Welcome to the August Market Update.

The past few weeks have been a textbook example of the value of resilience in planning for the operation of supply chains. How an individual, business or industry navigates short, sharp shocks is the litmus test, and it is safe to say that there are still lessons to be learned about how we prepare for and adapt to the unknown.

The Crowdstrike global IT meltdown is the incident most of you will either have experienced first-hand or seen affecting family, friends, colleagues or clients. Whether you were the one staring at the ‘blue screen of death’ or were fielding calls from people suddenly stranded at an airport or unable to complete a financial transaction due to the impact on the banking system, it really was something of a pop quiz on ‘what will we do if the technology isn’t working?’

Another sudden change is the response of some of the major shipping lines to the level of congestion at the key transshipment ports, which is translating into major headaches for importers in Australia reliant on the South-East Asia market.

And while political instability has almost become normal operating conditions in the Red Sea region, with most shipping lines now more or less adapted to avoiding the area for the foreseeable future, the sudden eruption of civil unrest in Bangladesh is sending ripples across the Oceania garment trade.

Rates are another element in the mix where change is sometimes rapid, and we are now seeing the carriers push the envelope with GRIs and new Peak Season Surcharges.

We’ll go into more detail below on the specifics - and remember that your Client Service Specialist and Client Success Manager are only ever a phone call or email away if you need to follow-up on any specific matter or gain additional information or clarification.

July saw two GRIs announced by carriers, one of USD 500 per TEU starting from 1 July which didn’t succeed, and a second of USD 300 per TEU, starting from 15 July which was implemented at around USD 150 per TEU, equating 50% of the announced quantum. The rate rise is a sign that the frequent blank sailings in the trade lane have had the desired effect (from a carrier perspective) by reducing capacity enough to justify the increased charges.

They are not done with pushing prices upward, with the shipping lines announcing plans for a Rate Restoration or Peak Season Surcharge ex-Asia to Australia and New Zealand to apply to all container types from 1 August.

The proposed rates for North-East Asia to AU/NZ are USD 300/20’GP USD 600/40’GP/HC and USD 12.00W/M (LCL).

We do not expect all carriers will succeed with the full quantum, however, best to be prepared for that ballpark in your budgeting. It is also likely a further GRI will be announced August 15, and we will send an email client advisory should that occur.

To add salt to the wound, in addition to strategic blank sailings, there has been substantial schedule disruption to sailings ex North Asia to Western Australia due to the ongoing level of congestion at the transshipment ports of Singapore and Port Kelang. Schedule integrity to Australia’s East Coast ports is also sub-optimal, due to the continual blank sailings carriers are implementing to maintain high rates.

In addition, a new tactic is being deployed whereby carriers are downsizing some vessels to restrict space availability.

Overall, the carrier strategies do mean there is likelihood further GRIs will occur and be successfully implemented.

There are also changes ahead for MSC’s schedule generally as it reshuffles services between North Asia and Australia/New Zealand, this is expected to occur from mid-August.

Air freight is also showing signs of pressure ex-Shanghai, as ecommerce dominates available space. The recent cancellation of a Qantas service will also put more pressure on direct air freight services capacity, however, space and rates for deferred service remain relatively unchanged.

The rates honeymoon is well and truly over in this market. Carriers announced a GRI of USD 250 per TEU starting from 1 July, and most carriers successfully implemented approximately USD 125 per TEU – 50% of the quantum, with some implementing the balance of USD 125 per TEU from 15 July, depending on the carrier’s space and equipment situation.

A further GRI has been announced of USD 300 per TEU to start from 1 August, and several carriers, including ANL have also planned to impose a Peak Season Surcharge of USD 500 per TEU on containers ex SE Asia. We do not anticipate all carriers will succeed with the full pricing increase, however almost certainly part of it will be successfully implemented due to the current squeeze on space.

This market is also seriously affected by congestion at Singapore and Port Kelang – itself a flow-on from the ongoing avoidance of the conflict-ridden Red Sea route.

The effects of the congestion including lack of equipment and space are now starting to compromise local operations as well as sailing schedule integrity. It is likely the situation will worsen in the coming months as peak season swings into play, unless somehow the congestion eases. Already some carriers are choosing to omit these two ports, which is further reducing space capacity in the SE Asia-Australia route.

MSC has reportedly responded to the congestion situation by suspending transshipment services into Australia and New Zealand. The Freight and Trade Alliance and Australian Peak Shippers Association began hearing reports from members about this and swung into action to find out from MSC if the reports were true. As a result, MSC confirmed it will stop bookings transiting via Singapore and Tanjung Pelapas TPP until further notice.

MSC confirmed that while the Europe-Singapore-Australia service is suspended, there is an alternative Europe-Australia direct service available. As bookings are transitioned across to the alternative, MSC is also varying which vessels will call at which Australia East Coast Ports in the coming weeks, and this will specifically affect those planning for goods to be loaded. If this concerns you, please contact your Client Service Specialist or Client Success Manager to discuss any changes and what they mean for your timelines, costs and planning.

In the US, importers are driving a surge of goods into the ports to prepare for potential industrial action by the International Longshoremen’s Association (ILA) and US Maritime Alliance (USMX) when the Master Contract between ILA and USMX expires on 30 September. Any industrial action is likely to affect both US East Coast and Gulf Coast ports.

A new contract must be negotiated, however discussions between the two parties are not proving productive, with the ILA concerned about the introduction of automation equipment in the form of auto gates, which enable trucks to be processed without the need for human labour, something that contravenes the current contract. Planning ahead is key to mitigating the risk of industrial action for any goods coming to Australia from the US.

While discussions and forward planning can mitigate human risks, they can’t change the weather, which has also been giving the Gulf Coast ports a battering, on 11 July Hurricane Beryl disrupted operations at both Galveston and Houston, and this week, Storm Debby caused major disruption at the Port of Charleston, along with flooding affecting large parts of the Southern US.

Importers of garments from Bangladesh are facing major disruption to the supply chain due to the escalation of measures to control growing civil unrest. During late July, student protests over job quote reforms escalated rapidly, with the government responding to the protests by cutting internet services and imposing a curfew from 18 July. As a result, customs services could not effectively operate and thousands of TEU export containers could not be shipped.

The government did reinstate some limited internet for offices only and the curfew lifted for business operating hours. Social media remained blocked.

Meanwhile, container ships were building up outside Chittagong Port, and air freight cargo began accumulating at the Dhaka freight terminals, due to the limits on internet access restricting the ability to process cargo. It has been reported the backlog was going to take a week or more to clear.

The situation became even more challenging last weekend, when an escalation of clashes between protesters and authorities resulted in the government declaring a three-day public holiday for 5, 6, and 7 August. All garment factories are closed, as are offices, and mobile internet has been suspended for the duration.

As the situation remains a fast-evolving one, for those reliant on the output of the Bangladesh garment industry, it is best to keep in contact with your Client Success Manager or Client Service Specialist to determine next steps for your supply chain.

Sydney

Weather has also played havoc with cargo moving into and out of Port of Sydney in recent weeks. On 31 July pilotage was suspended due to strong winds and high swells that exceeded safe working limits for vessel movements and pilot transfers. The suspension remained in place for five days before conditions eased, causing a major backlog of cargo at the ports and out at sea, of vessels waiting to enter Port of Botany. Operations were also affected at Newcastle and Port Kembla, and it is expected it will take some days to clear the backlog and restore normal schedules.

Perth

Please be aware that the introduction of the new Weigh in Motion system at DP World Fremantle is going to add additional cost of $14.80 + GST as the WMT fee to all full import containers delivered by road. It will also potentially increase waiting times.

When large parts of the world’s IT systems crashed on Friday 19 July, there was an immediate response from the Freight and Logistics sector to identify and mitigate any business impacts. This shows our strength as an industry when we coordinate and communicate to navigate a crisis of any kind.

Post event surveys found that aside from short-term disruption to Jet Star’s systems, and IT system shutdowns at some stevedore terminal’s and ECPs, the Crowdstrike glitch had minimal immediate effects on logistics and freight.  

There was some backlog of freight movements where systems had been impacted, and as a result the Victorian Government adjusted the truck movement curfew for VICT Terminals until 25 July, to provide additional time windows for cartage to clear the backlog, mainly supermarket produce deliveries.

Patrick terminals was also affected and export cut-off times for Melbourne and Brisbane were temporarily extended as a result. In addition, Qube Logistics’ operated empty container parks had to cease operations for the initial period of the outage on the Friday night.

It was a salutary reminder that while IT and digital processes are beneficial for productivity and efficiency in so many ways, they are not infallible. The connected nature of our global economy and the reliance on digital communications and processes always needs to incorporate good old fashioned human oversight and strong team relationships as a fail-safe.

It’s that time of year again - Brown Marmorated Stinkbug season is upon us. In addition to the usual requirements, China and the Republic of South Korea are being added to the BMSB target risk countries list for heightened vessel surveillance only.

The Department of Agriculture, Fisheries and Forestry (DAFF) released Industry Advice Notice 166-2024.

DAFF states the reason is to ensure requisite measures are in place to manage biosecurity risks associated with seasonal pests on RoRo vessels, recognising the recent rise in exotic stinkbug detections from BMSB native countries. RoRo vessels that berth, load or tranship cargo from China and/or Republic of Korea will be subject and to heightened vessel surveillance, and risk management measures where necessary.

Further information on the seasonal measures for vessels can be found on the DAFF website, here

From 15 September DHL will be applying a surcharge on shipments of AUD$0.50/kg for all air freight shipments into Oceania from all parts of the world – see full details here. It will also apply to exports from Australia to other markets via DHL services.

The surcharge will remain in place until 31 January 2025 and applies to goods consigned via DHL Express Worldwide Time Definite International (TDI); DHL Express 12:00, DHL Express 9:00, TDExport, TDImport, TD3rd Country, TD3rd Country Domestic, Express Easy Export, Medical Express Export, Medical Express Import, Breakbulk Express Export and Import, and Breakbulk Express 3^rd country shipments.

DHL is stating the surcharge is in response to factors including high demand, the volatile conditions for global trade, and to ensure DHL can continue to allocate additional resource and capacity during peak season.

All of the shifts and incidents covered above highlight one very important factor that is key to resilience – timely, accurate and trustworthy information. That is why we bring you these newsletters every month, why we send the client alerts, and why your Client Service Specialist or Client Success Manager should always be your first port of call for discussing any changes to your own plans or to understand what your options might be for improving the robustness of your supply chain.

Best regards,

Matt Ward
COO International – YKGA
AXIMA Pty Ltd
www.axima.com.au

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