Market Newsletter - February 2025
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Welcome to the February Market Update.
If the first month of 2025 is any guide, this year is shaping up to potentially be less turbulent for global shipping and logistics. We are seeing rates softening or holding steady, congestion easing and schedule reliability improving across major markets including North and South Asia.
This week we also welcome the Year of the Wood Snake with Chinese Lunar New Year celebrations, also known as Spring Festival, taking place between January 28 and February 4. Tradition says that Wood Snake is associated with flexibility, wisdom, renewal and abundance – all of which are beneficial qualities for our sector, relying as it does on foresight, adaptability and insight.
While we can’t read the tea leaves and predict how everything will unfold in the months ahead, as there are still some major variables in play such as how USA trade relationships will shift, your Client Service Specialist or Client Success Manager will always be just a phone call or email away to help you protect and optimise your supply chain planning.
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Spring Festival and Lunar New Year is the longest public holiday period in the North Asia region. Due to the festivities, there are shutdowns of factories, wharf side operations and most warehousing and offices for up to a week. The following AXIMA Offices will also be closed for the festival with work resuming in all locations by Wednesday February 5.
- AXIMA Shanghai & Qingdao office – closed from Tuesday January 28 – Tuesday February 4
- AXIMA Hong Kong – closed from Wednesday January 29 – Sunday February 3
- AXIMA Shenzhen & Xiamen offices - closed from Tuesday January 28 – Tuesday February 4.
The lead-up to the festival sees many factories wind back operations from January 19, leading to reduced volumes of cargo heading for the wharves. The carriers also pull back on scheduling sailings once the pre-holiday peak is behind us, and there are several blank sailings planned for the early part of February.
Because the Lunar New Year also marks the start of the traditional slow season for shipping generally, there has been no GRI announced for February in this market. Carriers in December had announced a planned GRI of USD 500 effective as of January 1st, however, they only succeeded in implementing around 50% of that quantum before the market softened, demand slowed, and rates took something of a dive.
This was due both to the usual slow down of orders post-Christmas and the foresight of many shippers who noted the global trade headwinds last year and shipped pre-Chinese New Year orders early. As a consequence, the traditional pre-CNY rush was both short and relatively mild. One element of the supply chain where rates did stay high is land transport, with peak season rates being applied to local transport in China due to drivers taking holiday leave and the availability of services reducing.
While there are still issues with constant delays occurring for sailings ex North Asia to Australia’s East Coast, overall schedule integrity has improved. Sailings to Western Australia are also becoming more reliable as the congestion at Port Kelang and Singapore terminals continues to ease.
While we can expect carriers to continue to blank sailings in an attempt to maintain rates through reduced space availability, it is not expected this will occur as frequently as it did in 2024. Overall, demand is likely to remain low of its own accord until all factories resume full production after Spring Festival, so freight costs may continue to improve in the short term.
Space availability is also easing in the air freight sector of this market. The big ecommerce flows around Black Friday and Boxing Day sales have ebbed; however, rates have risen slightly as increases in passenger numbers have reduced the space available for commercial cargos.
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No GRI has been announced for this market for February, and with the traditional slow season commencing and demand reducing, rates are expected to remain soft into March. In more good news, the congestion that has plagued terminals at port Kelang and Singapore is improving, leading to reduced delays and greater schedule reliability.
Even the number of blank sailings is reducing, though they are still a factor as the carriers attempt to maintain their upper hand on pricing.
In terms of air freight, it’s also a calm market, with both services and rates ex Southeast Asia maintaining a steady state.
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Good news out of India – after months of industrial unrest, the threat of a strike at India’s major government ports has been averted. A new five-year labour agreement has been approved, following intense negotiations between dockworker unions and the Indian Government. The Ministry of Shipping has instructed all 12 government-owned and operated ports to now implement the Bipartite Wage Negotiation Committee (BWNC) settlement, which was agreed upon in September and finally formally approved by the Government.
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The new President is now in place, and while there has been a surge of media headlines around potential trade, customs and tariff matters, nothing is certain at this stage. We will be watching developments closely, assessing what any decisions mean for our clients, and updating you as any reliable information comes to hand. If you have any queries or concerns, or if you are looking to develop pre-emptive contingency plans, please get in touch with your Client Success Manager or Client Service Specialist.
Meanwhile, there’s been some positive news in terms of conditions onshore in the US, with strike action expected to affect US East Coast and Gulf Ports called off. The International Longshoremen’s Association and United States Maritime Alliance have reached an interim agreement on a new six-year deal. The current contract has been extended until both parties ratify the deal, which means it’s business as usual in terms of portside operations and the movements of ships and cargo through the ports.
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Good news too on the industrial front at Australian ports, with the Maritime Union of Australia (MUA) ending the industrial action that has been affecting Qube terminal operations at Brisbane, Port Kembla, Melbourne, Fremantle, Adelaide and Darwin since December.
While there is a major backlog of cargo to process due to the strike action affecting loading, unloading and transporting of goods, the return to full operations across all terminals nation-wide will help get supply chains moving efficiently again.
Unfortunately, not all industrial relations matters are as positive, with air freight operations at dnata terminals at airports in airports, Sydney, Melbourne, Brisbane, Darwin affected by Protected Industrial Action on Friday January 24. The Transport Workers Union’s four-hour stoppage involved more than 1000 dnata ground workers across baggage handling, cargo and ramp services. It came after a year of negotiations between the union and terminal operator failed to reach a new in-principal agreement on wages and conditions.
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Airport terminal fees increase
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We have received notice via the Freight and Trade Alliance that dnata have revised their schedule of fees for their airport terminals nation-wide. The increase kicked in on January 6, 2025. For further details of how this will affect your costs and pricing, please speak with your Client Success Manager or Client Service Specialist.
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Free Trade Agreements update
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Customs duty matters continue to become less onerous for exporters and importers engaging with some of Australia’s key Free Trade Agreement partner nations. At the end of December, the UK officially joined the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
The agreement allows UK goods to benefit from preferential duty rates under the CPTPP framework, expanding trade opportunities with member countries, including Australia. Most products will be duty-free, although there will be transitional tariffs in place for a limited number of exceptions such as certain cheeses and steel products.
There are also some bottom-line bonuses kicking in for international trade, with reductions in preferential rates of customs duty from January 1, 2025 under the following FTAs:
- India-Australia Economic Cooperation and Trade Agreement (ECTA)
- Regional Comprehensive Economic Partnership Agreement (RCEP)
- Free Trade Agreement between Australia and the United Kingdom of Great Britain and Northern Ireland (A-UKFTA)
This means, for example, that certain iron, steel and aluminium products traded under ECTA will see a reduction of duty rates from 2% to 1%.
Please be aware duty rates will be affected by the date of lodgement of customs paperwork. Consult your Client Service Specialist or Client Success manager to help guide you in maximising the likelihood your shipments are eligible for the lower phasing duty rates.
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Customs requirements around quarantine are one of those things where the benefits are often invisible. After all, we know they are working when we DON’T see the pest, parasite or illness here in Australia.
Two recent events highlight just how effective the system is, and the lengths our quarantine officials and biosecurity experts go to in ensuring Australia retains its agricultural productivity, biodiversity and population health.
In December last year, holds were placed on shipments post-clearance from the vessel TS Guangzhou at Port Botany, due to detections of the Giant African Snail. This voracious land mollusc can grow to around 20cm in shell diameter, and gorges on around 500 different plant species including grains, trees, fruits, herbs and flowers. It can decimate both agricultural crops and native forests, and in addition is also known to carry deadly parasites such as rat lungworm and contagious human pathogens. It is recognised globally as one of the worst pest organisms, having spread across topical and subtropical regions due to its ability to travel attached to cargo vessels, vehicles and machinery.
So, stopping this creature from entering Australia is vital, which is why the affected containers in December were isolated and held offshore while officials and biosecurity experts undertook the necessary inspections and remediation actions.
This did have a flow-on effect of slowing cargo operations at the Port of Botany, however, that’s a small price to pay for maintaining the viability of our agricultural and forestry sectors in the medium to long term.
At the other end of the size scale, but just as lethal, a pest control trap at dnata’s Melbourne air freight facility detected an exotic mosquito, identified as Aedes aegypti. Commonly called the “yellow fever mosquito” these insects carry potentially deadly and contagious viruses including Dengue Fever, Yellow fever and Zika Virus.
As a result, there were two temporary shut downs in mid-January affecting warehousing, reception, the security gatehouse and truckyard of dnata’s air cargo facility while fumigation was undertaken to dispatch any unwanted insect life.
There has also been a reminder from DAFF about the need to carefully check that only approved providers are being used for Brown Marmorated Stink Bug treatments, after the discovery some treatment certificates for incoming goods have been provided that involved treatments performed before the provider was formally approved.
As BMSB measures are critical for protecting Australia’s grain crops and exports, all offshore treatment providers of target high risk goods shipped as break bulk from target risk countries must be registered and listed as approved on the List of Treatment Providers with an approval date that is earlier than the date of treatment.
Any treatments carried out prior to the provider approval date will not be accepted as valid. And any treatments conducted by an unapproved treatment provider in a target risk country will be deemed as invalid and the goods will be subject to onshore treatment (if permitted) or directed for export.
To check the status of treatment providers. find the treatment provider on the List of treatment providers then click on 'View Contact Details' then check ‘date approved’.
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There are potential freight cost reductions ahead for imports and exports that have been using the lengthy Cape of Good Hope Route to avoid the hostilities in the Red Sea, with the ceasefire agreement between Israel and Hamas ratified on January 19.
The Freight & Trade Alliance (FTA) and Australian Peak Shippers Association (APSA), as Australia's representative to the Global Shippers Forum (GSF), have welcomed the agreement, which resulted in Yemen’s Houthi rebels announcing a phased cessation of hostilities against non-Israeli-linked shipping in the Red Sea.
The year-long Houthi blockade of the region has been lifted for vessels that are neither Israeli-flagged or Israeli-owned. However, they have also warned that the situation could flare up again if the US, UK or Israel target Yemen with military action.
The carriers remain cautious about resuming routes through the Res Sea region and Suez Canal, with considerations including war risk premiums from the insurers still a factor.
Industry experts are suggesting a phased return to Red Sea transits is most likely, with smaller and mid-sized ships potentially taking the lead initially.
Should the peace gold and confidence in safety return, it would mean potentially reduced shipping times, increased capacity, reconfigured scheduling and downward pressure on rates as more space becomes available.
AXIMA will continue to monitor the situation closely, looking for any advantages that make become available for our clients and their customers. At all times, the security of cargos and the safety of seafarers will remain top of mind.
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New Year, new staff, same commitment
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We are delighted to introduce you to our new National Client Service Manager, Erin Tobin. Based in our Melbourne office, Erin steps into the role after Lechae Dolan moved into the Chief Client Officer role at the start of this year.
Erin most recently worked at CH Robinson (formerly APC Logistics) and has a strong Operations background. She is dedicated to ensuring an exceptional client experience and is passionate about contributing to AXMIA’s ongoing development of a high performing, client-centric team.
Our people are everything at AXIMA – and when I say “our” that also includes our partners and you, our clients. Supply chains are built on relationships, trust and commitment to shared values and goals, and we have seen in recent years that it is that shared strength that helps us through whatever global geopolitics, weather, price shifts or any other eventuality sends our way. We’ve also seen how those relationships lead to innovation and smarter solutions for improving outcomes and benefiting bottom lines.
So, no matter what the Year of the Wood Snake holds in store, know that your Client Success Manager and Client Service Specialist, along with the whole AXIMA team are with you every step of the way.
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Committed to your success,
Matt Ward
COO International
AXIMA Pty Ltd
www.axima.com.au
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