. Ningbo’s situation worsened due to an explosion on 9 August aboard the YM Mobility.
Equipment
Container equipment shortages in Asia and North America are due to extended transit times, rising global demand, and port congestion. In Asia, carriers are prioritising Trans-Pacific Eastbound demand, reducing container availability in North America. Major ports like Shanghai and Singapore are experiencing significant delays, further disrupting schedules. High intermodal demand and long inland journeys worsen the shortage in North America. The situation is being monitored, with hopes that peak season demand and geopolitical factors may ease the strain later in the year. For now, the global shipping industry faces significant logistical challenges.
Global Air Freight
Spot Rate Increase: In July, global air cargo spot rates increased by 12% year-on-year and 2% month-on-month to $2.50 per kg, driven by rising cross-border e-commerce from Asia, ocean shipping disruptions and higher demand for high-tech semiconductors.
Global Air Cargo Growth: Tonnages rose 9% compared to last year despite a capacity increase of only 3% YoY.
Terminal and Port Update
Patrick Terminals
- Brisbane: Delays approx. 0 – 0.5 day
- Fremantle: Delays approx. 1 – 2 days
- Sydney: Delays approx. 2 – 3 days
- Melbourne: Delays approx. 0 – 0.5 day
DP World Terminals
- Brisbane: Delays approx. 0.5 – 1 day
- Fremantle: Delays approx. 0 – 0.5 day
- Sydney: Delays approx. 2 days
- Melbourne: Delays approx. 0 – 0.5 day
VICT
Melbourne: Delays approx. 0.5 day
AAT
- Brisbane: Working with minimal delays.
- Port Kembla: Working with minimal delays.
- Melbourne: Working with minimal delays.
MIRRAT
Melbourne: Working with minimal delays.
New Zealand
- Auckland: delays approx. 1 – 2 days
- Tauranga: minimal delays approx. 0.5 day
- Napier: minimal delays approx. 3 days
- Lyttleton: minimal delays approx. 0.5 day
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. Despite the headwinds of current freight market conditions, 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 with one of our freight specialists at AUS 1300 651 888 or NZ (09) 974 4818.
Sources:
With thanks to the FTA for their freight market update.
