With over 10 per cent of the world’s maritime trade, by volume, passing through Australia, the shipping industry is integral to the success of Australia’s economy. So, it’s not a surprise that during peak season 2020 the global pandemic and the response of shipping lines to it have had a big impact on local supply chains.
The consequences for the freight forwarding industry and importers include reduced services, soaring rates, port omissions, frequent delays, equipment scarcity, empty container park congestion, reduced capacity due to smaller vessels and a stronger than anticipated peak season. Compounded by local trading restrictions, other industry issues (like port industrial action and cyber-attacks on shipping lines and logistics companies) and other extraordinary events such as trade wars and bad weather it has ended up being a very different peak. Or to use the word of the year – unprecedented, so much so that it has even made the mainstream news.
Wary of the impact on shipping of the last global financial shock, GFC – Maersk and MSC – the two largest carriers in the world – reduced the trade lane fleet by some 236,000 TEU slots or the equivalent of a 23% reduction in space availability for Australia since July 2020. Demand exceeding supply is the main cause of the steep rates increase, space shortages and reliability in general.
Space constraints remain a major issue right across Asia / Australia trade lanes, especially China where equipment shortages have also become a major challenge. Some shipping lines have started implementing surcharges on some equipment types as well as the Sydney Port Congestion surcharge. There is no indication of the congestion surcharge being lifted until all backlogs are cleared.
The freight rates have grown rapidly since August 2020, accelerating in September ahead of the China National Holiday and reached record levels in October with further increases scheduled for November.
As the space problem becomes more serious, we are seeing shipping lines implementing new approaches including:
- More frequent rate changes: daily/weekly instead of monthly rate offering, rates keep rising!
- Strict control of space allocations by evaluating the earlier support by individual clients low season
- Earlier bookings (14 – 21 days booking in advance)
- More new charges imposed eg, cancellation fees
- Rationalisation of name account space allocation for earlier contracts
- Named account rate negotiations on hold
Every year peak season presents its challenges and this year is certainly no exception. However every year with solid advance planning Magellan navigates a path. It is the ultimate juggling act – securing enough space to get your Christmas product into store, all the while watching the escalating costs. Or worse, when a cut-off is missed, and you need to airfreight it so it makes it on time.
The silly season tests the best of us, and this year has been one to remember. If peak season 2020 it is getting the better of you get in touch with us to hear about the tailored solutions our clients are using to get around the roadblocks.
At Magellan Logistics, we provide a variety of services including supply chain visibility solutions throughout Australia. Contact us today for more information.