KERRYCONNECT - DECEMBER 2024

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

Executive Summary

As we wrap up 2024—what a year it’s been! Thank you for joining us on this journey and trusting KerryConnect as your go-to source for trends, logistics, and supply chain insights in Oceania. In this final issue of the year, we’ll reflect on 2024 and anticipate 2025.

Our next issue will arrive in February 2025, so stay tuned for more updates.

Wishing you a happy, prosperous, and rewarding 2025!

The logistics sector is bracing for continued volatility as 2025 approaches, with the global composite index reflecting sharp increases driven by factors such as front-loading ahead of the Chinese New Year, tariff uncertainties tied to the incoming U.S. administration, and the potential ILA strike. Geopolitical challenges, including the ongoing Red Sea crisis, continue to impact global shipping lanes, forcing carriers to reroute and elevate operational costs. These dynamics highlight the need for agile and strategic planning.

Ocean freight markets face mixed prospects for 2025. While an 8% capacity increase may stabilize rates, challenges such as blank sailings and elevated waiting times at major ports persist. The restructuring of shipping alliances, including the dissolution of the 2M Alliance, introduces both risks and opportunities for shippers. Businesses must navigate these changes alongside decarbonization pressures, as only 60% of the 2025 fleet will be equipped with alternative fuels, emphasizing the need for sustainability-focused strategies.

Air freight markets are evolving, with digital platforms streamlining bookings and boosting operational efficiency. Although air cargo volumes remain below pre-pandemic levels, e-commerce and high-value goods continue to drive demand. Regional disparities persist, with Asia and Africa showing growth potential while Europe and North America face economic slowdowns. Geopolitical tensions and rising sustainability expectations further complicate the market outlook.

Economic conditions in Oceania remain challenging. Australia anticipates slower growth and persistent inflation, while New Zealand faces a deeper recession. Trade diversification efforts continue across both nations, with strategies targeting Southeast Asia and Pacific Island countries. Infrastructure bottlenecks and logistical delays add complexity to supply chain operations in the region, particularly at key ports and rail lines.

Sustainability efforts remain a priority despite setbacks from global disruptions. Investments in greener technologies and alternative fuels are gaining traction, reflecting consumer demand for eco-friendly solutions. However, high implementation costs and market uncertainty hinder widespread adoption. Collaborative strategies and long-term resilience planning will be essential for balancing environmental goals with operational realities in 2025.

 

Business Tip

Leverage Digital Solutions for Enhanced Efficiency in 2025: Integrate online booking platforms and digital tracking tools into your logistics operations to gain real-time visibility, optimize costs, and improve efficiency. As market uncertainties grow, these technologies provide a competitive edge by enabling faster decision-making and better resource allocation across the supply chain. Kerry Logistics offers a cutting-edge VBO that can act as a command center for your whole supply chain.

Spotlight

From small to big companies, from small to big cargoes, Kerry Logistics Network can elevate your current supply chain from good to great.

We are THE ONE in Asia, with unmatched capabilities in the region that enable us to craft out-of-the-box solutions that have quantifiable impacts toward your business success.

Our flexibility and expertise make us THE ideal logistics partner to make your business grow and thrive.

 

 

Market Trend

As anticipated, the market is scaling up due to uncertainties and speculations, with the global composite index recording an 8% week-on-week increase and a staggering 129% year-on-year rise. Key factors driving this surge include:

• Front-loading by importers

• An earlier Chinese New Year (January 29)

• President Elect Trump’s upcoming inauguration (January 20)

• The anticipated ILA strike (January 15)

• Ongoing repercussions of the 35-month RES issue

Regional Shipping Insights

Shipping trends differ across regions, influenced by unique economic and logistical factors:

• United States: The U.S. market is experiencing a significant lift due to the uncertainty around tariffs on imports. Businesses are accelerating shipments to beat potential price hikes, a trend known as “front-loading.” This surge in demand has led to regional variations in shipping rates, particularly affecting trans-Pacific and trans-Atlantic routes.

• Southeast Asia: Shipping rates remain high due to infrastructure bottlenecks and labor shortages. For instance, costs in Vietnam and Indonesia are 10-15% above average due to port congestion. The supply-demand imbalance exacerbates these elevated rates.

• Europe: Geopolitical instability, particularly the Ukraine conflict, continues to disrupt trade. Rising fuel costs and port congestion contribute to higher-than-average freight rates, making pricing and delivery timelines increasingly unpredictable.

Factors Influencing Shipping Costs

Several factors are shaping shipping cost disparities globally:

Geopolitical Tensions:

• Conflicts near the Suez Canal, where 12% of global trade flows, have led carriers to reroute vessels via the Cape of Good Hope, increasing transit times and fuel costs.

• In Europe, the Ukraine conflict and rising fuel prices keep freight rates elevated.

• China’s economic slowdown, leading to reduced outbound volumes and global ripple effects.

Supply and Demand Imbalance:

• In North America, pre-tariff bulk purchasing has driven up demand on trans-Pacific and trans-Atlantic routes, causing congestion at U.S. ports and temporary price hikes.

Infrastructure Constraints:

• Southeast Asian ports, particularly in Vietnam and Indonesia, face congestion and delays despite ongoing government investments in infrastructure upgrades.

Industry Predictions for 2025

Industry experts foresee key trends that will impact global shipping:

• Fuel Price Volatility: Geopolitical tensions are likely to keep fuel prices unstable, significantly influencing shipping rates.

• Port Development: Heavy investments in port infrastructure across Southeast Asia and Africa aim to address bottlenecks, though relief may take time to materialize.

• Geopolitical Stability: Resolution of conflicts, particularly in Europe, could stabilize freight rates, though the outlook remains uncertain.

• Tariff Impact: Anticipated U.S. tariffs may shift trade flows toward tariff-exempt regions, altering global supply chain dynamics.

• Decarbonization Pressures: Carriers are investing in greener vessels and alternative fuels, which could impact freight rates in the short term.

Projections for TEU growth remain conservative, with an expected 3% increase in 2025 versus a 5.4% fleet expansion, suggesting an oversupplied market. Analysts such as Xeneta anticipate scenarios ranging from modest growth to potential contraction, heavily influenced by geopolitical and infrastructural factors.

Restructuring of Global Shipping Alliances in 2025

Significant changes are set to reshape the container shipping market, including:

Alliance Changes:

• The 2M Alliance will dissolve, with Maersk and Hapag-Lloyd forming the Gemini Alliance, while MSC will operate independently.

• The Ocean Alliance will continue as is.

• THE Alliance will rebrand as the Premier Alliance with three members instead of four.

Implications for Costs:

• Enhanced efficiency and shared resources could lower operating costs.

• Increased service frequency on major trade routes may improve supply chain reliability.

• Competitive pricing among carriers could drive rates down.

• However, initial investments in sustainable practices may temporarily increase costs.

These alliances will nearly double the number of Asia-Europe and trans-Pacific services, with significant expansions in Asia-Mediterranean routes. Some services will remain outside alliance agreements, offering additional flexibility to shipping clients.

While the global shipping market remains speculative, businesses are advised to explore short-term rate agreements (STR) for Q1 and plan long-term strategies post-Chinese New Year. With geopolitical, economic, and infrastructural factors at play, staying informed and adaptive will be key to navigating this dynamic landscape.

Air Cargo Industry Embraces digital Transformation with Online booking Platforms

The air cargo industry is undergoing significant digital transformation, with airlines increasingly adopting online booking platforms to enhance efficiency and meet growing demand for digital processes. Cargolux, for instance, has joined major platforms such as CargoAI, cargo.one, and Freightos' WebCargo to improve its "speed to market" capabilities. Embracing these platforms offers clients intuitive tools to book capacity that matches their requirements.

This shift towards digitalization is not limited to Cargolux. Finnair Cargo reports that approximately 60% of its capacity is sold via various platforms, including its own, appreciating the unique features each offers. The industry's move towards multiple platforms reflects a broader acceptance of digital tools, each catering to specific niches within the market.

Despite the widespread adoption of these platforms, profitability remains a challenge for tech providers. Freightos, one of the pioneers in this space, went public via a SPAC listing but continues to strive for financial success. The ongoing digital evolution in air cargo signifies the maturation of the industry, aiming to enhance operational efficiency and data accuracy, even as it navigates the complexities of integrating new technologies.

The Impact of Chinese New Year 2025 on Global Logistics

Chinese New Year (CNY) in 2025 falls on January 29th, and its ripple effects on global logistics are expected to last 4-6 weeks as factories and operations gradually resume normal activity. Here’s what to anticipate:

Key Considerations:

• Factory Shutdowns: Production slowdowns will begin in early January, with complete or partial shutdowns extending up to six weeks. This could delay outbound production orders significantly.
• Rising Freight Rates: The holiday season often triggers front-loading, leading to increased transportation costs driven by peak season surcharges.
• Port Congestion: Heavy shipment volumes before and after the holidays are likely to cause congestion at Chinese ports, resulting in container shortages, longer wait times, and customs clearance delays.
• Reduced Workforce: Factories often operate with limited staff immediately after the holiday, which impacts timelines and delays the restoration of full operational capacity.
• Industries to Watch: Automotive, Fashion & Lifestyle, and Electronics & Technology industries are advised to prepare contingency plans to mitigate disruptions during this period.

Expert Suggestions for Managing CNY 2025 Challenges

• Plan Supply Chain Timelines Early: Engage with customers to adjust timelines and budget for higher Q1 shipping costs.
• Book in Advance: Pre-book shipments at least 2-3 weeks ahead to avoid delays.
• Explore Alternative Routes: Consider SEA-AIR or AIR-AIR services, or indirect routing options. While these may increase transit times, they can help bypass port congestion and related surcharges.

For this, we can help.

Developments in Oceania

Australia's Economic Outlook

In December 2024, Australia's economic landscape presents a mix of challenges and cautious optimism. The Mid-Year Economic and Fiscal Outlook (MYEFO) forecasts a budget deficit of A$26.9 billion for the 2024–25 fiscal year, slightly improved from previous estimates. However, larger deficits are anticipated in subsequent years due to increased spending on health, cost-of-living support, and veteran care.

Economic growth has been revised downward to 1.75% for the fiscal year ending June 2025, reflecting the impact of high interest rates and global economic uncertainties. Despite these challenges, the government emphasizes that public expenditure will help maintain economic stability.

Inflation remains a concern, with the International Monetary Fund (IMF) projecting Australia's 2025 consumer price inflation at 3.6%, one of the highest among advanced economies. This underscores the need for fiscal discipline to manage inflationary pressures effectively.

New Zealand's Economic Developments

New Zealand's economy has entered a recession, with GDP contracting by 1.0% in the third quarter of 2024, following a 1.1% decline in the second quarter. This marks the largest two-quarter decline since 1991. In response, the Reserve Bank of New Zealand (RBNZ) has reduced interest rates by 125 basis points to 4.25%, with further cuts anticipated to support economic recovery.

The Treasury projects ongoing budget deficits over the next five years, with a deficit of NZ$17.31 billion for the fiscal year ending June 2025. A return to surplus is now expected by 2029, delayed from earlier projections, highlighting the challenges in achieving fiscal balance amid economic contraction.

Despite these challenges, there are positive signs, including a recovery in business activity and confidence levels, as indicated by recent surveys.

Trade and Industry Highlights

Both Australia and New Zealand continue to pursue trade diversification strategies to enhance economic resilience. Australia's trade surplus remains robust, supported by steady exports of raw materials to key Asian markets. Efforts are underway to expand economic ties beyond China, with emerging trade discussions involving the United Arab Emirates and India. The ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) continues to reinforce regional trade architecture.

New Zealand is focusing on Southeast Asia, with ministers reaffirming their commitment to trade expansion strategies outlined in joint economic engagement plans through 2040. Both nations are also coordinating efforts to uphold high standards in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and aim to strengthen ties with Pacific Island countries, emphasizing shared economic and sustainability goals within the Pacific Islands Forum framework.

These collaborative initiatives highlight the region's strategy to build more robust, sustainable, and diversified trade networks while maintaining critical partnerships within Asia and the Pacific.

Ocean Freight Updates

• RR, GRI and PSS notices from Carriers with effect on  1^st of January 2025.
• Carriers booking utilization sits at 90%-100% to both AU and NZ, with space remaining tight and cargo rolling. We suggest placing bookings at least 3-4 weeks in advance.
• COSCO shipments to AU Transshipment via Singapore keep waiting times around 2-3 weeks in SIN, under their FIFO operational policy.
• Blank Sailings in WK1 and WK2 with 4.6% and 7.4% capacity cuts respectively.
• Terminal Operation (subject to changes):
  • Qingdao: Waiting time 12 to 24 hours due to due to vessel bunching.
  • Shanghai: Waiting time 24 to 48 hours due to vessel bunching.
  • Ningbo:  Waiting time 12 to 36 hours due to vessel bunching. Berth situation is different from terminal to terminal.
  • Busan: Waiting time 24 to 48 hours due to vessel bunching.
  • Sydney (DP World): Waiting time up to 251 hours due to vessel bunching.
  • Brisbane (DP World): Waiting time 0 to 119 hours due to vessel bunching and bad weather conditions.

Rate Trend - Asia to Oceania

2025 Ocean Freight Forecast

The logistics landscape in 2025 is expected to mirror 2024 trends with some key changes:

• Increased Capacity: An 8% rise in shipping capacity is anticipated, compared to a 3% demand increase, which could stabilize rates and ease volatility.
• Earlier Peak Seasons: To counteract delays caused by diversions like the Cape of Good Hope route, shippers are starting their planning earlier, resulting in an earlier-than-usual peak season.
• Market Volatility: Despite added capacity, unexpected disruptions could lead to fluctuating rates and limited space availability.
• Rate Fluctuations: Current rates for East Coast and West Coast routes are similar but could change, especially if disruptions like the potential ILA strike occur around mid-January.
• Blank sailings, previously used to balance supply and demand, will likely remain a response to vessel shortages, which affected 15-20% of operations in 2024.

Besides those points, the Red Sea crisis will continue to impact supply chains. The EU ETS will ramp up in 2025 with the aim to cover 70% of Carbon Emissions, as the decarbonization and environmental regulation initiatives double down. Globally, only 60% of the capacity to be delivered in 2025 has alternative fuel capabilities, with 43% able to sail on LNG. only 2 of the top 10 carriers will not have any new ships with alternative fuel.

Supply Chain Disruptions Challenge Green Transport Initiatives

In 2024, global supply chain disruptions have led to increased carbon emissions, hindering progress toward sustainable transport goals. The ongoing Red Sea crisis has forced carriers to reroute vessels via longer paths, such as the Cape of Good Hope, resulting in higher fuel consumption and emissions. Additionally, to maintain schedules, many ships have increased their speeds, further elevating their carbon footprint.

Consumer interest in sustainable shipping is growing, with 60% valuing eco-friendly options and 35% willing to pay a premium. However, this demand has not yet translated into widespread adoption of greener transport solutions within the logistics industry. High costs associated with biofuels and other sustainable practices remain significant barriers. Experts suggest that enhancing vessel utilization and shifting from air to ocean freight could offer immediate environmental benefits.

Despite these challenges, the logistics sector continues to explore pathways to reduce its environmental impact. Collaborative efforts among industry stakeholders are essential to balance operational efficiency with sustainability objectives. As the industry navigates ongoing disruptions, maintaining a focus on green initiatives will be crucial for long-term resilience and environmental responsibility.

Ocean Freight Snapshot (up to December 31st, 2024)

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

Air Freight Updates

Global Economic Context and Air Freight Demand

The air freight market in 2025 is heavily influenced by global economic dynamics and evolving consumer behavior. E-commerce continues to grow at a rapid pace, driving demand for air freight, especially for high-value and time-sensitive goods. However, overall air freight volumes remain below pre-pandemic levels due to lingering economic uncertainties.

The recovery of passenger air travel has restored some belly cargo capacity, but this improvement is uneven across regions. While emerging markets in Asia and Africa are showing strong growth potential, Europe and North America face challenges from economic slowdowns. This regional disparity highlights the importance of tailoring strategies to specific markets.

Capacity Trends

Capacity is expected to remain a critical factor in shaping air freight markets. The resurgence of passenger flights has brought back some belly cargo capacity, providing relief to certain routes. However, the investment in dedicated freighter fleets continues, particularly on high-demand lanes like Asia-North America and intra-Asia routes.

The market may face an overcapacity issue as more freighters come online, potentially putting downward pressure on rates. For businesses, this presents both opportunities and challenges, as they need to balance cost considerations with reliable service options.

Geopolitical and Regulatory Influences

Geopolitical tensions and regulatory shifts play a significant role in shaping air freight dynamics. Ongoing conflicts, trade wars, and sanctions, particularly in Europe and the Middle East, contribute to uncertainty in trade routes and costs. Meanwhile, sustainability regulations are becoming stricter, compelling airlines to adopt more fuel-efficient aircraft. While these changes align with environmental goals, they may increase operating costs in the short term.

Additionally, protectionist policies, such as tariffs and trade barriers, are prompting supply chain restructuring. This has a direct impact on air freight demand, as trade flows adjust to navigate these hurdles.

Technological and Operational Shifts

Technology is transforming air freight operations, with digitalization leading the way. Airlines and shippers are increasingly leveraging data analytics and AI tools to enhance cargo tracking, forecast demand, and optimize routes. These innovations help reduce costs while improving operational efficiency.

Automation is also reshaping warehousing operations. Automated cargo handling systems are addressing labor shortages and speeding up processing times at major hubs. Additionally, many carriers are investing in fleet modernization, replacing older aircraft with models that offer better fuel efficiency and greater cargo capacity. These shifts are critical for meeting future demand and staying competitive.

Market Outlook and Predictions for 2025

Looking ahead, the air freight market is expected to experience continued rate volatility, driven by fluctuating fuel prices, geopolitical risks, and regional demand imbalances. Sustainability will play an increasingly prominent role, with eco-friendly shipping solutions becoming a priority. These options may come at a premium, as carriers and shippers align with stricter environmental standards.

Regional hotspots, such as Southeast Asia and Africa, are poised for significant growth. Expanding middle-class populations and improved infrastructure are making these regions attractive for air freight operations. Meanwhile, shippers and carriers are focusing on long-term contracts and diversified supply chain strategies to mitigate risks and improve stability.

Air Freight Snapshot (up to December 31st, 2024)

Customs, Inland Transport, Terminal and Regulation Updates

Port of Auckland Operations

Streamlining Port Operations Through the Holidays

The last week of December marked a milestone with over 12,000 container moves—the busiest period since August 2020. Despite challenges such as vessel schedule volatility, all container vessels were dispatched on time. We urge customers to clear imports promptly to support smooth operations across the port during this busy period. Repairs on the "I" crane were expected to be completed by Christmas, further enhancing efficiency.

Anticipating Congestion: Container Terminal Update

Ongoing disruptions to vessel schedules and the looming Kiwi Rail Block of Line are contributing to anticipated congestion at the port and across the supply chain. The busiest period is forecast for early January, with further pressures expected mid to late January. We encourage customers to closely monitor updates on vessel movements and cargo receival windows via our website and Kiwi Rail’s resources.

POAL VBS Slot Price Increase Effective 1st January

Vehicle Booking System (VBS) slot prices at Ports of Auckland (POAL).

Effective 1st January 2025, the VBS slot price will increase to $150 per container, applicable to all collections and drop-offs at POAL.

Montreal Convention Updates

The Montreal Convention of 1999 (aka MC99) is an international treaty that governs liability in international air transport, setting clear limits on compensation for cargo loss, damage, or delays. These liability limits, expressed in Special Drawing Rights (SDRs)—a value determined by the International Monetary Fund (IMF)—provide a standardized framework for air cargo claims.

Starting December 28, 2024, there’s a big change coming to international air cargo rules that might impact how your business handles shipments: the liability limits for air cargo are increasing from 22 SDR to 26 SDR per KG, offering better compensation if something goes wrong with your shipment. The change, part of the treaty’s built-in mechanism to adjust for inflation every five years, ensures that compensation levels remain fair and relevant in today’s economic landscape.

This update is vital in maintaining balance and fairness for businesses relying on international air transport.

We have put together an article to explain the change in detail for you.

Key Updates on Rail and Road Disruptions in New Zealand

Rail Freight Disruptions: December 2024 - January 2025

Auckland's rail services will be fully closed from December 27, 2024, to January 27, 2025, affecting 16 business days. Freight and passenger transport to and from the Ports of Auckland and Tauranga will face interruptions. KiwiRail has announced capacity adjustments within the Golden Triangle to accommodate freight needs and is coordinating road transport solutions to minimize delays. Freight services between Ports of Auckland and Southdown will continue from January 3–24 before the final closure, with rail services resuming by 6:00 PM on January 27, 2025.

City Rail Link (CRL) Project Updates

The CRL project remains on track for completion in early 2026. Major works are being expedited during the lower freight volume period, and additional costs for transitioning freight to road transport are covered under the project. Estimated transit delays due to the switch to road transport are around 24 hours. KiwiRail is working with port partners to implement road bridging solutions, ensuring goods continue to move during the closures.

Additional Notes: Road Disruptions

In addition to rail closures, the Desert Road will be closed from January 6 to late February 2025, requiring alternative routing. KiwiRail is collaborating with Auckland Transport, NZTA, Police, and Auckland Council to manage truck traffic and mitigate the impact on road networks. Stakeholders are encouraged to plan freight movements carefully during this period to navigate these disruptions effectively.

Logistics Trends

• Norway will support the construction of nine new ammonia or hydrogen-powered vessels, bringing the total to 24 government-backed ships in 2024, with NOK 943.8m allocated to six Norwegian shipowners.
• Duvenbeck Group transitioned its fleet serving ZF Saarbrücken to emission-free systems, with 16 battery-electric trucks handling local services and biogas powering long-distance routes.
• US President Biden unveiled the Maritime Decarbonization Action Plan on 11 Dec, aiming for net-zero emissions in the maritime sector by 2050.
• The aviation industry is accelerating sustainability efforts through the IATA's net zero 2050 framework, with the industry being encouraged to collaborate on shaping industry-wide sustainability benchmarks.
• The surge in demand for end-to-end airfreight and logistics services, driven by e-commerce and technological advancements, led Ansync Global to offer tailored, cost-efficient, and sustainable solutions with real-time tracking and predictive analytics.
• Anemoi Marine Technologies installed five Rotor Sails on the Sohar Max, the largest vessel to use wind propulsion technology, reducing fuel consumption and cutting carbon emissions by 3,000 tonnes annually.
• Sustainability in supply chains is a critical challenge due to data management issues, supplier trust, and budget constraints, but investing in AI, cloud-based analytics, and strategic partnerships can drive growth and mitigate risks.

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.