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. Logistics Trends

Executive Summary

As we close the first half of 2024, marked by the Red Sea Crisis (RES), supply chains worldwide are experiencing significant disruptions. The World Container Index has seen a 324% increase since the start of the RES, with global shipping challenges including severe port congestion and geopolitical tensions leading to extended vessel waiting times and rerouted shipments. The peak shipping season has arrived earlier than usual, driven by early restocking activities, further straining shipping capacities and rates.

Rising freight rates are influenced by increased demand and operational costs, with carriers reallocating capacity to more profitable routes, reducing availability for Oceania. Despite the introduction of significant new vessel capacity in 2024 and 2025, ongoing port congestion will make it challenging to manage this increase efficiently. Oceania markets are expected to see continued rate volatility through further General Rate Increases (GRIs) and potential service consolidations.

Developments in Oceania highlight mixed economic signals, with Australia's jobless rate rising and New Zealand experiencing softened inflation. Key factors influencing the ocean freight market in the second half of 2024 include demand fluctuations, capacity management, industrial actions, and the breakup of alliances. The conflict in the Red Sea has also led to increased carbon emissions, further complicating logistics.

Air freight updates reveal softened global rates and demand, despite elevated prices driven by high demand from Asia and the Middle East. New air routes, such as China Cargo's service to Budapest, are expanding capacity. The recent global IT failure caused by a Microsoft outage may result in weeks of delays, adding to the existing pressures on air freight capacity. Terminal operations in Oceania are also experiencing delays due to weather and equipment outages.

 

Business Tip

Prepare for the upcoming Golden Week: As the Golden Week looms closer, starting preparations is critical to make sure that the impact to your supply chain is minimal. Especially with the constraints on space, booking in advance can be a game changer. You can check our piece on this subject here.

Kerry Logistics counts with key partnerships with Carriers and can help you navigate these uncertainties with proven experience.

 

Spotlight

We will do whatever it takes to meet the customers' needs

 

Market Trend

As we close the first half (1H) of 2024, marked by the Red Sea Crisis (RES) and its cascading effect throughout supply chains worldwide, it is crucial more now than ever to be informed of the changes and trends.

The World Container Index has moved slightly during July, with 3 consecutive weeks of rates sliding, albeit slowly for some Trade Lanes. The Index jumped on average 324% since the beginning of RES.

With the upcoming Golden Week, it is paramount to start preparations to minimize ongoing impacts to your supply chain.

Global Shipping Challenges

• Port Congestion: Major transshipment hubs like Singapore are facing severe congestion due to geopolitical tensions and increased container volumes. Vessels are experiencing extended waiting times, creating back log of cargo and misconnections. In some cases, we are seeing transshipment delays of up to 4 week and some carriers are managing their backlog by suspending fresh bookings on services routing via Singapore.
• Geopolitical Tensions: Ongoing conflicts in the Red Sea have forced vessels to reroute, disrupting schedules and creating bunching at ports. Most of the containerships between Asia and Europe are still being diverted via the Cape of Good Hope, with only CMA so far sending a couple of their services through the Suez being escorted by the French Navy at significant cost. The route via the Cape is often battled by bad weather causing ships to wait out the storms extending transit times even further.
• Early Peak Season: The peak shipping season has arrived earlier than usual, as most companies are trying to avoid not having stock on the shelves as we have seen during COVID. Increase in demand is being driven by early restocking activities, this has put additional strain on shipping capacities and rates.

Rising Freight Rates

The increase in demand has pushed Global Freight rates to surge across all major trade lanes and carriers are now looking at reallocating capacity to more lucrative routes, reducing capacity for Oceania trade.

• Reallocation of Capacity: Over the past month we have seen a number of vessels being pulled out of the South East Asia to Oceania services and either being replaced by smaller vessels or not at all.   This has put further pressure on capacity and is what driving up rates despite relatively flat economic conditions.
• Operational Costs: Rising fuel prices, labour costs, delays and inefficiencies in major ports are having an impact on operational costs, further inflating freight rates.

Future global capacity

Even though the global shipping industry is set to receive a significant boost in capacity, with over 1.3 million TEU of new vessels expected by the end of the year and an additional 2 million TEU in 2025, the market is likely to continue facing disruptions throughout 2024. The integration of this new capacity into the trade lanes takes time, and ongoing port congestion will make it challenging to efficiently manage this increased capacity unless there are substantial improvements in logistics and port operations.

We predict that Oceania market will continue to see rate volatility through further GRIs as carriers try to keep pace with increasing costs and rate increases in other trade lanes or risk further consolidation of services or loosing ships altogether.

To navigate these challenges, we strongly suggest the following approach:

• Ship early and soften peaks
• Be flexible with shipping options
• Build in longer lead times to account for potential enroute delays
• Book shipments at least 4 weeks in advance
• Consider other modes of transport, such as LCL, Airfreight or multimodal (sea / air)
• Talk to us about your requirements, urgency vs cost

Developments in Oceania

Australia’s jobless rate rose in June even as employers added the newest positions since February as more people started looking for work. The unemployment rate in June was 4.1% seasonally adjusted, according to the Australian Bureau of Statistics. The economy added just over 50,000 jobs compared with the 20,000 additional positions forecasted by economists. Full-time roles rose by 43,300 and part-time positions rose by 6,800.

Inflation in New Zealand softened by more than expected in the three months through June, raising the prospect that the official cash rate could be cut as soon as next month. New Zealand's consumers price index increased 3.3 percent in the 12 months to the June 2024 quarter, following a 4 percent increase in the 12 months to the March 2024 quarter, the statistics department Stats NZ said on Wednesday. Rising prices for insurance, which increased 14 percent in the 12 months to the June 2024 quarter following a 14-percent annual increase for the previous quarter, was the second largest contributor to the annual inflation. Quarterly, New Zealand's consumers price index rose 0.4 percent in the June 2024 quarter, due to rising prices for housing and household utilities, partly offset by lower recreation and culture prices, according to Stats NZ.

Key Factors to Watch in the Second Half of 2024

According to Xeneta, these are the 6 factors that could be central to the way the ocean freight shipping market develops during the final months of 2024 and beyond:

• Demand. Longer sailing distances increases TEU miles while some shippers respond to the current situation by frontloading importers, while macro-economics and shifting trade alliances between nations also comes into play.
• Capacity. 2024 has seen further record-breaking numbers of new ships delivered, but the overcapacity previously expected in 2024 has not materialised.
• Short-long market spread risk. The spread between the short- and long-term market presents a big risk to shippers – and it may get worse before it gets better.
• Industrial Action on the US East & Golf Coasts. Union action is being seen in the US and Europe, with disruptions and congestions already having a detrimental impact.
• Break-up of Alliances. The shifting landscape of alliances in ocean freight shipping will present both risks and opportunities for shippers, especially in an already turbulent market.
• Carbon Emissions. Conflict in the Red Sea has brought massive carbon emissions increases with the Xeneta and Marine Benchmark CEI hitting the highest its highest ever level.

Ocean Freight Updates

• Anticipated RR, GRI and PSS notices from Carriers on 1^st of August 2024.
• Carriers booking utilization sits at 90-95% to both AU and NZ. Space is full for earlier August and cargo keeps getting rolled. We suggest placing bookings at least 2-3 weeks in advance.
• COSCO shipments to AU Transshipment via Singapore keep waiting times around 4 weeks in SIN due to renewed congestion, under their FIFO operational policy.
• ANL continues facing equipment shortages from CN/SEA, they have stopped booking ex SEA to AU/NZ until Week 32, reviewing on vessel-by-vessel basis.
• COSCO and OOCL have stopped bookings ex SEA to AU/NZ with immediate effect until further notice due to vessel transfers to other trades and serious backlog at South East Asia (SEA). Bookings are reviewed on a case-by-case basis.
• Blank sailings anticipated for Week 32, with around 17% capacity cut to AU.

Ocean Market Rate Trends

Influenced by RES, the lack of space and the imbalance between supply and demand, we are seeing an increase of 21%+ of the average rates across core ocean carriers for the Asia – Oceania corridor, in a comparison between 1H Jan 2024 to 2h Jul 2024,.

MSC CAP/KIWI Service Suspended until further notice | Major Service Change Update

MSC has announced that they are making considerable changes to their Asia to Oceania services.

Over the past several weeks MSC has been suppressing the number of bookings taken on their South East Asia services: Kiwi Express and Capricorn.  At the end of last week, they have announced that both services will be suspended with last sailing on each to be 20^th August 2024.

At this stage MSC have not announced any plans to substitute these with another South East service, however it is likely that they will route South East Asia cargo via Hong Kong, at least in the interim.

Additionally, MSC have announced a reinstatement of the Wallaby service, with extended port coverage which will also be calling New Zealand.  This will be their own standalone service, with no slot sharing arrangements with other carriers.

MSC is claiming their reestablished Wallaby service will not inject new capacity into the market, as they will use it to cover the reduced capacity on the Panda as well as possibly for routing SEA cargo.

Half of the vessels from Kiwi and Capricorn will be deployed into the Wallaby service and the other half will be deployed on other major trade routes where freight rates are considerably higher than those into Oceania.

For a more detailed overview, click here.

Bangladesh Civil Unrest generating backlog

As a result of the civil unrest in Bangladesh in July, the government instituted a mandated curfew and internet connections were severed, resulting in a standstill for airport operations and seaports operating at a minimal capacity.

After the internet connections were restored, the country’s imports and exports took a massive hit as the delays created a backlog estimated in between 8K-10K TEU and 3-3.5 Ton of Air cargo, with the estimations reaching more than a week to be able to clear the backlog.

While some garment factories in Dhaka have re-opened, it is likely that many will remain closed until the situation has resolved.

General Average Declared on Maersk Frankfurt

 Shippers with cargo on the Maersk Frankfurt, which has suffered fires on board for six days, have been, or will be, served General Average (GA) notices by vessel owner Tokei Kaiun, according to the latest Maersk update. Some 1,100 containers were reportedly onboard when the fire broke out during the vessel’s maiden voyage, according to industry sources. But Maersk didn’t release any official data.

This situation highlights the importance of engaging on Cargo Insurance services on any and all international transportation operations.

If you would like to learn more about General Average, you might want to read our comprehensive guide.

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

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

Air Freight Updates

Worldwide air cargo rates and demand softened slightly from most regions in the second week of July, although tonnages and average global prices remain significantly higher than this time last year, thanks to continuing elevated demand and high rates from Asia and the Middle East.

According to the latest weekly figures and analysis from WorldACD Market Data, there was a -1% drop in worldwide tonnages in week 28 (8 to 14 July), mainly due to falls from Europe (-5%), Asia Pacific (-2%) and Africa (-5%). But a post-Independence Day rebound from North America (+6%) origins and from Central & South America (CSA) (+4%) helped keep total worldwide tonnages relatively firm during what is normally a quiet month.

Rates per kilo are up +11%, year on year (YoY), based on a full-market average of spot rates and contract rates, and remains significantly higher than the equivalent period prior to Covid (+44% compared to July 2019). As in previous weeks, those higher rates are mainly driven by increases from Asia Pacific and MESA origins, where average prices are up by +23% and +51%, respectively, driven by the increase in Ecommerce.

China Cargo adds new service to Budapest

China Cargo Airlines has launched a new service to Budapest Airport that the eastern European hub hopes will support trade with China. The new Shanghai Pudong (PVG)-Budapest service is operated by a Boeing 777 freighter three times per week on Mondays, Wednesdays, and Fridays.

It is the first time the Hungarian airport has been linked with Shanghai by the China Eastern subsidiary. The new flight is not the first time the airport has added a new freighter service from China this year. In mid-June, the carrier added a Boeing 747 freighter flight linking Ezhou Huahu Airport in central China’s Hubei Province with Budapest International Airport in Hungary. This is the first air cargo route linking Ezhou Huahu Airport to Hungary and is also SF Airlines’ third route from this airport to Europe. Meanwhile, China Cargo recently signed an extended partnership with Air France KLM Martinair Cargo. The agreement will allow China Cargo Airlines to utilize Air France belly capacity for flights from Paris CDG to São Paulo Guarulhos Airport (GRU).

Warning of weeks of delays to cargo operations following global IT failure

The IT failure on 19 Jul 24 grounded airline and airport operations around the world could take weeks to recover from, according to supply chain data firm Xeneta. The disruption resulted in delays to thousands of flights and is understood to have been caused by a Microsoft IT outage triggered by a software update from cyber security company CrowdStrike.

Shippers already had concerns about air freight capacity due to huge increases in demand in 2024, driven largely by the extraordinary growth in e-commerce goods being exported from China to Europe and the US. Supply chains have already been put under pressure this year by the Red Sea Crisis that has resulted in containerships needing to divert around southern Africa to avoid missile attacks in the Red Sea. The current global IT issues stemming from the CrowdStrike outage may cause bottlenecks and delays with several of our airline partners in the coming weeks.

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

Customs, Inland Transport, Terminal and Regulation Updates

Terminal Operations

Please take note of the impacts suffered at the end of July, with repercussions for the early weeks of August due to generated backlog:

• Brisbane (DP World): Waiting times 0-31 hours due to crane outage and strong winds.
• Sydney (Patrick): Waiting times 0-91 hours due to bad weather.
• Fremantle (Patrick): Waiting times 48-96 hours due to vessel bunching.

Port of Tauranga (POTL) - Changes to Import Reefer Power and Monitoring Billing

Effective September 1st, 2024, POTL will change their current power and monitoring billing process by introducing cost acceptance for active import Reefer Containers at Tauranga Container Terminal (TCT), MetroPort and Ruakura Inland Port (RIP).

Daily Reefer Power and Monitoring charges accumulated after standard free time contracted are applicable to the account of the shipper or importer.

This change will require shippers or importers to have a PortConnect login, which will allow to search and accept any associated container costs sush as demurrage or regulatory clearance and assign them to a preferred guarantee party or debtor while including any purchase order or reference numbers.

You can check further details on Cost Acceptance by clicking here.

CrowdStrike National IT Outage

On July 19^th, 2024, there was a worldwide IT outage that affected some industries more than others. The global Cyber-Security platform provider, CrowdStrike, delivered a comprehensive update on a recent system configuration issue that resulted in a “crash” impacting on Microsoft Windows devices, which was promptly addressed by CrowdStrike.

In terms of container logistics, there were short-lived impacts that were addressed as priority:

• Patrick Terminals operations were impacted for a few hours before landside receival and delivery operations could resume. Some export cut-off times for vessels in Melbourne and Brisbane were extended.
• Victoria International Container Terminal (VICT) was similarly affected, with operations resuming the next day.

This incident had a minor impact in terms of delays thanks to the prompt actions of different teams along supply chains to find workarounds and quick solutions, resulting in a controlled effect.

Logistics Trends

• A new DP World report reveals 82% of supply chain professionals believe sustainability enhances financial performance, with increased prioritisation and resource allocation for sustainability influencing supplier selection and strategies.
• CargoKite and Lomar Shipping’s Lomarlabs are developing crewless, sail-powered micro-ships with AI for optimal routing, aiming to address maritime decarbonisation with low-carbon, sail-based technology.
• Barcodes, celebrating 50 years, are being replaced by 2D barcodes for better supply chain traceability and consumer engagement, supported by GS1 Digital Link and initiatives like Sunrise 2027.

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.