Market Newsletter - October 2024
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Welcome to the October Market Update.
For some months now there has been something of a holding pattern in global affairs that affect the shipping and logistics sector, with accepted workarounds developed for challenges like the Red Sea no-go zone and ongoing conflict in the Ukraine.
Recent weeks, however, have seen some major issues arise that will have both immediate and longer term impacts on global trade. They include extreme natural disasters such as Hurricane Helene, which has dumped unimaginable quantities of rain and left a trail of almost apocalyptic destruction across Florida, Tennessee, Alabama, Georgia and North and South Carolina.
This will have significant consequences for sea, land and air logistics for those states and other areas of the South and Mid-West, with the repair bill likely to run into billions and involve months of restoring road and rail infrastructure. This is not the only challenge facing exporters and importers with US links, and we’ll explain more about the other issues below.
In addition, the situation in the Middle East is evolving rapidly, with Lebanon now the target of both air strikes and ground invasion. This may have a ripple effect across not only the immediate region but more broadly globally. We can expect to see heightened security concerns and enhanced border control processes for cargo, and as you’ll read later in the newsletter, this is already beginning to occur.
At times like these, relationships built on trust and teamwork combined with the most up-to-date information are essential. Please stay in touch with your Client Service Specialist and Client Success Manager to get their expert with ensuring your plans are robust, flexible and resilient.
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Prices are continuing to push upwards in this market, with carriers succeeding with almost the full quantum of one of the two GRIs announced for September. This rate rise came in at between USD 300 and 500 per TEU and commenced from 1 September. The pre-Golden Week rush occurring earlier than usual in September forestalled the mid-September GRI as booking numbers dropped at the same time as carriers added extra space.
This month, carriers have announced a GRI of USD 500 per TEU from 15 October.. This may not succeed or only partially go through, as demand has not increased as expected. China’s extra-long seven-day holiday weekend from 1-7 October will also slow demand, as operations will only resume on 8 October.
This close-down for the National Day celebration will also affect AXIMA offices in Shanghai and Quingdao – please speak with your Client Success Manager or Client Service Specialist if you have any inquiries about arrangements for this period.
Landside operations are largely running smoothly, aside from some disruptions due to Typhoon Bebinca, which briefly shut down port operations in Shanghai and Ningbo. Sailing schedules are in general challenging, as the carriers continue to blank sailings to retain their rate advantage, and sailings to Western Australia from this region are affected by the ongoing congestion in Singapore.
Air freight is also feeling the pressure, with eCommerce cargo continuing to demand a large share of available space, particularly for direct services. This is resulting in a continued upward pressure on rates, so please plan ahead.
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Prices are also on the up in this region, and carriers succeeded with around 75-80% of the announced quantum for two GRIs in September, both at USD 300 per TEU. While some carriers did not issue a formal announcement, a few ran with the pack and implemented a GRI to match their competitors.
While the carriers are blaming the ongoing congestion at the transshipment hubs of Singapore and Port Kelang in Malaysia for driving the need for rate increases, it’s reasonable to assume the profit motive has also played a part. After all, even when demand is high and space is tight, we are seeing carriers blank sailings to maintain the upper hand on pricing. As the old saying goes, if it looks like a duck, and walks like a duck, and quacks like a duck…
On the congestion front, while the situation in Singapore and Port Kelang have substantially improved, operations are still not returned to 100% efficiency.
In addition, carriers are still blanking sailings or omitting the call at Singapore port, partly as a way of maintaining rates through keeping demand high for available space. We may also see some carriers marginally adjusting rates without issuing a formal GRI notice. In some cases, carriers with large space allocations are improving their rates in the shippers’ favour, while others with capacity or equipment shortages are tending to increase rates slightly.
Overall, we are seeing signs of easing in the trade lane for sea cargo, and likewise for air freight the market is stable in terms of both rates and service.
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Indian Sub-Continent - Bangladesh
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A major computer glitch hit Bangladeshi customs software in late September, and this has led to extreme delays for movements of cargo at Chittagong Port. This compounds the delays and slow downs experienced throughout last month due to the ongoing labour dispute and government action to try and rein in protests and other unrest.
For importers of garments from Bangladesh this is a very concerning state of affairs, with many orders significantly delayed and some altogether cancelled due to the closure of hundreds of factories coupled with government-imposed curfews and communications restrictions.
With the traditional changeover to warm weather fashions and festive season finery upon us, contact your Client Service Specialist or Client Success Manager if you require assistance with any shipments coming out of this region.
Freight rates into and out of Bangladesh have also risen rapidly recently, air spot rates to Europe and the USA both ratcheted up considerably, this largely driven by a spike in demand as importers attempted to bypass the challenges at the port.
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While the threat of strike action crippling rail movements and air cargo in Canada appears to have been averted for now, south of the border in the USA chaos is the order of the day. In addition to the catastrophic effects of Hurricane Helene, strike action has commenced at US East Coast and Gulf state ports.
Despite attempts at negotiations between the International Longshoremen’s Association and the United States Maritime Alliance, agreements have not been reached and the dockworkers have downed tools.
The strike affects 36 ports, including Baltimore, Boston, Charleston, Houston, Jacksonville, Miami, Mobile, New Orleans, New York/New Jersey, Norfolk, Philadelphia, Savannah, Tampa, and Wilmington, all critical hubs for containerised cargo movements.
Even if the strike is swiftly resolved, the ripple effect of congestion and global schedule and supply chain disruptions could extend into 2025. As a result, there will be implications for global trade and for Australian importers and exporters.
Here’s what you need to know:
- The strike is already impacting global trade, as the US East and Gulf Coast ports handle 40-50% of US imports and exports, shipments from Europe and Latin America are already affected. Vessels are likely to remain anchored outside the affected ports, delaying the next leg of their route to destinations such as the Far East including Asia.
- Some US importers had planned ahead by increasing volumes of cargo from China both to avoid strike impacts and to evade the imminent US tariff increases on China imports, and this has generated record traffic for the US West Coast ports, straining terminals and setting the scene for congestion in coming weeks.
- Freight rates are expected to rise, with some experts tipping an increase of between 25% to 50%, and some shipping lines have already introduced surcharges on shipments to US East Coast and Gulf Coast ports. We can expect a similar effect for the West Coast ports as the volume of redirected cargo grows.
- This will affect Australian trade over the coming weeks and months, as the US is Australia’s second-largest trading partner after China, accounting for around 9-10% of exports and around 12-13% of imports.
- Expect delays – cargo may be stuck on ships at anchor or delayed within the terminals, and the flow-on effect for supply chains will be disruption, increased transportation costs and emerging bottlenecks for equipment and vessel capacity. In addition, where inventory levels begin to fall, those customers reliant on those products or equipment for their own operations will need to develop contingency plans.
In terms of the shipping lines response of implementing Port Congestion Surcharges possibly as early as 1 October, the expectation at the time of writing is charges will likely be:
- USD 800 per 20GP standard dry container
- USD 1000 per 40GP/HC standard dry container
- USD 1000 per 20RF, 20OT, 20FR special equipment
- USD 1500 per 40RF, 40RH, 40OT, 40FR special equipment
Several lines have also announced Emergency Operations Surcharges (EOS) and adjusted port charges due to the expected disruptions:
MSC (effective 1 October 2024):
- USD 1,000 per 20ft container
- USD 1,500 per 40ft container
This will apply to shipments from Europe to the U.S. East and Gulf coasts, as well as ports in the Caribbean, Mexico, and Canada.
CMA CGM (effective 11 October 2024):
- Import: USD 1,500 per TEU (Twenty-foot Equivalent Unit)
- Export: USD 800 per 20ft container, 1,000 per 40ft container
Hapag-Lloyd (effective 18 October 2024):
- USD 1,000 per TEU (Twenty-foot Equivalent Unit) on all U.S. imports
In addition, a GRI has been announced for this market by ANL of USD 250 per 20’ container and USD 500 per 40’ container from 15 October. MSC also has announced a mid-month GRI of USD 250 per 20GP container, USD 500 per 40GP/40HC container applying all container types moving under MSC bill of lading on or after 15 October 2024 for cargo to Oceania, India Subcontinent, Middle East, Red Sea, Far East, Israel, Africa, Canada, Mexico, Central America, Caribbean and Venezuela
There will most likely be further additional charges, surcharges and price adjustments announced in the coming months. Also, as importers and exporters look for alternative transport arrangements such as re-routing cargo via Mexico or Canada and integrating road and rail links, the market could get quite complex. Seeking advice from your Client Service Specialist or Client Success Manager should be your first port of call to understand your options and the overall impact of the situation on your planning for the balance of this year and Q1 of 2025.
If all of this is making you consider air freight, keep in mind there have been recent changes announced by US Customs and Border Protection (CPB) regarding the Air Cargo Advance Screening (ACAS) Program, which had been in effect since 12 June 2018. The recent changes announced will see the introduction of additional data elements added to the existing ACAS data elements required on air cargo shipments destined to the USA.
To assist the trade community in understanding the expectations of CBP concerning the new Enhanced ACAS Security Filing, CBP has also published an interim frequently asked questions (FAQ) document as guidance, which also outlines each of the additional data elements: Enhanced Air Cargo Advance Screening Security Filing Frequently Asked Questions (FAQ).
Qantas Freight announced that CBP have introduced a nationwide rejection of vague cargo descriptions in Air Cargo Advance Screening (ACAS) for any freight arriving or transiting in the US. The new policy takes effect from 7 October 2024. From this date, ACAS files will need to include more detailed cargo descriptions. Any non-compliant, vague descriptors will be rejected, and freight will not be loaded at origin until the cargo descriptions have been amended to be compliant.
Visit the US CBP for more information about acceptable descriptions and Cargo Systems Messaging Service rejection messages, and review the information at the Qantas Freight website.
In addition, both the US and Canada are implementing emergency measures to control air cargo originating from Europe and the Commonwealth of Independent States due to heightened security risks and civil aviation threats. The new emergency measures come in the wake of reports of two packages containing incendiaries having caught on fire within European parcel networks.
We suggest reading the FIATA notification to understand what the new measures entail. A flow-on effect immediately for Australian importers is US Customs may hold back exports to Australia where those goods weight in at over 500 kg, are consigned by shippers that do not have an existing relationship with US Customs and originate from one of the 55 countries affected by the Enhanced ACAS programme measures. These shipments may not be allowed onto passenger aircraft. In addition, increased inspections of all shipments on air carriers via the US or Canada may be subject to additional inspections.
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Biosecurity Protection Levy
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The DAFF Biosecurity Protection Levy Charges which were due to come into effect from 1 July this year but were delayed, have now been implemented from 1 October. These charges aim to recoup some of the costs of enhanced cargo screening measures, and full details can be found here.
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Good news from Sydney Airport, with the announcement that Turkish Airlines will be operating direct flights between Sydney and Istanbul. The first of the direct flights via Malaysia is scheduled to land in Sydney at 6.30Pm AEST on 5 December.
There will be four passenger services per week from this date, transiting via Kuala Lumpur, with plans in future for the Sydney-Istanbul route to be a non-stop direct flight.
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Major projects again last month at Port of Melbourne affected logistics operations, and this seems to have become something of a regular occurrence. In addition, another computer system outage affecting DP World IT systems caused ongoing delays and disruptions for road operations as far north as Port of Brisbane. This was thankfully resolved quickly, however it does remind us all that while digital systems add efficiency and accountability to processes, they are not infallible, so the human backup provided by AXIMA staff contacting clients who may have been affected proves that relationships are the ultimate strength for any supply chain.
On the Melbourne air freight front, more good news ahead with the federal Government approving a third runway for Melbourne Airport at Tullamarine. This will enhance freight capacity enormously – already the airport handles over 40% of Australia’s air freight exports, and the third runway will further enhance capacity for seamless round-the-clock freight movements. It is expected to be operational by 2031. New direct routes to key markets like Asia, North America are expected to emerge when it is finally cleared for take-offs.
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At Port of Brisbane, the next steps are underway for the Port of Brisbane Channel Enhancement Project. This project will expand capacity and safety by ensuring the port can be accessed by the growing fleet of larger vessels in the world’s sea cargo fleet and improving the safety and efficiency of transit through Moreton Bay. Transit times will be shortened as the project will enable two-way passing by vessels.
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In Perth a new freight transfer terminal is going to be developed at Kenwick which will be capable of moving 200,000 containers per year by rail between Fremantle and the future Westport and Kenwick – slashing truck trips by an estimated 135,000 vehicle movements a year. Read more here.
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Australia’s first free trade deal with a Middle East trade partner has been achieved, with the conclusion of negotiations on the Australia-United Arab Emirates Comprehensive Economic Partnership Agreement. It is expected this will result in an increase of Australian exports to the UAE of the magnitude of $678 million per year in value. The two-way trade between Australia and UAE was estimated to be worth $9.9 billion in 2023.
Over 99 percent of Australian products will enter the UAE tariff free, resulting in estimated tariff savings of $135 million in the first year, rising to $160 million per year once the agreement is fully implemented.
Similarly, the agreement cuts Australian import tariffs on UAE produced furniture, copper wire, glass containers and plastic. It is estimated that Australian households and businesses will save around $40 million a year.
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New import restrictions for Australian shippers to be aware of are the new prohibition on importing of engineered stone, which comes into effect 1 January 2025. This will particularly affect the construction and interior fit-out sectors.
In addition, new Australian Border Force requirements relating to assurances imported goods do not contain asbestos have been released. Read the full ABF announcement here to understand what it means for customs paperwork, declarations and arrangements for testing of high-risk products.
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New air freight restrictions for goods ex-Europe and UK
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Cargo from 55 European countries including Spain, Denmark, France, Germany, Ireland, Italy and the United Kingdom moving into Australia via air freight is now subject to a Special Security Direction issued by the Department of Home Affairs. While described as ‘temporary’ measures, no sunset date has been given so it will be best to assume these requirements are the new business as usual for the foreseeable future.
Qantas Freight has responded quickly by outlining the specifics which include:
- Cargo weighing more than 500g booked by an unknown shipper will not be accepted for uplift at point of origin where those goods originated from one of the 55 listed countries. This will apply at transhipment locations also.
- Unless tendered by a Known Consignor, shipments that contain liquids, aerosols or gels and are packaged in the same consignment as battery-operated, electrical or electronic items, batteries, or analogue or electronic devices.
These types of shipments are now entirely prohibited from entry into Australia via air freight, and announcements from other carriers are expected in the coming days.
The Freight and Trade Alliance has published a full list of the 55 countries here – please contact your Client Success Specialist or Client Success manager for advice if this is likely to impact your supply chain plans or shipping arrangements.
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Also, don’t forget it’s Brown Marmorated Stink Bug Season, and special requirements apply for imports into Australia and New Zealand from target countries in Asia. Refresh your memory on the specifics here.
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New multilateral supply chain pact
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The UK, US and Australia last month signed a Memorandum of Understanding (MoU) establishing a new trilateral collaboration that will strengthen strategic cooperation and address risks to critical supply chains.
The MoU includes the establishment of the Australia-United Kingdom-United States Supply Chain Resilience Cooperation Group to cooperate on data sharing and joint action to build resilience in priority supply chains, with the immediate focus being the telecommunications supply chain, due to its critical role in supporting the digitised global economy.
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We are seeing some consolidation across the major carriers. Firstly, the renewal of the cooperation agreement between ONE, HMM and Yang Ming has been given a new umbrella brand of Premier Alliance (PA). The renewed arrangement will be effective for five years from February 2025.
Formerly known as THE Alliance (THEA), it had included Hapag Lloyd, however HL has now sailed off to commence a new agreement with Maersk called the Gemini Cooperation, effective from February 2025.
The Premier Alliance Agreement encompasses mainline services across major East-West trade lanes, including routes between Asia and the North America West Coast, North America East Coast, the Mediterranean, North Europe, and the Middle East.
MSC has also made an announcement, brokering a slot exchange agreement with PA on the Asia-Europe trade. MSC also unveiled a future standalone East/West network from February 2025 which aims to provide complete coverage across all East/West routes, while also offering clients both Suez and Cape of Good Hope routing options.
Not to be left out of the festival of announcements, ZIM released news of a new three-year operational cooperation with MSC effective February 2025 covering the strategic transpacific trade. ZIM stating that it has entered into a new long-term operational cooperation with MSC on the Asia - US East Coast and US Gulf trades.
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Given the fast-evolving situations in so many of Australia’s key trading regions, and the additional pressure of planning for the holiday season shopping rush and end of year planning, it is important to lean in on the strong relationships you have with your supply chain partners, your customers and your staff.
Just as we successfully navigated the shocks and disruptions of the pandemic, we can chart a course through these murky commercial waters and geopolitical challenges. Together, our supply chains are always greater than the sum of the parts, and your Client Success Manager and Client Service Specialist are always within reach to help you achieve success.
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Best regards,
Matt Ward
COO International
AXIMA Pty Ltd
www.axima.com.au
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