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

The maritime industry is grappling with significant challenges as nearly 90% of activities in the Red Sea region have ceased due to Houthi rebel attacks. This has caused severe congestion, trapping cargo in ports and driving up freight rates. Ships are rerouting around the Cape of Good Hope, avoiding the Suez Canal, which exacerbates congestion near Singapore. Nearby Malaysian ports like Port Klang and Tanjung Pelepas are insufficient substitutes due to limited connectivity, causing further delays. Experts predict that while shipping peak season may end sooner than usual, the broader disruptions could extend into 2025.

The imbalance between supply and demand is expected to widen in 2024, but prolonged Red Sea disruptions could mask market overcapacity by forcing longer voyages. If resolved, the market may face overcapacity and falling rates by 2025-2026 with new ship deliveries. Air and ocean freight capacity from Asia remains tight due to high demand, with advance bookings surging in response to new tariffs and potential work stoppages in North America and Brazil. Rates from Asia to North America and Europe have significantly increased, driven by peak season and additional surcharges.

In Oceania, global shipping prices continue to rise with carriers implementing General Rate Increases (GRI), Rate Restorations (RR), and Peak Season Surcharges (PSS). Australia's economy grew modestly, but high interest rates and rising prices have led to record business insolvencies. New Zealand's trade deficit has narrowed, and its economy shows signs of recovery, though GDP per capita continues to decline. Both countries are impacted by ongoing shipping disruptions, with space and equipment shortages further straining logistics.

Air cargo demand remains strong, with rates elevated due to high demand from Asia and the Middle East. New air routes, such as SF Airlines' Ezhou-Budapest connection, are expanding capacity, though rates remain high compared to pre-COVID levels. Regulatory changes, including the new EU/NZ Free Trade Agreement and Australia's removal of minor tariffs, offer some relief, potentially boosting trade and reducing costs for businesses. However, ongoing supply chain challenges and rising costs underscore the need for strategic planning and partnership with logistics providers like Kerry Logistics to navigate these complexities.

 

Business Tip

Optimize Port Utilization and Diversify Port Entries: Liaise with your service provider to explore diversifying routes and port entries. By planning shipments through alternative ports such as those in Malaysia or India's Mundra Port, you can potentially reduce delays and optimize transit times. Utilizing a mix of primary and secondary ports through our services ensures flexibility and resilience in your logistics planning, helping you maintain smoother operations amid ongoing disruptions.

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

 

Spotlight

Kerry Control Network (KCN)

Global Airfreight Programs

As part of our Global Airfreight Programs, under our own KCN (Kerry Controlled Network), we are offering weekly direct flights from China to the US, with trucking across the US to final destinations and onforwarding anywhere in the US, Canada and Mexico + LATAM.

Market Trend

The maritime industry is currently facing significant challenges, with almost 90% of activities in the Red Sea region coming to a halt. The avoidance of the Red Sea due to Houthi rebel attacks has led to a backlog of container vessels outside one of the world’s busiest maritime trade hubs. This congestion is trapping more cargo in ports for extended periods, driving freight rates higher with no immediate relief in sight. The peak season has intensified these issues, exacerbated by the ongoing reshuffling of the fleet.

As a result of rerouting ships around the Cape of Good Hope, shipowners are avoiding the Suez Canal, opting for the longer route around Africa's southern tip. This detour prevents them from refueling or unloading cargo at Middle Eastern ports, worsening congestion near Singapore. The lack of viable alternatives to Singapore in the region is further aggravating the situation.

Nearby ports in Malaysia, such as Port Klang and Tanjung Pelepas, are not sufficient substitutes due to their limited connectivity. Outbound cargo may face delays if not shipped from Singapore. While container lines might start using Malaysian ports, they are constrained by capacity limits. Some relief might come from schedule adjustments by liners. Experts predict that the shipping peak season, which arrived earlier than usual this year, might end sooner, potentially easing freight rates by September as more capacity returns to Asia.

Additional considerations include increased trucking and transport costs for cargo diversions, as well as potential customs clearance issues. A return to normal trade patterns in 2024 is increasingly unlikely, with diversions potentially extending into 2025 and beyond. According to Xeneta, an ocean freight rate benchmarking and intelligence platform, spot rates on major trades out of the Far East will rise again on June 15, though less sharply than in May and early June.

It's difficult to predict when these disruptions will end, but currently, carriers are in control. This dominance is unlikely to last long, especially as substantial capacity is expected to be deployed in the second half of this year. The market, which saw a rapid spike in early 2024, is anticipated to experience a quick decline.

In January 2024, a record 478 container ships with a capacity of 3.1 million TEU are scheduled for delivery, surpassing 2023’s record by 41%. Consequently, the container fleet capacity is projected to grow by 10% in 2024. While an increase in ship recycling is expected, the fleet could still expand by nearly 2.8 million TEU, reaching over 30 million TEU by the end of 2024 for the first time.

The supply and demand imbalance is predicted to widen in 2024. However, prolonged disruptions in the Red Sea could tighten this balance, as ships take longer voyages around the Cape of Good Hope, obscuring overcapacity in the market. If the Red Sea situation is resolved, the delivery of 3 million TEU in 2025-2026, coupled with a lack of recycling, could lead to overcapacity and a sharp decline in freight rates.

Air and ocean capacity from Asia to major markets is expected to remain tight, driving up rates due to a combination of factors increasing demand. Moderate economic expansion has been a key driver of exports from Asia. However, volumes have also been boosted by disruptive developments such as potential work stoppages in Canada and on the US east coast, impending new tariffs in the US and Brazil, and new regulations like the EU’s Import Control System 2, prompting Asian exporters to expedite their shipping.

US tariffs, particularly on electronic vehicles, have led to a surge in advance bookings from China. Brazil's plans to tax Chinese hybrid and electronic vehicles have caused Full Container Load (FCL) rates from China to Latin America’s largest economy to quadruple. Consequently, there has been no slow season since March, and rates have remained consistently high.

The combination of an early peak season, Red Sea diversions, and subsequent port congestion has tightened capacity, causing ex-Asia ocean spot rates to rise significantly last week. Prices from Asia to North America's West Coast and Northern Europe have surged to approximately $7,000 per FEU, surpassing their previous 2024 highs by 40-50%. Rates to the East Coast now exceed $8,000 per FEU, which is 20% higher than in February, with these levels last seen during the decline from pandemic highs in mid to late 2022.

With transpacific demand expected to peak in August, rates are likely to continue increasing, driven by additional surcharge hikes and General Rate Increases announced for July to North America and Europe, potentially pushing rates up to around $10,000 per FEU on some lanes.

Congestion, port omissions, and the shifting of more capacity from regional to long-haul services are leading to various surcharges and rate increases on lower-volume and intra-regional trade lanes. For instance, Freightos Terminal data indicates that some East Asia to India rates have quadrupled since early April. Despite the addition of significant East-West capacity by major carriers and regional operators, downward pressure on transpacific or Asia-Europe rates remains minimal, as the trend has not reversed this year despite new vessel deployments. Congestion issues persist in Barcelona but are reportedly easing in Singapore, Malaysia, and China. This improvement may be partially due to the increased use of India’s Mundra Port for transshipment, which has, in turn, led to some congestion there.

Despite increased scrutiny by US Customs on e-commerce imports, air cargo volumes have remained robust. Freightos Air Index rates from China were elevated last week at $5.43/kg to North America and $4.33/kg to Europe. Air cargo rates from South Asia and the Middle East remain high but stable, despite expectations that recent ocean delays and costs would shift some volume from ocean to air.

Freightos Terminal data shows that ocean rates from Shanghai to the UAE have increased by 115% to almost $5,000 per FEU since early April. This increase, coupled with port congestion delays in Jebel Ali, may reduce the attractiveness of sea-air service for shippers seeking faster alternatives to ocean freight that are less expensive than direct air cargo.

Developments in Oceania

Global shipping prices continue to surge, with carriers implementing General Rate Increases (GRI), Rate Restorations (RR), and Peak Season Surcharges (PSS) to the Oceania market to try and maintain service levels and cover escalating operational costs. This surge is driven by several factors, including increased demand for space, capacity constraints, equipment shortages, port congestions, and schedule delays, which are compounded by ongoing challenges in the Red Sea.

Australia's economy grew by 0.1% in the first three months of 2024 and by 1.1% over the year, according to the Australian Bureau of Statistics (ABS) national accounts. Treasurer Jim Chalmers acknowledged the slow growth but highlighted that Australia was performing better than many comparable countries, including Canada, Italy, the United Kingdom, Japan, and Germany. However, economic activity per person fell for the fifth consecutive quarter, dropping 0.4% in the March quarter and 1.3% over the year.

Research shows that crippling interest rates and skyrocketing prices of everyday items, from a bag of concrete to a cup of coffee, are behind record business insolvencies in Australia. CreditorWatch's business risk index highlights the deteriorating business outlook, especially for small companies. In the year to May, insolvencies hit a record high of 1,378, a 38% increase in the rate of business failures. The industries with the highest increases in insolvencies were electricity, gas, water, and waste services (89% increase), education and training (87%), and mining (72%). The information, media, and telecommunications sector was the only industry to report an improvement, with a 2% drop in insolvencies.

New Zealand's trade balance showed a deficit of 1.4 billion NZ dollars (870 million U.S. dollars) in the March 2024 quarter, an improvement from a 2.6 billion NZ dollar deficit (1.61 billion U.S. dollars) in the same quarter of 2023, according to Stats NZ. The narrower trade deficit was primarily due to a decrease in imports rather than a significant increase in exports. Australia remained New Zealand's largest trading partner for travel services, though travel exports to Australia fell by 49 million NZ dollars (30.32 million U.S. dollars) to 778 million NZ dollars (481.48 million U.S. dollars) compared with the March 2023 quarter.

Meanwhile, New Zealand’s economy seems to be emerging from a recession following two consecutive downturns over 18 months. Official figures show that GDP grew by 0.2% in the first quarter of the year after a 0.1% contraction in the previous quarter. However, on a per capita basis, GDP fell by 0.3% in the first quarter, marking the sixth consecutive decline. New Zealand’s economic recovery has been sluggish, particularly in the agriculture and tourism sectors, which were severely impacted by the COVID-19 pandemic.

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

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Ocean Freight Updates

• Carriers booking utilization sits at 90-95% to AU, 85-90% to NZ. Space is full for earlier June 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 is facing equipment shortages from CN/SEA, as well as implemented a PSS to long term rate.
• 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.
• Carriers have released RR, GRI and PSS notices with effect of 1^st of July 2024.

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

Ocean Market Rate Trends

Influenced by RES, the lack of space and the imbalance between supply and demand, we are seeing an increase of 109%+ of average rates across core ocean carriers for the Asia – Oceania corridor, in a comparison between 1H October 2023 and the expected 2H of June 2024.

The container throughput and demand has seen an increase, specially from Far East to Oceania, which highlights as well why we are seeing such high rate levels.

*Source: Alphaliner

Plan around the Port of Singapore Congestion

The shipment delays at the port of Singapore are at an all-time high, as the sheer volume of ships passing through has increased. This could translate into higher prices for consumers, as well as significant delays in supply chain for the business unprepared.

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

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

Air Freight Updates

Air cargo rates remain strong during what is typically a quieter market period, driven by sustained high demand and elevated spot rates from Asian and Middle Eastern origins, according to the latest data from WorldACD Market Data. In the last full week (week 24, June 10-16), global tonnages decreased by 2%, but average rates stayed stable at $2.51 per kilo. This is an 8% increase compared to the same week last year and a significant 42% above pre-COVID levels in June 2019, based on over 450,000 weekly transactions tracked by WorldACD.

During June, there was a 1% rise in both rates and tonnages compared to the previous two weeks. Year-over-year comparisons show substantial growth, with tonnages up 11% and rates up 8%, driven by higher demand from all major origin regions. The Middle East & South Asia (MESA) regions led the way with a 52% increase in rates and a 13% rise in tonnages, while the Asia Pacific regions saw a 17% increase in rates and a 16% rise in tonnages. These figures are based on both spot and contract rates across the market.

SF Airlines launches Ezhou-Budapest Air Cargo Route

SF Airlines has launched an air cargo route 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, reported China’s state press agency, Xinhua.

Operated by a Boeing 747-400 freighter, one round-trip flight is scheduled on this route every week, providing more than 200 tonnes of air-cargo delivery capacity per week. The route will mainly transport parcel express and e-commerce goods, according to SF Airlines. Ezhou Huahu Airport officially opened in July 2022 and is a cargo-focused hub airport with some passenger traffic. The airport features a 23,000 sq m cargo terminal, a nearly 700,000 sq m freight transit centre and two runways. In April 2023, the airport marked its first international cargo route, operated by SF Airlines.

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

Customs, Inland Transport, Terminal and Regulation Updates

Benefits of the New EU/NZ Free Trade Agreement

Effective May 1st, 2024, 91% of New Zealand's exports to the EU are duty-free. This major milestone in the Free Trade Agreement (FTA) marks a significant boost for trade.

Key Points:

• Duty-Free Exports: 91% of exports to the EU are now duty-free, saving NZ businesses about NZ$100 million annually. This will rise to 97% in seven years, benefiting agriculture the most with savings of NZ$90 million per year.
• Economic Boost: The FTA encourages more NZ companies to enter the EU market, boosting the economy. Annual savings on EU imports will be NZ$74 million.
• Environmental and Social Responsibility: The EU is implementing new shipping fees to manage carbon emissions and enforcing ethical business practices by 2028.

Despite ongoing supply chain challenges, the new EU/NZ FTA offers a positive outlook, potentially driving economic growth amid domestic downturns.

Do you want to know if your business can benefit from this FTA?

ABF Removal of 'Nuisance Tariffs'

Starting 1 July 2024, the Australian Government will eliminate 457 minor tariffs, simplifying $8.5 billion in annual trade. This move, outlined in Budget 2024-25, will remove tariffs on items such as toothbrushes, refrigerators, dishwashers, clothing, and sanitary products.

The Australian Border Force (ABF) detailed these changes in ACN 2024/17, which also extends duty reductions for Ukrainian goods. From the effective date, customs duties for 457 tariff subheadings and headings will be reduced to 'Free,' allowing a wide range of goods to enter home consumption duty-free.

To support Customs Brokers and Importers, the ABF Trade and Tariff Policy Section has provided a Tariff List using the HS Code format. The ABF will update the Integrated Cargo System (ICS) soon. Note that Free Trade Agreement (FTA) and other preferential rates of duty will expire on 30 June 2024 where the General Rate of Customs Duty is set to 'Free'.

For shipments usually subject to duty that might benefit from these changes, please contact us to evaluate the potential delay in Customs Lodgment.

DAFF Regulatory Charge Updates for Biosecurity and Imported Food Activities

The Department of Agriculture, Fisheries and Forestry (DAFF) has completed its annual review and adjustment of regulatory fees for biosecurity and imported food activities.

From 1 July 2024, the Formal Import Declaration (FID) fees will increase:

• Air FID: from $43 to $45
• Sea FID: from $63 to $66

The Import Processing Fees for Sea FIDs will also rise:

• Shipments under $10,000: from $113 to $116
• Shipments over $10,000: from $215 to $218

For Air FIDs:

• Shipments under $10,000: from $93 to $95
• Shipments over $10,000: from $195 to $197

These increases apply to FIDs lodged on or after 1 July 2024, with billing arrangements remaining unchanged. Detailed tables of the new fees and charges can be found on the DAFF website.

The complete table of Indexed fees and charges can be found here:

• Fees and charges for biosecurity regulatory activity from 1 July 2024
• Fees and charges for imported food regulatory activity from 1 July 2024

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.

Logistics Trends

• Climate literacy among Indian businesses is crucial for effective ESG disclosures and climate change mitigation, with SEBI mandating business responsibility and sustainability reports for India's top 1,000 listed companies to improve transparency and accountability.
• Supply chain leaders should strategically adopt AI by aligning it with specific business challenges and goals, ensuring compatibility with existing technology, and fostering a culture supportive of innovation.
• Sustainable procurement is essential for companies to protect the planet, gain business momentum, and meet consumer and regulatory demands, requiring a sustainability-focused culture and leveraging technology, particularly AI, for decision-making and efficiency.
• Sustainability in supply chains has evolved into a strategic imperative driven by consumer and investor demands, with technology playing a key role, as highlighted by a recent research underscoring how sustainable practices can mitigate environmental impact and enhance economic efficiency.
• AI is revolutionising logistics by improving last-mile delivery, driver management, customer service, and sales management, though companies must ensure AI tools are business-specific and based on a solid understanding of workflows.

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.