Largely in response to stagnant import market conditions (see my post from September this year) and a lack of profitability in the containerised seafreight market, the industry is seeing some changes beginning to emerge.
As a follow up to my earlier article here are the updates:
- China Shipping and Cosco – two major carriers participating in North Asia to Australia trading are working on a merger agreement;
- NYK will cease to operate within the Australian containerised market effective from Quarter 2, 2016;
- Acquisition of APL is currently being considered by several lines including Giants, Maersk and CMA-CGM;
- Two major services (CKA and NEAX) from North Asia, key ports for the Australian trade will be combining into one service, the members in these two consortiums will re-allocate their capacities for the new service. This is set to take effect in Quarter 2, 2016. As a result:
- CKA Service will be suspended;
- A 10% or 3500 TEU (twenty-foot equivalent units) capacity per week reduction.
What does this mean for importers?
- While the merger between CSCL and Cosco, pending acquisition of APL, NYK’s withdrawal and the combined service clearly indicates a lack of performance in the Australia trade, some industry wisdom view this as a positive change;
- Shipping lines are optimistic that the containerized shipping market may gradually swing back and become “vendor’s market” rather than a “buyer’s market” as it is at present;
- Seafreight rates are likely to increase over the course of the year and will probably fluctuate less than what has been experienced since the GFC in 2008.
With the potential for higher freight rates next year this will impact importers who are already struggling with the impact of the weakening Australian Dollar, making some imports unviable. However, as most of my customers say, the freight rates are not really influential on purchasing product from overseas, rather they consider it to be an additional cost. This just makes the need to ensure competitive freight rates even more crucial to their bottom lines.