Freight Market Update: May 30th, 2024

What’s new this week?

Rates

Rate hikes! Not the words that anyone wants to hear. General rate increases have continued to be released bi-weekly out of China and are expected to remain on the rise for the next 3-6 months.

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Disruptions & Congestion

The Red Sea situation continues to wreak havoc on shipping. Diversions are expected to extend well into the second half of this year, and potentially into 2025. Maersk predicted total capacity loss of 15-20% on the Far East to North Europe and Mediterranean market in Q2 alone. Re-routing of vessels adds (on average), an additional 14 days to the overall transit time.

Equipment shortage is now becoming an issue as vessels are taking longer to return to China. Shanghai, Xiamen and Ningbo are all reporting severe shortages of 20', 40', 40'HQ equipment.

Singapore congestion is becoming problematic. The Sea liner database currently shows 51 vessels at berth and 69 at anchor. This is only expected to increase.

The Panama Canal is showing signs of an improvement in operating conditions. The Panama Canal Authority has increased the daily number of ships to transit from 24 to 31. We are still far from normal conditions, however this is heavily dependent on rainfall in the area after unprecedented drought.

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Air Freight

Airfreight demand continues to hold in China - mainly driven by e-commerce. With ongoing delays in the ocean freight trade, this is also pushing volume to air in order to accommodate ETA requirements.

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What's to come?

There is no sign of slow down in demand as we roll into peak season.

Carriers continue to report full or overbooked vessels and have no desire (or need) to negotiate on pricing. This has been evidenced by the disregard of previously agreed contracts. There is potential for a slight slow down in late June/early July, however this may not eventuate if capacity is restricted.

Space is now king, and we are now seeing a ‘Just in Case’ model similar to COVID times.

Asia to Oceania - Let’s Dive In Deeper

We commence week 22 with full vessels, rolling bookings and congested transhipment ports.

Equipment shortages in SHA/NGB/XMN/TAO/SHK are now being reported regularly. This is a result of vessels returning later than usual due to re-routing and slow steaming.

Empties are being released later than usual, with turnaround times sometimes being only a few short days. We will see this impact destination free time also, as equipment needs to be returned to China to accommodate export demand.

While many high volume clients had negotiated named account pricing, this is now being disregarded by the carriers. They are pushing for either a 50% cut in allocation, or a 1:1 booking agreement of NAC vs FAK.

Majority of the decisions are made in the global HQs for each carrier. They are pushing for their largest vessels to service the highest yielding trades which typically lie in the US/EU.

May GRIs held firm, with additional hikes on 1st June, 15th June and another expected on 1st July.

Singapore hits critical congestion.

Congestion in Singapore, the world’s second-busiest container port, has reached a critical level, compounding the shortage of ships and containers.

Typically, ships berth on arrival or wait half a day at most in Singapore. However, severe congestion is causing carriers to omit Singapore calls, leading to downstream port congestion and schedule disruptions. Here's what we're seeing:

• Wait Times: Container ships are waiting up to seven days to berth, with up to 450,000 TEU in the queue.

• Global Impact: Port congestion globally has tied up 2 million TEU of ships, about 7% of the fleet, supporting carrier rate hikes.

• Causes: Diversions from the Red Sea crisis and skipping Port Klang in Malaysia have worsened bottlenecks in Singapore.

• Regional Impact: Asian ports are the most congested, with South-east Asia accounting for 26% and north-eastern Asia 23% of global bottlenecks.

• Economic Impact: Congestion affects Asia-Europe services, increasing China's container futures price to $4,209/TEU, 6% higher than on 20 May and a 25% premium on the Shanghai Containerised Freight Index.

What we're expecting:

• Future Outlook: Congestion expected to worsen in June, pushing liner operators to secure new containers and charter ships beyond September.

• Rate Pressure: Planned rate hikes on 1 June and 15 June are influenced by ongoing congestion.

Our advice:

• Advance Planning: Book shipments well in advance to account for potential delays and ensure space availability.

• Cost Management: Be prepared for increased shipping costs due to rate hikes and budget accordingly.

• Enhanced Communication: Maintain close communication with logistics providers to receive timely updates and adjust plans accordingly.

Stats Source: The Loadstar

Blank Sailings

• A3N - Vessel bunching in WK 20 and no vessel in WK 23.
• A3C – Vessel sliding from WK 21 to 22.
• CA2 - No sailing in WK 20.
• CAT – No sailing in WK 25
• A1X – Omitting Qingdao in WK 20
• AAS WK 21 Christie Shulte will be replaced by Wide Alpha

How you can get ahead.

1. Increase Inventory Levels and Adopt a 'Just in Case' Model

Given the expected delays and capacity issues, increase your safety stock to buffer against longer transit times. This approach ensures you have enough inventory to meet demand even if shipments are delayed.

2. Strengthen Relationships with Carriers and Forwarders

In a tight market, strong relationships with carriers and freight forwarders can provide better access to space and equipment. Regular communication and long-term partnerships can lead to preferential treatment and more reliable service.

3. Leverage Technology for Enhanced Visibility and Planning

Use advanced logistics software to gain real-time visibility into your supply chain. This technology can help you track shipments, predict delays, and optimize routes, allowing for more informed decision-making and proactive problem-solving.

4. Stay Informed and Agile

Keep up-to-date with the latest market trends and developments, such as changes in the Red Sea situation or Panama Canal conditions. Being informed allows you to anticipate disruptions and adjust your logistics strategies quickly to maintain operational efficiency.

5. Diversify Your Supplier Base

To mitigate risks from rate hikes and equipment shortages, consider sourcing from multiple suppliers across different regions. This strategy reduces dependence on any single route or supplier, providing greater flexibility in response to disruptions.

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Thank you for reading!