Contents

1. Executive Summary & Business Tip
2. Market Trend
3. Spotlight
4. Ocean Freight Updates
   • Ocean Freight Snapshot
5. Air Freight Updates
   • Air Freight Snapshot
6. Customs, Inland Transport, Terminal & Regulation Alerts
7. Supply Chain Innovation

Executive Summary

The recent escalation between Iran and Israel has heightened concerns in the maritime industry, as direct military engagements threaten the stability of shipping routes in the Persian Gulf, potentially disrupting global supply chains and elevating shipping costs with new surcharges. Additionally, the potential compromise of the Suez Canal's traffic until 2025 and threats to the Cape route by Houthi forces are poised to cause extended disruptions across crucial global shipping lanes, leading to an increase in the global shipping fleet due to reduced ship scrapping and a spike in demand.

In reaction to these threats, the maritime sector has witnessed a substantial increase in war risk insurance premiums and a significant modal shift from sea to air freight. This shift aims to sidestep delays linked to maritime threats, with the air cargo sector seeing a notable rise in demand. This strategic pivot is crucial as businesses adapt to ongoing and emerging geopolitical risks.

In Oceania, Australia and New Zealand are particularly vigilant, given their substantial roles in regional trade. Both countries are enhancing contingency plans at congestion-prone ports and making necessary operational adjustments to mitigate the potential adverse effects of these international tensions on their economic activities. These efforts are vital in maintaining the resilience of supply chains in the face of geopolitical challenges, despite the slow growth of the economies.

Moreover, the logistics sector is adjusting to evolving customs and regulatory landscapes. Key developments include Australia and India's new trade facilitation agreement and New Zealand's impending free trade agreement with the European Union, both set to streamline and boost trade efficiency. Changes like the end of the Brown Marmorated Stink Bug season and new virtual inspection protocols in Australia are also enhancing operational fluency at ports. These regulatory shifts are crucial for businesses to stay competitive and responsive in a rapidly changing global market.

 

Business Tip

Adopt Advanced Technology for Real-Time Tracking and Management: To navigate the complex challenges of fluctuating freight rates and potential cargo delays, businesses should invest in advanced tracking and logistics management technologies. Utilizing comprehensive logistics platforms can provide real-time data on cargo status and location, allowing companies to make informed decisions quickly and adapt to any logistical hurdles they encounter.

Kerry Logistics offers a state-of-the-art end to end visibility platform in our Virtual Buying Office (VBO), that can help you circumvent these complexities.

 

Spotlight

New Zealand Warehousing & 3PL

Finding the right storage solution for you

Our Auckland warehouse facility is strategically located less than 1km from the country’s largest international airport and only 15km from container ports, making it an ideal hub for all freight modes. 

Market Trend

The recent escalation in tensions between Iran and Israel, characterized by a drone and missile attack on Israeli territory, has heightened concerns within the global maritime sector. This development poses risks of supply chain interruptions and potential blockages of shipping routes. Notably, there is a looming threat of a shutdown in the Persian Gulf, which could significantly influence shipping costs and alter trade dynamics. The attack signifies a serious escalation in the conflict, directly engaging the two nations. Following this news is a possibility of increased risk-related costs in the Persian Gulf and Gulf of Oman. These could manifest as Peak Season Surcharges, Congestion Surcharges, War Risk Surcharges, or other newly defined fees.

Unfortunately, there is an expectation that the Suez Canal might continue to see reduced usage until 2025. A Houthi leader broadcasted plans to extend their offensive to the Indian Ocean, targeting vessels navigating via the Cape route, suggesting that the conflict may persist.

In response to these geopolitical developments, there has been an adjustment in the maritime industry's expectations. The anticipated growth in the global shipping fleet for this year has been revised upwards to 8%, from an initial forecast of 7.8%. This adjustment stems from a lower than expected rate of ship scrapping, coupled with a resurgence in demand following the crisis in the Red Sea. Following the announcement of Red Sea diversions by major carriers in mid-December 2023, there was a significant spike in spot market freight rates, although these prices have begun to stabilize.

War risk insurance premium, which was at around 0.05% before the crisis, is now between 0.75% and 1% of the insured value of the vessel. As an example a 100 Mil $ (Common cost) vessel will attract 1M $ insurance war risk premium + Cost of additional fuel due longer transit. Many ports in MED which were earlier a direct port of call is not being served by feeder-ing, & raising up feeder and chartering cost.

Discussing fuel costs, analysts from Goldman Sachs have observed that Iranian crude production has increased by over 20% in the last 24 months, reaching 3.4 million barrels per day, which accounts for approximately 3.3% of the global supply. Consequently, Goldman Sachs suggests that a recalibration of market expectations regarding Iranian supply could lead to an elevated geopolitical risk premium.

Market uncertainties often lead to potential increases in ocean freight shipping rates. This trend was evident following recent conflicts in the Red Sea. Nevertheless, oil prices have remained stable, and navigation through the Strait of Hormuz continues uninterrupted, thus any direct impacts on shipping rates are likely to be minimal.

We advise all businesses to enhance their contingency planning, especially in ports prone to congestion such as Sri Lanka, Singapore, Port Klang, and Tanjung Pelepas. There is a growing concern that Indian ports might also face increased challenges. Experts suggest that disruptions may lead to cargo being stranded at transshipment hubs, requiring unforeseen onward transport. Therefore, a robust contingency plan is essential.

You might want to read: logistics solutions explained: the difference between transactional operations and strategic planning

We anticipate intermittent port congestions and equipment shortages, influenced by ongoing crises in the Middle East. These disruptions are likely to continue affecting supply chain operations.

On the other hand, historically, air cargo spot rates have a tendency to either stabilize or decrease during the first half of the year, with a resurgence typically occurring from September through the end of the holiday season. However, this year has deviated from the norm, as evidenced by the average global air cargo spot rate experiencing its seventh consecutive week of growth as of mid-April, registering a 9% increase from four weeks prior and a 6% rise year-over-year.

The robust start to 2024 for air cargo rates is largely driven by increased demand, partially due to a lower comparison base from early 2023, which was marked by weaker consumer demand. This early boost has benefited forwarders and airlines alike, spurred by strong e-commerce activity and disruptions in ocean freight, including issues in the Red Sea, the incident with the Baltimore Bridge, and the recent drought affecting the Panama Canal.

Despite initial delays from these disruptions not immediately impacting the market, subsequent shifts from ocean to air freight to circumvent delays in the Red Sea have prominently fueled this growth, particularly with increased shipping volumes from the Middle East and South Asia.

Interestingly, even as ocean freight rates from Asia to Europe fell by approximately 20% in March following rerouting measures around the Cape of Good Hope, air cargo rates have continued to face upward pressures. This ongoing strength in air cargo rates suggests that exporters are likely to keep relying on air freight or employ a combination of sea-air or air-sea transport solutions to meet tight delivery timelines, consumer demand, and enhance supply chain resilience amid geopolitical and unexpected global events.

You might want to read:

• Ins and outs of cargo rollover: causes, consequences, and mitigation
• How gri impacts pricing and service in ocean freight
• Blank sailings: what they mean for your supply chain and how to adapt

Developments in Oceania

The import market in Oceania is currently exhibiting stability following the disruptions of the Chinese New Year, though it continues to operate at the subdued levels typical for the second quarter. The slower demand is expected to continue into June, influenced by ongoing issues in the Red Sea and positive economic developments within Oceania. Moving forward, an increase in demand is anticipated from June or July as companies prepare for the peak season and the subsequent Christmas demand surge in late Q3 of 2024.

The DP World Industrial action Enterprise Agreements (2024) have been approved by the Fair Work Commission (FWC). With effect from April 23rd, 2024 through to the nominal expiry date of January 31st, 2028, these agreements include discussions for re-negotiation to commence 4 months in advance of this nominal expiry date.

The FWC approval sees an end to the protracted dealings between DP World and the Construction, Forestry and Maritime Employees Union - MUA Division (MUA), which led to almost 4 months of protected industrial action.

You can review our related advisories here, and subscribe to our communications to receive relevant news as they happen.

If you would like to subscribe to our customer advisories, that let you know of any significant operation risks as they happen, click here:

The Australian economy is facing a period of subdued growth. GDP is expected to continue its slow pace in the near term, compounded by stalling inflation which might see a slight moderation later in the year​​. The Reserve Bank of Australia (RBA) is maintaining a cautious approach, likely keeping interest rates unchanged in the short term despite some weak economic indicators​. The labor market remains tight, which could prevent a rapid easing of inflationary pressures. Additionally, there is an increased focus on geopolitical relationships, particularly with China, which could influence economic and trade policies moving forward.

New Zealand's economy is also experiencing a slowdown, with the Reserve Bank of New Zealand (RBNZ) keeping the Official Cash Rate (OCR) high at 5.50% to counter persistent inflation​​. This restrictive monetary stance is intended to help inflation return to the target range of 1-3% amid weak economic growth​. The government's fiscal policy is likely to remain tight, which, coupled with the high OCR, could slow economic recovery​. There is also a significant shift in foreign policy, as New Zealand strengthens its military and economic ties with Australia, potentially affecting its trade and security strategies in the Asia-Pacific region​.

Both countries face challenges from global economic conditions, including slow growth in major trade partners and persistent inflation pressures. These factors are crucial for businesses involved in international trade and logistics, influencing everything from consumer spending to freight rates. Keeping a close eye on these developments will be essential for navigating the potential challenges and opportunities ahead in the transportation and freight sectors.

Ocean Freight Updates

• Carriers booking utilization sits at 95-100% to AU, 85-95% to NZ. With the upcoming Labour Holiday in China from 1-5 May, space is tight and some vessels are already fully booked for early May. We suggest placing bookings at least 2-3 weeks in advance.
• COSCO shipments to AU Transshipment via Singapore keep waiting times around 2 weeks in SIN, under their FIFO operational policy. Please also note that capacity has been reduced on some vessels, affecting allocation as well.
• ONE has added a new surcharge – CMC (Container Maintenance Fee), applicable for all containers for cargo to/from Europe/Mediterranean, wef (with effect) April 1^st, 2024.
• With the current situation, several carriers are limiting their negotiations around rates and space. Partnering with a provider like Kerry Logistics, that can circumvent these limitations, is critical to have options on hand.
• GRI are still ongoing as part of the Peak Season trend, with some that have been rolled into freight directly.
• Trans-Tasman trade lane has more options. CMA has launched a new fortnightly service to Auckland. This service adjustments will offer more routing solutions and better port coverage along New Zealand coast.

You might want to read: understanding the different types of ocean freight contracts

General Average Declared on Dali

Singapore-based Grace Ocean has officially declared General Average on its vessel, the Maersk-chartered and operated Dali, which was involved in the unfortunate Francis Scott Key Bridge allision. This process could often take four to five years, in order to quantify the total value of the cargo and the share of cost for all.

General Average is a maritime principle where all parties involved in a sea voyage share any losses incurred, and the share a shipper will pay correlates with their share of the cargo. The shipowner, manager, and charterer will also be partly liable.

You might want to read:

• Understanding the law of general average: a comprehensive explanation
• How cargo insurance can safeguard your business

Ocean Freight Snapshot (up to April 30th, 2024)

Check our snapshot for a quick glance on space, rate, equipment and transit times for Oceania

Air Freight Updates

Following successive weekly rises since the end of February, average global air cargo rates held steady in the second week of April – equaling their level in the equivalent week the previous year for the first time since mid-2022 – despite a drop in tonnages partly linked to Eid.

According to the latest weekly figures and analysis from WorldACD Market Data, total worldwide tonnages fell by -3% in week 15 (8-14 April), with particularly big week-on-week (WoW) declines from predominantly Muslim countries including Pakistan, Bangladesh and the UAE. Average global rates remained flat in week 15 at US$2.52 per kilo, following consecutive weekly WoW rises of between +2% and +3% in the previous six weeks, equaling their level in week 15 last year and significantly above pre-Covid levels (+40% compared to April 2019), based on the more than 450,000 weekly transactions covered by WorldACD’s data.

Hong Kong Remains Busiest Cargo Airport

 Hong Kong International Airport (HKIA) last year retained its position as the world’s busiest cargo airport, while US hubs reported some of the largest declines amongst the world’s top 10 freight hubs.

Provisional figures released in April by Airports Council International (ACI) show that HKIA registered a 3.3% year-on-year increase in cargo volumes last year to 4.3m tonnes. It is the 13th time since 2010 that HKIA has been the busiest cargo airport in the world. However, its figures remain down on 2019 levels when the airport handled 4.8m tonnes as passenger operations last year were still in recovery mode following the Covid pandemic. The airport lost the top spot in 2020 due to the Covid pandemic and related drop-off in passenger flying.

Dubai Cargo Disrupted After Flash Floods

Cargo operations in Dubai continue to face disruption following flash flooding that temporarily closed Dubai International (DXB) airport. The UAE recorded its heaviest rainfall in 75 years as almost 26cm of rain fell, resulting in the temporary closure of DXB cancellation of around 300 flights. Over two days, more than 1,200 flights were cancelled due to the adverse weather conditions.

Operations are getting back underway but flooding remains in areas of the airport and flights continue to be delayed and cancelled. DXB said in its latest operational update that it was now accepting check-in at terminal three, where Emirates and FlyDubai operate, as operations are back underway from that terminal. This unforeseen circumstance has caused unintentional delays and reroutings for all cargoes scheduled to use Dubai as a hub.

Air Freight Snapshot (up to April 30th, 2024)

Customs, Inland Transport, Terminal and Regulation Updates

Australia-India Authorised Economic Operator Mutual Recognition Arrangement

On 18 April 2024, Australian Border Force (ABF) signed the Australia-India Authorised Economic Operator (AEO) Mutual Recognition Arrangement (MRA) – Australia’s 10th AEO MRA.

The MRA will provide reciprocal trade facilitation benefits to our AEOs, and will support Australian Trusted Traders to gain faster and more efficient access into one of the fastest growing economies in the world.

AEO MRAs are arrangements between Customs administrations with equivalent AEO programs developed in accordance with the World Customs Organization (WCO) SAFE Framework of Standards to Secure and Facilitate Global Trade (SAFE Framework).

This MRA is available to all accredited Trusted Trader exporters. Trusted Traders just need to ensure their business name and ABN are reported appropriately on all export cargo consignments. The ABF conducts regular data exchanges with AEO partners to ensure the latest Trusted Traders are captured in respective cargo systems to deliver the border efficiencies.

Interested to apply? We can help.

Brown Marmorated Stink Bug (BMSB)

BMSB Seasonal measures have now ceased on 30th of April for this season for consignments which have departed after this date. You will see in time the reduction in your consignments being sent for treatment.

You can refer to our article here for more information on BMSB and what to expect, to prepare for the next season later this year.

Quarantine Documentation Processing Delays

We are still experiencing delays and increased costs recently due to document processing delays. We hope with the conclusion of the BMSB season that this may improve.

Once again we suggest to push your suppliers to send documentation as soon as possible to navigate any delays which may arise moving forward.

Regulatory Charges for Biosecurity and Imported food activities

DAFF will embed an annual review cycle and apply indexation to regulatory fees and charges for biosecurity and imported food regulatory activities, with charges set to commence in July 1^st, 2024.

There is an opportunity to share your opinion on the matter, which concludes on 7^th of May.

Click here to share your opinion and understand more about this

Imported Foods Virtual Label and Visual Inspections

In response to recent feedback from industry groups, we understand that the Department of Agriculture is facing challenges in performing label and visual inspections due to staff shortages. To help alleviate these issues, they have made available an efficient alternative: Virtual Visual Inspections. This streamlined process can significantly reduce inspection times, with turnaround as quick as 9 days. Take advantage of this opportunity to expedite your imports seamlessly.

You can find more information here

New Zealand-European Union Free Trade Agreement

The NZ-EU FTA signed between New Zealand and the European Union on 9 July 2023 in Brussels enters into force on 1 May 2024.

From day one, duties will be removed on 91% of New Zealand’s goods exports to the EU, rising to 97% after seven years. This will allow for duty free imports into NZ and 90%+ NZ Exports to EU.

Melbourne Road Works – Container Transport Disruption

Road works in Melbourne are forcing detours for road transport vehicles, increasing delivery times and costs associated. For a complete list of the detours and more details on the planned works, click here.

Tariff Concessions (TC)

Do you import goods which are not manufactured in Australia? We may be able to assist in obtaining a tariff concession which could result in zero duty payments. Currently there are 15000 items covered, with more announced weekly.

If you would like experts to review your customs process and see if you have overpaid or are overpaying Customs Duties, click below. We have a track record of helping companies succeed with the complexities of Customs in Oceania.

Supply Chain Innovation

• Moglix, named “Asia's Greatest Brand of the Year,” leads digital procurement with Sandeep Goel emphasising innovation, cloud-based platforms, AI, and e-procurement for cost-effectiveness and transparency, with a focus on data analytics, compliance, blockchain, IoT and sustainability.
• At MODEX, automation, especially AMRs powered by AI, showcases advancements for speed, accuracy, and sustainability in manufacturing and warehousing, optimising logistics, regulatory compliance, and data-driven decision-making.
• Holistic supply chain risk management gains importance, emphasising early-stage risk assessment, collaboration, digital tools, operationalizing risk management, climate risks, sustainability, and standardised risk assessment processes for resilience.
• Sustainability gains traction in business, highlighted by a 23% YoY increase in RFQs, with small businesses differentiating through sustainable supply chains, effective marketing, supplier data leveraging, clear language, and consumer benefit emphasis.
• Middle East e-commerce growth, driven by technology and government support, sees AI-driven logistics improvements, optimising route planning, last-mile delivery, customer service automation, and data insights for marketing and supply chain management.
• Latin America embraces digitalisation for the supply chain revolution, integrating advanced technologies for efficiency, transparency, agility, and collaboration, with a surge in digitalisation initiatives and strategic partnerships with logistics integrators for navigating the digital frontier.

Why Partner with Kerry Logistics

Selecting Kerry Logistics as your trusted partner isn't just a choice—it's a strategic move towards ensuring your success. Our commitment to excellence is not just a promise; it's a guarantee. With a global network that's both vast and meticulously managed, we stand head and shoulders above the competition. This means you benefit directly from unparalleled service quality, ensuring your supply chain needs are met with precision, efficiency, and minimal hassle.

Are you ready to elevate your logistics game and experience seamless support tailored to your unique needs? Let's discuss how we can bring unparalleled value to your business.