AXIMA Market Newsletter - February 2021

AXIMA Market Newsletter - February 2021

Welcome to the February Market Update. 

We may have hung up a new calendar for 2021 but unfortunately, many of the challenges affecting the freight and logistics sector are still with us. One thing this has made clear is the advantages of having an AXIMA/Yang Kee local presence in severely impacted markets including China, the UK, the US and South East Asia as well as Australia and New Zealand. This gives us the ability to respond in real-time to changes in circumstances and work closely with clients to reduce the impacts on their supply chain from limited space, equipment shortages, pandemic lockdowns, shifting border regulations and other factors.

 

This month the sector also has to navigate additional limitations associated with China’s Lunar New Year which will see offices closing for celebrations from 11 February to 17 February 2021. Generally, this also means factories close, however, as impacts of the pandemic and freight restrictions have generated a backlog in order fulfilment, our local sources tell us some factories may remain open throughout. This is an attempt to clear the backlog, as stockpiling is becoming an issue due to lack of demand to Europe.

 

Lockdown orders associated with a resurgence of COVID-19 cases have also meant some factories have started their holiday earlier and brought forward their re-opening time. Parts of Beijing are in lockdown ahead of Chinese Lunar New Year celebrations, small factories have been asked to close if possible while schools are taking winter holidays two weeks earlier. Trucking companies are anticipated to struggle as workers take earlier leave. With Shanghai upgraded to middle risk of the pandemic spreading, transport companies are backing away from delivering cargo to Shanghai terminals as they may be forced to isolate for 14 days when returning home. As the situation is fluid, your Client Service Specialist will keep you informed of any delays.

 

China is not the only market where the situation is complicated – the UK is also problematic as the impacts of Brexit coming into effect start to manifest. Coupled with port congestion and the pandemic crisis, it’s going to be a bumpy ride through the coming weeks and months.

 

Overall, the picture globally is of high prices, limited space, sudden changes to sailing schedules and ongoing shortages of empty containers at key export shipping ports. More than ever, planning ahead and booking space as early as possible are crucial, so speak to your Client Service Specialist or Key Account Manager now to find solutions that keep your supply chain moving.


North Asia 

There was very little change in the market ex-China over the Christmas and New Year period. While there has been a minor decrease in some rates, most have held steady at the high prices of 2020. The easing of upward price movement is being seen as a courtesy due to ongoing negative feedback on high rates and the shortage of equipment.

 

Recent reports are the Head of Foreign trade for China is in talks with the Ministry of Transport and other related departments to increase shipping capacity and steady the freight rates. There is also speculation that the shipping lines could be called to meetings to discuss current container freight rates and equipment shortages. Our AXIMA offices in China and Hong Kong will be ensuring we can keep clients informed of any news on this front.

 

The seafreight outlook is still problematic due to factors including the general shortage of equipment, high demand for space on limited sailings and frequent – and sudden – changes to sailing schedules. For shipping lines that adjust their IMO2020 monthly, you can expect to see an increase for February sailings. Land freight and barge services are also being impacted by the COVID-19 situation and there may be some delays caused by this.


There is some good news, however, on the air freight front as flights are not as over-booked as they were near the end of 2020. Prices are still high and may rise further due to demand, and in addition, a fuel surcharge ex HK to AU and NZ will be implemented from 1 February at HKD 0.20/kg.

Trucking and barge services are also being impacted, and with the parts of Beijing in lockdown, there is expected to be some delays once Chinese Lunar New Celebrations are finished and work resumes. 

 

South East Asia

Major transshipment hubs such as Port Klang, Colombo and Singapore are experiencing delays with connections of transshipment vessels. A further complication is parts of Malaysia have been in a round of COVID-19 lockdowns from 13 January 2021 until late January. A movement Control Order has been in place for Penang, Selangor, Kuala Lumpur, Sabha, Johr and Melaka with essential services remaining operational. 

 

As volumes remain high in the region and space remains tight ex South East Asia ports, prices are still rising. In addition, one shipping line has introduced a booking fee which is to be paid at time of booking before booking confirmations are sent, to reduce the cancellation of bookings by shippers moving to other lines.

 

As part of the Yang Kee group, having our own offices in SE Asia is an asset, as it enables us to ensure our clients receive priority with space and multiple options to get cargo moving as efficiently as possible.

North America.

 

Imports into the USA remain extremely high, with TEU numbers up 102% from the same time last year. This is creating severe congestion at many ports around North America. All terminals at Los Angeles are extremely impacted, and this is expected to continue for the rest of the first quarter of 2021. To give you a snapshot - as of Wednesday 13 January, there were 91 vessels in port in Los Angeles. 45 in port and 46 anchored waiting to berth. In addition, the seriousness of the COVID-19 pandemic in the LA area means terminals are working with limited labor and split shifts.

 

Congestion is also now being experienced on the east coast also at New York and New Jersey and also in Canada. A flow-on effect of this is a slowing of containers returning to China, exacerbating the equipment shortage being felt by global shipping destinations around the world including Australia.

 

 In previous years, shipping lines normally cancelled several sailings over the Chinese New Year holiday period as they adjusted to the seasonal decrease of exports from Asia. This would allow for clearing on inbound congestion, however, this year this is not the case and shipping lines have not opted to cancel sailings.

 

Prices remain high overall, and in addition, CMA CGM has advised they will be increasing their local port charges in USA. West port charges will increase by USD 5 per TEU and East Coast and Gulf by USD 2.50 per TEU. Domestic trucking is also still challenging, and we are seeing costs rise in this sector with Chassis rates increasing by USD 10 per day from 1 February.

 

Having our own AXIMA offices on both the East and West Coast of North America will help ensure we can work with our Australian clients to navigate the challenges and develop multiple, workable options to get their cargo moving as rapidly as possible.

 

Europe 

As we see elsewhere in the world, the EU is a carrier’s market and shippers are feeling the pressure of ever-increasing freight rates. Port congestion and space remain challenging, and shipping lines are being accused of breaching contracts to apply standard rates until end of March 2021.


The UK

The UK is experiencing issues with major congestion, shipping lines suddenly changing pricing, equipment shortages and changes to expected landing slots. In short, it is quite chaotic.

 

 In response to port congestion, surcharges came into effect at the end of 2020 for the major ports. The current average vessel delay into the UK is approximately 18 days and the system for managing vessels is creating its own set of challenging consequences.

 

 Currently, vessels are placed in a queue when approaching ports and must wait for a slot, however, if the wait is regarded as too long, the vessel may decide to omit that port and proceed to their next destination. What this means for cargo is the containers are offloaded at the next destination and a feeder vessel used to retrieve them and ship them to the correct destination, adding additional delay.

 

 As the Asia to UK trade lane rates continue to increase at a rapid rate, shippers and freight forwarders are reporting carriers breaching both long and short-term contracts to charge rates far in excess for what has been agreed in contracts. 

 

 The European Freight Forwarders Association and European Shippers Council have protested about the damage the carriers are causing.

 

 Another flow-on effect of congestion that is also affecting pricing is the rate of containers being returned to China is slower than it should be, contributing to the global equipment shortage that is affecting every market world-wide.

 

Some shipping lines have begun charging an Equipment Imbalance Surcharge (EIS) ex UK and North Europe as a cost recovery in the overall repositioning costs. The EIS rates vary drastically and are passed on as a cost. They will only be charged if relevant to the shipping line used, so speak to your Client Service Specialist about whether this needs to be factored into cost-planning. Having our own AXIMA offices in the UK means we can provide you with the most up-to-date information and work to develop the best solution to keep your goods moving at the most cost-effective price.


Australia

Global conditions are still having an impact in Australia also. Ports have announced an increase in their booking fees, and this is having a flow-on effect with transport companies forced once again to increase their Vehicle Bookings Fees as the ports impose further increase.

 

On review, Timeslot Bookings Fees that get charged for FCL containers arriving in Sydney will increase as of 1 February 2021 by AUD 10.00 per container. An increase to the wait time at Client premises for sideloaded delivery has increased to AUD 155.00 per hour or part thereof in 15 min intervals. You will find this update in the further particulars of our quotations and rate sheets.


Tips for Lunar New Year Planning

Shipping is already incredibly complicated due to all the factors affecting markets world-wide. To minimise the additional impact of Chinese New Year, we recommend following these four tips:


Tip 1: Confirm shutdown dates with your suppliers


Tip 2: Forecast and schedule in production


Tip 3: Keep a focus on quality control


Tip 4: Book your freight forwarding in early

You can read more on these tips from an article posted on our website in the lead up to Chinese New Year 2020. 


Office closures

Lunar New year will see our China and Hong Kong offices closing for celebrations from 11 February to 17 February 2021. Specifically, the Hong Kong office is closed from 12 to 15 February and Shenzhen, Qingdao, Shanghai and all other offices in mainland China closed from 11 to 17 February 2021.


Planning for 2021

In some ways 2021 looks a lot like 2020 in terms of the global freight and logistics market, however, we do not have to be blindsided the way we were when the COVID-19 pandemic first began. This year, we have a better idea of what may happen and some tried and tested ways to overcome challenges including sudden lockdowns, rising prices, limited space, changing schedules and other hurdles.

 

Whatever you want to achieve this year – your Client Service Specialist or Key Account Manager is only a phone call or an email away. By planning ahead, booking early, exploring options and thinking innovatively, we can and will find a way through whatever 2021 might bring.


We wish you good fortune for both the calendar New Year and the Lunar New Year,

 

Best regards,

Matt Ward

General Manager - International

 

AXIMAPty Ltd

www.axima.com.au