AXIMA Market Newsletter - July 2021

Market Newsletter - July 2021

Welcome to the July Market Update.


Ideally, we would be welcoming in the new financial year with good news  but 2021/22 looks set to deliver ongoing challenges for the freight and logistics sector. Lockdowns, port congestion, price hikes and other complications are affecting most parts of the global trade network and there is little relief in sight. At this point, having up-to-date information when you need it is the best protection you can give your supply chain to ensure success.


The new wave of COVID-19 infections here in Australia is proving disruptive for many, so we would like to reassure you that AXIMA's services to you will not be affected. Our Melbourne office team was already working from home based on government directives, and recently, based on the current lockdowns, our Sydney and Brisbane office teams shifted to working from home. Rest assured our teams are here to support you and your business.


Port Congestions are likely to remain an issue around the world for the next 12-18 months, and are affecting costs, timelines and the flow of imports and exports globally. Just in the past two months there has been events including the flow-on effect of the Suez Canal fiasco, the fire at Yantian Port, ships queued up by the dozens at Long Beach and Los Angeles and ongoing COVID-19 outbreaks and lockdowns.


Because demand for space remains high, the carriers are continuing to implement General Rate Increases. Usually this is associated with a need to maintain service levels, however right now it is more an opportunistic response. There are some ways in which reliability of service has become a casualty of current events as carriers battle port congestion, omit ports to pull schedules back into line, remove ports of call and get redirected to other ports to offload containers. Some of these changes are occurring with little notice, making life difficult for shippers.


Spot rates are rising, and there is cause for concern for those relying on Named Account Contracts for freight being moved from Europe, Asia and North America heading to Australia, New Zealand and globally. Some lines are putting these contracts on the back burner in favour of higher-priced spot rate containers as they attempt to allocate tight space and get containers moving on heavily booked vessels. Asia to USA trade spot rates are currently sitting at USD 10K per FEU while Asia to Europe are sitting at USD 12K. July GRIs of USD 3000 per FEU are an indication that the rates could easily reach the USD 20K mark in coming months.


Booking Cancellation Fees have also been implemented by Shipping Lines from various loading ports to eliminate bookings being made in advance for more space than is needed, with shippers then cancelling the excess space at the 11th hour. One of the best ways to avoid this - and navigate the other complexities of the current global situation - is to have regular contact with your Client Success Manager or Client Service Specialist to ensure you have the best advice in relation to scheduling, pricing and options.


North Asia


Following the negative impact of COVID-19, Yantian International Container Terminal (YICT) reportedly resumed normal operations as of 25 June. However, it is not yet back to normal as there is a huge amount of container backlog. In the period, operations at the port reduced with more than 343 sailings omitted Yantian. As a result, Shekou and Nansha Ports were also heavily impacted, and delays remain an issue. Carriers such as Hyundai will not be calling into Yantian until the end of July and no bookings are being taken from that port until mid-July to allow the backlog to ease.


Guangzhou area is deteriorating, with more COVID cases being reported. As Nansha Port is located in this area, operations there are impacted and vessel delays of five days and upwards are to be expected in the coming weeks.


In Shanghai, Authorities have suspended the land transport of containerised non-essential dangerous goods following a fire in the port. This suspension is currently in effect until 2 July, and it is expected the hiatus will allow for improvements in the safety of transporting dangerous goods cargo such as lithium batteries, one of the key cargo items affected by the suspension.


The airfreight market is currently unusual in that despite the ongoing congestion, delay and disruption issues with sea freight, demand for air space has slowed. It appears many shippers are not taking the option of converting sea shipments to air shipments to circumvent port congestions. We suspect this could be because prices remain stubbornly high and keeping shipping costs low is still a primary goal for many importers and exporters.


In terms of air freight costs, the Fuel Surcharge ex HKG is increasing to HKD2.00 per kg from 1 July. With sea freight, shipping lines have also announced a GRI of USD 500 per TEU from July ex North Asia and we expect this will pass.



South East Asia


This market is similar to the majority of overseas ports in the degree of difficulty. Malaysia is currently in COVID-19 lockdown which is due to be lifted 28 June, however, the flow-on effect of congestion is likely to persist for some time as there is a large volume of cargo backlog to shift.


India, Pakistan and Bangladesh are also all experiencing congestion from the combination of lockdowns, equipment shortages and high demand for space. Major transshipment ports also remain plagued by equipment shortages and delays of approximately 2-3 weeks. We have no indication this will change in the immediate future.


Costs continue to escalate, with shipping lines introducing a GRI ex India and Pakistan to AU and NZ at USD 500 per TEU effective 1 July.


North America


The USA is currently breaking records in relation to import volumes, with a new benchmark set of a 45.6% increase from May 2020 to May 2021. This makes for challenges in terms of the flow of equipment and goods, but the major vessel backlog seen over recent months is beginning to ease from the February peak of 40 vessels waiting to dock at Southern California ports. By mid-June it was down to 10  a significant improvement.


This could however be a short-lived reprieve as holiday peak is just around the corner, and we do expect issues to again emerge as the Asia to USA trade lane makes the most significant impact on import volumes.


On the good news front, BAL Container Line and China United Shipping Co will begin new services in July, and Hamburg Sud are launching a new service on the South East Asia to South Atlantic trade lane.


On the not-so-good news front, shipping line space generally is being sold out between three to four weeks in advance. There have been instances where bookings are being made well in advance of the sailing, and shipping lines are cancelling those bookings at the very last minute just before the empty equipment is scheduled for delivery to be packed.


Rates in the USA are soaring further for land transport, and domestic trucking is struggling to cope with the volumes of cargo moving across the country and an ongoing shortage of drivers. Some carriers are turning away business as they cannot meet demand. For sea freight, a GRI of USD 200 per TEU from 1 July is expected to pass.


We cannot stress enough that being in regular contact with your Client Success Manager or Customer Service Specialist is vital for effective planning and finding options when flexibility is required due to changing circumstances.



Europe and the UK


For several years, the UK has struggled with a shortage of truck drivers and this situation has escalated rapidly in recent months with the estimated driver shortfall rising from 70,000 persons to 100,000. This has been exacerbated by the cancellation of 30,000 testing slots for new drivers due to COVID-19 lockdowns. Currently, the government is taking action to address the driver shortage and resolve testing delays, and this will start to relieve this seriously strained link in the supply chain.


In Europe, the ongoing port congestion in Hamburg or Rotterdam has resulted in 2M Partners MSC and Maersk advising they will be omitting Hamburg Port on their AE7/Condor Loop to Asia. They have included Bremerhaven as the alternative. Antwerp is experiencing slight issues; however, it currently seems to be the only port in the North Europe schedule that does not have major congestion.


A GRI of USD 150 per TEU is expected to pass. LCL GRI's ex Europe vary, however it should be noted that all have been significant. With the largest increase from the UK.


New Zealand


As noted in last month's Market Update, ANL have announced they will not accept the dehire of empty containers in Auckland as the empty container parks are full due to the current level of port congestion. This is still the case, and as a result shipping lines are pushing all empty containers either into Tauranga or North Port. This means there are additional costs expected for clients as while some of the extra cost is credited back by the shipping line, the costs of the diversions to the alternative ports outweighs the credit being offered.


A GRI EX AU to Auckland of USD 1000 per TEU has been announced, and a GRI EX AU to the remaining NZ ports of USD 500 per TEU.


Overall, the Australia to New Zealand trade lane is facing major challenges. Each shipping line is presenting a different scenario in terms of when bookings will be taken. Here is an outline of the situation:


Booking being taken from end of July - Gold Star/ Zim: taking bookings for end of July onwards.

Booking being taken from September - ANL: no space until September and no 20GP equipment; Maersk: No space until September and no 20GP equipment.

On Hold with no announcement of when bookings can be made - MSC: in June, MSC announced major cancellations due to issues on vessels. Currently bookings ex MEL and SYD are on hold until these are resolved; COSCO: all bookings have been suspended; Hapag Lloyd: not accepting any bookings.

On hold but some bookings are being accepted - Hamburg Sud: all bookings are technically on hold as they work through the backlog of containers, however, we are finding some space available on a case-by-case basis; LCL: co-loaders are fully booked but we are finding some space available on a case-by-case basis.

For LCL shipments, co-loaders will be implementing a fee of NZD 15.00 per cbm for LCL shipments to cover the dehire costs.


Australia Ports


We have also been advised by VICT in Melbourne that they will increase their Terminal Access Fee from 1 July. In addition, VICT are introducing a "Premium Slot Fee" from 1 July to discourage last minute slot bookings. We are also currently waiting for transport companies to list their new charges.


Overall, there appears to be little protection for importers and exporters and the Freight and Trade Alliance continues to call for a review of charges and the lack of notice being provided for increases in fees and charges. Even if this call is answered by the government, it will take time to occur. So, at this point, there is no solution in sight.


Several Australian ports will be experiencing some challenges due to industrial action in the coming weeks with Patricks MUA Protected Industrial Actions continuing and creating delays.


Here is the current list of affected ports and planned Industrial Action:


Patrick Terminals - Sydney AutoStrad

A ban on the performance of work on vessels that have been subcontracted to or outsourced to Patrick Terminals by another stevedoring company from 00:01 on Thursday 24 June 2021 until Thursday 15 July 2021.

Stoppages of work of 1-hour duration at 0500, 1300 and 2100 each day commencing on Thursday, 24 June 2021 for a 21-day period until Thursday 15 July 2021.


Patrick Terminals - Brisbane AutoStrad


A ban on the performance of work when an employee is rostered as "off/avail" from 0700 on Wednesday 30 June 2021 until 2300 on Friday 2 July 2021.

A ban on the performance of work on vessels that have been subcontracted to or outsourced to Patrick Terminals by another stevedoring company from 0700 on Wednesday 23 June 2021 until 2300 on Wednesday 7 July 2021.


Patrick Terminals - Fremantle


A ban on attending for work on days an employee is rostered as "off/avail" commencing from 7.00am Wednesday 30 June 2021 and ending at 7.00am on Wednesday 21 July 2021.


Prepare for peak season


There are two things that can make life very difficult for shippers  disruption to schedules and surges in shipping costs. Right now, most importers and exporters are experiencing both. We were pleased to see that we are not suffering in silence, however, with a recent episode of ABCs The Business examining the impact of shipping price hikes. You can watch it here.


Knowledge is one of the superpowers available to us all to navigate the current challenges, particularly with peak season approaching at a rate of knots. We urge you to speak with your Client Success Manager or Customer Service Specialist and start your planning.


Aim to be looking at notice of at least five or six weeks ahead for bookings, or more if possible. It is also wise to talk through the solutions that may exist for building in some flexibility in your planning, finding cost-effective options for a plan B and really understanding the exact space requirements and service levels you will need. You are the expert in your customers and what they expect we are your partners in ensuring supply chain success so you can meet those expectations.


Stay safe and well,

Matt Ward

COO International YKGA