AXIMA Market Newsletter - June 2021

Market Newsletter - June 2021

Welcome to the June Market Update. 

 

As we look ahead at conditions leading into the peak shipping season, there are still multiple complicating factors affecting global trade and logistics. Just in the past few weeks, unexpected natural disasters, new waves of COVID-19 infection, equipment shortages and congestion have all disrupted timelines at key trade destinations. 

 

One thing that is becoming predictable is increases in pricing, as the supply and demand equation still entirely favours shipping lines and airlines. All evidence points toward higher rates being likely to continue for at least the next two years. While this is frustrating from a cost point of view, having this longer-term indication does assist with both planning and budgeting.  

 

Given the volatility of conditions in the major trading nations, having an ongoing dialogue with your Client Success Manager or Client Service Specialist is important. Congestion, for example, has proven a major hurdle for timeframes and the location and duration of blockages has continued to evolve. 

 

A case in point - Europe and the UK are still experiencing flow-on congestion following the Ever Given incident in the Suez Canal back in April due to the backlog of cargo ships unable to pass through the trade lane. In North America, while the wider society and economy is taking some tentative steps towards normal levels of activity, there are still delays at key ports and challenges for land transport links. 

 

The overall imperative is ensuring you have up-to-date insights into conditions, scheduling and pricing. It is also wise to have discussions around contingency plans, to better position your business to navigate disruption and uncertainty. 


North Asia 

The RFQ season was delayed compared to previous years, as many shippers held back while they watched what direction the market was heading in following the Lunar New Year. Carriers were more in favor of offering shorter contracts that provided an opportunity to adjust rates sooner rather than later. It was also reported that last year more containers on longer duration contracted rates were rolled or bumped in favor of containers being moved on spot rates.

 

 There is now some degree of predictability in that current rate conditions are expected to continue for the next two years. Carriers are expected to be able to keep freight rates higher based on better management of freight space. The main message for shippers is do not expect any easing of rates even if the supply of space increases – particularly as demand will increase in the short-term with Peak Season just around the corner.

 

 Severe congestion is being experienced at Yantian Terminal. The Yantian International Container Terminal (YICT) will stop receiving full containers as of May 30. Due to several Covid-19 infection cases, all vessel loading procedures have been delayed. The congestion issues will be expected to affect close ports and not limited to Shenzhen and Hong Kong as space shortages along with reduced carrier capacity will become an issue once due to the port closure.

 

 Our AXIMA Container Freight Station for LCL cargo located in Yantian has advised drivers may experience longer than normal waiting and loading times as schedules will most certainly be changed at last minute. Waiting Fees may be charged where applicable. Vessels that berth Yantian port will encounter lengthy delays. Some carriers will change their schedules to omit Yantian at this time to avoid adding to the issues, therefore schedules will be subject to change without notice. We have been forewarned that this congestion issue is going to drive the rates up ex Shenzhen, Hong Kong and close ports as the demand for space increases.

 

 We were expecting May’s price increases would be followed by further price hikes in June and this has proven to be the case. A GRI of USD 300 per TEU has been announced for 1 June. As we are already receiving rates from shipping lines that include this GRI, we expect this increase will pass through with some small variations depending on the shipping line.

 

 There is another rise to come this month too, for Cross Trade from Asia to USA/Canada, with what can only be described as an extremely hefty GRI of USD 3000 per TEU announced effective 15 June 2021. 


South East Asia

The pandemic situation in India is a humanitarian and public health disaster, and the struggle being experienced across the nation will also have impacts for the logistics supply chain.

 

 Other nations in the region have responded to the high rate of infections by imposing restrictions to crew changes in order to reduce the risk of transmission to their own population of the India COVID-19 variant. Ports in Singapore, China and Malaysia are refusing to allow vessel docking where crew changes have resulted in seafarers being in India within the previous 14 days. Where ships are being allowed to dock, in some cases crew changes are not being permitted, with an exception being made for crew that requires medical treatment. Some vessels are simply not being allowed to dock at the ports at all.

 

 Because there are several transshipment ports and final destination ports within 14 days from India’s upload ports, these restrictions will begin to affect vessel schedules and transshipment planning. Many industries in India are also suffering due to employees being ill and unable to work, and this is affecting timelines for the supply of goods for export. 

 

 In addition, Pipavav port is closed due to Cyclone Tauktae. Power supply and communication links were disrupted, and storm impacts have forced the terminal to suspend operations until 1 June 2021. This will now put further strain on an already struggling operation. Containers will be diverted to other ports like Nhava Sheva, which will put immediate pressure on those ports. 

 

 Overall, with ports in India struggling with multiple constraints, speak to your Client Success Manager or Client Service Specialist about planning shipments at least four weeks in advance.

 

 Two other key South East Asia nodes are also still affected by disruption. In Bangladesh, Chittagong port is heavily congested. This may change in the coming months, as the Bangladesh Government are planning to build an additional 20 depots constructed to supplement the 19 existing depots and it is hoped this will help ease the volume of containers coming through the port.

 

 In Singapore, rollovers of containers is still a frequent occurrence. All shipping lines have reported a significant increase since April 2020 compared to April 2021, one line for example reported a 30% increase in rollovers from 24% of all containers to just over half (54%) of all containers.

 

 In terms of cost and pricing in the coming month, Sea Priority rates continue to be standard for FCLs ex India and the airlines are taking longer to issue spot quote rates. A GRI ex South East Asia of USD 250 per 20 TEU is expected to be passed.


North America


Congestion remains a serious hurdle at multiple USA freight terminals including New York, Savannah, Los Angeles/Long Beach and Oakland. These terminals are also reporting an increase in import volumes.

 

 As a result, there are a range of wait times for vessels to berth and unload. On the West Coast at Long Beach vessels are waiting from 8-11 days; at Seattle there has been a four-day vessel wait time and Yard utilisation is at full capacity; Oakland is seeing 10-14 days vessel wait time; on the East Coast there is up to 24 hours berthing delay at New York and Baltimore and there is a 24-hour vessel wait time at Savannah.

 

 Rail car shortages also continue to have an impact, and rail chassis shortages are creating delays at multiple intermodal nodes including LAX/Long Beach, New York, Philadelphia, Cleveland, Columbus, Atlanta, Nashville and Louisville.

 

 Shipping lines have announced a GRI effective 1st of July 2021 ex USA and Canada to Australia and New Zealand. USD 200 per 20GP USD 400 per 40GP/HC USD 8.00 per cbm for LCL.


Europe and the UK 

Inland waterways in Europe are experiencing major congestion, so shipping lines are imposing surcharges for containers that required Barge or rail services. Containers coming via road to Rotterdam are also being hit with a road transport surcharge, and there is currently a five day wait time at Rotterdam port.

 

 The additional charges will be in place until the end of June when the situation will be reassessed.  

 

 Blank sailings are making a return after a short hiatus. Several lines have announced their blank sailings that will be effective between the start and middle of June.

 

 In the UK also, high prices and congestion remain the status quo. Containers are still incurring a Port Congestion Surcharge and there is no sign of this changing in the immediate future.


New Zealand

Auckland is also struggling with port congestion. ANL have announced they will not accept the dehire of empty containers in Auckland as with the current level of port congestion, the empty container parks are full. Shipping lines are pushing all Empty Containers either into Tauranga or Northport and this means additional costs are expected for clients. Despite the shipping line offering a USD 200 per TEU credit for each container dehired at Northport or Tauranga, the costs of the diversions to these ports outweigh the credit being offered.


Australia Ports

Congestion is not the headline issue for Australian ports, instead the not-so-good news is the landside charges being passed across from the Terminals. DP World in Sydney have now implemented a Peak Surcharge fee for containers collected between 5am and 4pm each day, further increasing booking fees. A general increase in booking fees for Sydney will also be implemented as of 1 June 2021.

 

VICT have announced as of 1 July they will be increasing their Terminal Access Charge and also implementing a Premium Slot Fee for containers being slotted in at the last minute. This last charge reinforces the value of planning ahead and speaking with your Client Success Manager or Client Service Specialist to ensure your bookings are secured cost-effectively and in advance.


Managing risk

While there are many unknowns in how events will continue to unfold around the world, the insight you have into your customers is a powerful tool in forecasting your logistics needs. By examining your planning and assessing what needs to get to whom and when at the earliest instance, strategic decision-making becomes possible. As your supply chain partner, we are committed to ensuring your business continues to succeed, no matter what challenges the rest of this year has in store.

 

 Speaking with your Client Success Manager or Client Service Specialist during the planning stage will help you determine the most cost-effective options for securing the space and services you require. This is particularly important now as we head towards the traditional consumer peak season. 


Stay safe and well,


 

Matt Ward

COO International – YKGA

 

AXIMA PTY LTD

www.axima.com.au