AXIMA Market Newsletter - November 2021

 

Market Newsletter  - 

November 2021

Terminal

Welcome to the November Market Update.

 

With the shoppers unleashed in Australia’s two largest states, retail can look forward to inventory shrinking rapidly as consumers make up for lost time. The loosening of restrictions in NSW and Victoria also coincides with the traditional Christmas peak, so experts are tipping a record-breaking period ahead.

 

The challenge will remain with supply chains functioning effectively to keep warehouses, storerooms, and the shelves at the end of the chain well-stocked. Congestion, equipment shortages, high demand and tight space remain a feature of the global shipping market, so for the next to last episode in the drama of 2021, we need to stress that planning ahead is absolutely vital. After the holiday season, there’s also a whole new year ahead for both you and your customers to consider.

 

One sign of some stability potentially returning is the steadying of sea freight rates. The price rises this year have been dizzying in both their speed and the eye-wateringly large costs passed onto shippers. This has proved a bonanza for many of the global carriers but made it challenging for the financials of those relying on them. Despite peak season presenting carriers with something of a blank cheque due to extremely high demand, they are currently refraining from capitalising on it by implementing another major price hike.

 

At this stage, we do have some grounds for optimism this may continue for the beginning of 2022, which would grant some certainty for costing landed prices of consumer goods. We are also expecting some predictability to return to trade lanes and schedules as key trading nations move into post-COVID recovery mode.

 

As ever, having the right advice and support to make your plans for 2022 is critical, so speak to your Client Success Manager or Client Service Specialist as soon as possible. In horseracing terms, we are heading down the home straight now with 2021 – together we can get your supply chain across the finish line.  

 

 

North Asia

 

In all our years in the global logistics industry none of us have ever seen a market like the current scenario. The ongoing and confounding factors of equipment shortages combined with lack of space that has defined the majority of this year has no precedent and has shocked forwarders as much as it has been challenging for importers and exporters. The situation was exacerbated by the massive increase in cargo volumes being moved – more in the first six months of 2021 than had generally been shipped in an average year.

 

This has all been rather profitable for the shipping lines, with the Washington Post reporting that the seven largest publicly-traded ocean carriers reported more than $23 billion in profits in the first half of 2021 – compared to a combined $1 billion last year. The ouch factor for shippers themselves has been the stratospheric price hikes, for example, spot rates on the Transatlantic services jumped by over 200% since March, and many shippers have had to pay premium rates or guaranteed space fees even though this may not have guaranteed them the space they booked.

 

So, you are probably wondering how long this whole difficult period is going to last? Much as we would like to think a positive change is just around the corner, at this stage we expect the next year will continue to be challenging in relation to prices and space, and 2023 is when we can expect to see some relief.

 

That said, sea freight rates are remaining somewhat stable. Golden Week in October seems to have encouraged carriers to maintain their current rates, and some had even reduced them. However, there are some carriers still trending upward with surcharges, for example, MSC increasing their PSS from CN to USA by USD2000 per TEU.  Spot rates from Asia to US are also regaining traction now that Golden week has passed and a GRI of LCL cargo USD 5/cbm becomes effective 1 November.

 

With the return of business and tourism travel increasing flights ex-Asia, and the tight timelines involved in fulfilling Christmas orders, air freight is on the radar for many. Demand remains much higher than capacity and this is particularly evident in Atlanta, Frankfurt and New York. The clamor for cargo space will drive up rates, but on a positive note, Shanghai airport is back to smooth operations following a series of COVID-related disruptions so while space might be expensive, at least it is more certain to be there. We recommend speaking to your Client Success manager or Client Service Specialist as soon as possible to secure space at the best available rate.

 

 

South East Asia

 

India is in recovery mode and is poised to embark on what has been described as its most ambitious infrastructure and trade initiative since Independence. It is opening Dedicated Freight Corridors that integrate state-of-the-art technologies, support the growth of its industrial zones, lower logistics costs and free up existing rail infrastructure for passenger trains. The goal is to shift the country onto a greener economic growth path and support regional and national development.

 

APM Terminals Pipavav is the first Indian port to connect to the Western Dedicated Freight Corridor (WDFC). The WDFC is an all-electric rail corridor stretching over 1500km from Jawaharlal Nehru Port in the Indian town of Navi Mumbai to Dadri Inland Container Depot (ICD) The first section is already operational, and when the entire DFC is completed in early 2022, transit times to the Northwest area of India are expected to be halved, and congestion on the road and rail network substantially eased.

 

In other good news in the Southeast Asia region, the Indonesian Ministry of Trade is working with the Indonesian Chamber of Commerce to assist shippers with the ongoing hurdle of container equipment shortages.  Mainline operators have promised to supply 800 to 1000 containers to exporters every month in addition to 3500 to 3800 containers worldwide.

 

In terms of pricing, air freight is behaving as one would expect this time of year. High demand from the Philippines and Indonesia coupled with reduced services due to the slow recovery of business and tourism travel has made for a very tight space situation and prices are following the demand curve and remaining high. There is, however, no matching major price rises for sea freight, with LCL cargo shipped from and transshipped through Southeast Asia incurring a GRI of USD 5/cbm effective 1 November but no other rate increases or charges currently expected.

 

 

North America
 

Congestion continues to be a vexing feature of North American ports due to record volumes of cargo moving through. Berthing proves to be challenging as vessels wait at length for space, and landside, 30% of truck slots are cancelled which is causing issues for the terminals in terms of hiring sufficient labour to handle the loading and unloading workload on the wharves.

 

As we previously reported, Los Angeles and Long Beach terminals did extend their gage hours to assist cargo flow, and the announcement of LA ports operating 24/7 will assist in easing congestion. Both Los Angeles and Long Beach ports will also increase the number of operations from 112 hours at each port to 168 hours with around the clock unloading and loading. Given there are close to 100 vessels anchored off Southern California at the time of writing, this will hopefully mean some easing of conditions in the weeks ahead.

 

Pricewise, sea freight remains extremely expensive, and MSC last month announced a GRI from all Ports in USA to Australia and New Zealand of USD 500 per TEU effective 1 November 2021, and an additional GRI has been announced since from 13 November of LCL at USD 20 per cbm.

 

And because difficulties in one mode often affect all others, airfreight is also currently congested. Airports such as Los Angeles and Dallas are seeing an influx of consignments, and the number of Freighters arriving has increased to 10 to 12 per week from approximately 3 per week. Space in warehouses is limited, which compounds the issue caused by slow collection as a result of road freight inadequacies.   

 

Often supply chains and logistics are somewhat invisible to the mainstream media unless there is a major disaster to report or a random event like the blockage of the Suez Canal. However, the Washington Post recently produced some detailed reporting on the systemic flaws the COVID emergency has revealed in the North American logistics infrastructure and operations domains. It also highlighted the struggle shippers have faced as prices soared.

 

According to the report, in October “the median cost of shipping a standard rectangular metal container from China to the West Coast of the United States hit a record $20,586, almost twice what it cost in July, which was twice what it cost in January, according to the Freightos index.

 

“Essential freight-handling equipment too often is not where it’s needed, and when it is, there aren’t enough truckers or warehouse workers to operate it.”

 

We highly recommend this excellent investigative reporting, and if you have links in your supply chain that involve North America, do speak to your Client Success Manager or Client Service Specialist so we can help you navigate the unique challenges of the current situation.

 

 

Europe

 

Full barges in the inland waterways linking to Rotterdam are being forced to wait for up to a week due to congestion, and the situation at seaports in Europe is also difficult. On the North Europe – Asia trade lane, vessels are taking up to 54 additional days to complete round trip voyages due to port congestion, and as a result, carriers are omitting some ports to reduce their round-trip delay to 7 days.

 

Italy is experiencing issues as the Government of the Italian Republic has mandated that all workers receive COVID-19 vaccinations effective 15 October 2021. There is the real threat of delays due to subsequent limitations on labour supply limiting truck capacity, and also protests about the mandate may also prove to become a significant hurdle.

 

On a positive note, for services ex Europe, Israeli carrier, Zim, will return to North Europe in November after being absent for 5 years. Zim had suspended its Asia to North Europe trade lane in 2014 when the carrier was saved from bankruptcy by a financial restructure and as a result pulled services that had been making heavy losses. The line’s financial turnaround has made it possible for the introduction of 9 new services in the past year.

 

 

The UK

 

We could sum up the UK situation as being in a spot of bother, to use a typical British understatement for what is altogether a rather dreadful state of affairs from a shipper’s perspective. The Main Terminals are inundated with unclaimed import containers, which because they are lurking about full of someone’s unclaimed cargo, can’t be turned around and sent back to Asia where they are desperately needed so more goods and can be packed and shipped.

 

Each month we touch on the “driver shortage” but to unpack this a little more, the shortage has extended the container dwell times in the past month. Container hubs are at capacity, and it is reported to be close to grinding to a halt. The flow on affect is significant. The huge amount of import containers not being returned as empty containers is causing further port congestion and in combination with the HGV driver shortage – it’s simply a shambles.

 

Empty container returns are being directed to Tilbury, Liverpool. Teesport and the Port of Tyne but because this is subject to change at a moment’s notice, it needs to be checked prior to dropping off – stretching resources that are already too stretched as it is.  Imports are then being hit with the extra costs of extra trucking and futile trips – and on it goes in some kind of logistics and supply chain doom spiral. To add salt to the wound, a GRI of LCL cargo USD 62 per cbm to Brisbane will be effective 1 November.

 

The best advice we can give is, if the UK is part of your supply chain planning, speak with your Client Success Manager or Client Service Specialist and we will work with you to navigate the difficulties.

 

 

New Zealand

 

Congestion is easing in Aotearoa, and the clearest signal of this is that in response to improvements in berthing times, Shipping line ONE has announced that effective 15 October, they will suspend the Port Congestion Surcharged for shipments in and out of Auckland.

 

Otherwise, there are some small cost increases for shippers, with terminal handling charges for containers into and out of New Zealand being implemented 1 November 2021.  This will also then have a flow on effect for Port Charges for LCL cargo, and the rate levels vary depending on the shipping lines. Speak to your Client Success Manager or Client Service Specialist before booking to ensure we can find you the most cost-effective options.

 

 

Australia Ports

 

COVID lockdowns are almost behind us, hopefully, and industrial action is also settling down. The main changes are in the west, where Container Parks in Fremantle have increased their fees. While this is something that has already happened, transport carriers are unable to wear this cost and Time Slot fees in Fremantle will increase from 1 November. This increase will be included in November’s rate cards.

 

 

A quick briefing: Regional Comprehensive Economic Partnership Agreement
 

I recently read an interesting article from our industry lawyers regarding the Regional Comprehensive Economic Partnership Agreement (RCEP).  RCEP is a new trade agreement between Australia and China, Japan, New Zealand, South Korea and the 10 members of the Association of Southeast Asian Nations (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam).  Australia already enjoys FTA’s with all of these countries and multiple Free Trade Agreement’s (FTAs) with many. 

 

No real benefits for those importers and exporters who already trade with these countries however as this FTA will now be the largest in the world all signatories will standardise their rules and procedures.  On a practical note we are expecting the choice between existing Government FTA certificates of origin and manufacturers origin self-declarations. We will provide more information on this as things move forward.

 

Interesting commentary about India and how they have removed themselves from the RCEP and the TPP but choosing to negotiate independent FTA’s directly with countries on a one-to-one basis.

 

Read the article here

 

Gary Brasher

National Customs Manager

03 8368 5352 (direct)

0418 103432

 

 

Just nine weeks to go

 

In so many ways, 2021 has seemed like an endless extension of 2020. So, it is with a sense of relief we turn the calendar to November and realise there’s very little time between now and New Year’s Eve. For many of us, being able to make plans to visit friends and family is the main item on our agendas along with recovering from any lockdown impacts on our business’ bottom lines.

 

In the coming weeks as life returns to its usual vibrancy in our retail malls, shopping precincts, building sites and transport hubs, we can all take a breath and start to be hopeful about what lies ahead. As you start making your plans, take the time to speak to your Client Success Manager or Client Service Specialist so we can help ensure your supply chain is ready for success.

 

Stay safe and well,

 

Matt Ward

COO International – YKGA