AXIMA Market Newsletter – October 2021

Market Newsletter - October 2021
Terminal

Welcome to the October Market Update.

 

This year has been one of the most challenging the global economy has ever faced, and one of the most difficult for the freight and logistics sector also. So, it is with some relief we draw a line under Q3 2021 and enter the final quarter of this COVID-dominated year. It is spring in more ways than one, as the vaccine rollout around the world promises some hope of stability and recovery.

 

For Australian businesses there is also the loosening of restrictions in our biggest and busiest cities to look forward to. This will almost certainly increase consumer activity as we head into the Christmas peak, and this is good news for everyone looking for an uptick in the bottom line.

 

Keeping all those shelves filled, however, is going to take very smart planning as the global freight sector is still navigating challenges including congestion, port disruptions, industrial action both in Australia and abroad, a shortage of space, and those eye-wateringly high prices.

 

On that last point there is the merest glimmer of stability emerging in some markets. Prices are not going down, but they have slowed their stratospheric upward trajectory. Given the cost of shipping as we head into spring and gear up for summer’s stocking stuffing, we strongly suggest reaching out to your Client Success Manager or Client Service Specialist now to plan for the coming months. Together we can make sure your customers’ wish lists can be fulfilled.

 

 

North Asia

Recovery in consumer markets as vaccination rates see life return to streets and the shops around the world is seeing shipping demand increase. Unfortunately, the same cannot be said for carrier capacity. To complicate matters, in addition to the squeeze on space availability and sailing schedules, the supply of equipment are significantly disrupted by a constant series of terminal closures, ongoing port congestion and labour shortages. Buckle up – it is going to be a bumpy ride for the already battered global supply chain.

 

For the first part of this year, shipping services ex-China had been improving compared to many other parts of the world. However, the Yantian Port closures in May followed by Ningbo closures has caused severe congestion in surrounding ports including Qingdao, Shanghai and Xiamen. 

 

Now Xiamen is being affected by the lingering pandemic, and services are very limited. Currently the Tongan district is the location of the most serious outbreak of the virus and the district has been closed. As this is the district with the largest number of manufacturers, impacts are inevitable. Only vehicles transporting epidemic prevention products and essential goods can currently enter and exit the district. There have been many cancellations of shipping schedules as a result, and it is likely that shipping lines will begin to omit Xiamen.

 

China to Australia carriers have removed some of their big vessels from this trade lane and shifted them to the China to USA/Europe trade. This is where the big money is for them, as demand is soaring, and space is limited.

 

Now for some good news – or at least not more bad news - CMA CGM/ANL/APL have quite surprisingly retracted the Peak Season Surcharge they had made applicable for ex China to East Coast Australia and New Zealand. This was to be payable on both collect and pre-paid shipments, so enjoy a sigh of relief on that count. They have also for now halted the upward spiral of spot rates, putting a freeze in place until 1 February 2022. 

 

This can be seen as positive as it provides some stability, but it does come after they have raised rates to the highest level seen in many years. We also can’t rule out new GRIs and other surcharges on top of the frozen rates which are at the highest levels seen in years.

 

Perhaps the price freeze is going to become a widespread trend, as Hapag Lloyd have also announced a price freeze. At this point, all the other lines are only offering limited validities – fortnightly at best.  We wonder if other lines will be following the lead of CMA CGM/ANL/APL and freezing rates as well.

 

The bottom line is, given the ongoing challenges of getting goods out of North Asia and into Australia and New Zealand in terms of space and securing your booking, speak to your Client Success Manager or Client Service Specialist as soon as possible so we can help ensure your forward planning meets your Q4 targets.

 

 

South East Asia

India is still navigating significant challenges for its import and export sector. Lack of equipment is still a major challenge, and this is being exacerbated by industrial action. Recent strike action undertaken by truck owners and workers had already caused issues, and a second strike has been announced for the end of September. During strikes, no containers enter the port area and shipments are stockpiled in off-docks and warehouses. Cargo was also not able to leave the factories, adding to general congestion in the supply chain and contributing to the difficult situation out of Chittagong.

 

Major transshipment hubs in the region are also struggling as some shipping lines try to find alternative ports. Given this is the start of the peak shipping season, we expect transshipment hubs will be congested and the connection times for shipments will be variable depending on the carrier and the specific trade lanes and services.

 

Of course, the carriers are responding to the overall high demand and restricted space availability with an increase in rates and a tendency to reject bookings on priority services or in some cases, any booking. This is expected to be the case for the immediate future. So, if India or South East Asia hubs are links in your supply chain, please speak to your Client Success Manager or Client Success Specialist now to develop a strategy for securing space and meeting your required timelines as cost-effectively as possible.

 

 

North America

Though there has been some easing of the major congestion at the main USA ports, the situation is still quite critical and continuing to cause disruptions and delays across the country. The anchorage time for inbound container vessels may potentially stretch up to 10 days which in turn causes long delays for outbound/export cargo as well.  To assist with the congestion issue, Los Angeles and Long Beach ports have extended gate hours at night and on the weekends – so there are signs things may start to ease, just not immediately.  

 

Inland transport services across the country are seeing major operational disruptions due to ongoing COVID cases with workers and the ongoing shortage of truck drivers. This is turning road transport services into a bit of a bidding game with the pricing odds firmly stacked on the side of the trucking companies.

 

With the trucking industry under such enormous pressure, intermodal is an unstable but economical alternative. Rail operators are continuing to restrict the number of domestic containers being accepted from major port cargo hubs until the congestion eases. So overall, the service level from intermodal providers has fallen and this limits its appeal as the reliable alternative to trucking.

 

Some upward movement in prices is on the cards, with Marfret Line announcing an increase in the BAF ex USA to Australia, New Zealand and Pacific Islands effective 7 October. The new BAF level is USD 511 per 20GP and USD 1022 per 40GP. Also, ANL/CMA CGM have announced a BAF increase for Q4 applicable, West Coast of USD 367 per 20GP and USD 734 per 40GP.  General Rate Increase is effective 20 October of USD 400 per TEU and again 1st of November USD 500 per TEU

 

The upshot of the situation across the US is moving goods into, around or out of the country remains extremely challenging. To ensure your cargo is able to overcome the hurdles, speak to your Client Service specialist or Client Success Manager as soon as possible so we can help you find solutions.

 

 

Europe

Rates on the Asia to Europe trade lanes showed a minor dip after Golden Week as did the volumes moving through these lanes. However, this is not likely to last as the consumer peak kicks in across Europe. Currently, CMA CGM and MSC are the only options for direct services, and the transshipment services are becoming increasingly popular with their relatively competitive rates.

 

That said, the peak will change conditions, and transits will vary as a result of congestion at major transshipment hubs pushing timeframes out further and further. Depending on the shipping line, the wait time for connection can be from 5 to 12 weeks.

 

The strong demand for containers and difficulty in ensuring supply of them is still a problem, and the Europe to US trade lane PSS is set to increase to USD 2700 per 40ft. Rates have also not finished their upward movement in this market - cargo ex Europe to Australia will incur a GRI of USD 1200 per TEU. This GRI will be implemented 1 October and is likely to be passed on at the full amount.

 

 

The UK

The truck driver shortage continues to prove challenging as fuel stations find themselves out of fuel stocks and no drivers to deliver new fuel stocks as with other cargo.  Drivers from European countries are being offered visas to encourage drivers back into the United Kingdom. 

 

Congestion remains a huge struggle as both equipment and driver shortages continue.

 

 

New Zealand

The Australia to NZ trade lane continues to be strained. MSC are trying to divert containers from the Europe to NZ trade lane by transshipping through Brisbane, which will almost certainly put further pressures on the AU to NZ trade.

 

Now for the positive note - New Zealand could see some relief soon, with whispers of two new shipping lines entering the market - TS Lines and at this stage an unknown competitor. While there is no specific timeframe announced, we are watching closely, particularly given they will have to navigate the same congestion issues as the existing carriers and will need to jockey for access to the limited berthing windows. Your Client Success Manager or Client Service Specialist will always have the latest intel to share, so get in touch to find out how this change can be factored into your planning.

 

 

Australia Ports

COVID is having some lingering impacts on Victorian ports, which recommenced operations on 26 September after a short closure due to positive cases. There will be some restriction on operations for a short time yet, due to employees who were identified as close contacts needing to complete 14-day isolation. This will cause some delays until everyone is back on deck.

 

Those delays are a minor hiccup however compared to the major disruptions expected nation-wide due to an aggressive round of strikes announced by the Maritime Union of Australia. Over the coming weeks there will be a series of strikes and work bans at Australia’s largest container terminals, including Sydney, Fremantle, and Melbourne, as well as rolling industrial action in Brisbane.

 

This is part of an ongoing altercation between Patrick and the MUA which has been dragging on since February of 2020. Patrick Terminal’s Melbourne container terminal will be affected by strikes every Monday, Wednesday, and Friday through October, which of course causes impacts across for every other day of the month.  

 

Shipping Australia, the peak industry body, is advocating strongly for the interests of shippers and the customers relying on them. It does seem harsh that after all the difficulty of the first three quarters of the year, this final quarter will see the Christmas consumer peak supply chains affected by MUA actions.

 

DP World have announced an increase in Terminal Access Charge, Time Slot Fees and related charges such as Side-loader Fee for their terminals effective 1st January 2022. DP World are welcoming feedback to their announcement of increasing charges and request feedback be provided by Friday 22 October to below email addresses:

NSW.landsidefeedback@dpworld.com.au

VIC.landsidefeedback@dqworld.com.au

BNE.landsidefeedback@dpworld.com.au

Once all feedback has been received, their final announcement to industry to advise rate levels will then be announced 1 November 2021.

 

DP World Sydney increased their Empty Container Slot fee in August.  Transport providers have now increased their rates accordingly as they could no longer absorb the increase. This increase will be reflected on your rate cards from 15th October, 2021.

 

 

This too shall pass

Given the ongoing level of difficulty, it is important to focus on the small gains and the long-term wins ahead. This quarter will not be a walk in the park, but we do see it setting a trajectory for a better 2022. The gradual easing of rate increases is one bright note, and the general back-to-business approach of the shipping lines and other modes does offer us all a chance to regain some sense of stability and normalcy.

 

Also, as vaccination efforts reduce the impact of COVID on everyday life we can expect the overall community stress level to abate. That means people heading out to the shops, planning their Christmas lists, and generally tasting a little bit of freedom.

 

We are always here to help you ensure you can keep up with your customer’s needs and wishes in the coming months. Planning ahead is crucial, so pick up the phone or shoot an email across to your Client Success Manager or Client Service Specialist and together we will find ways to make your Q4 a good one.

 

Stay safe and well,

 

Matt Ward

COO International – YKGA