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 month of May began with yet more announcements of significant General Rate Increases due to strong import demand and renewed long-term contracts, leading to near-full vessel capacity. The escalating Red Sea crisis has caused ocean freight rates to surge, resulting in severe capacity crunches and equipment shortages. Port congestion and delays are widespread, with carriers announcing blank sailings to manage fluctuating capacity. Despite recent market stabilization, effective capacity remains a critical issue, with significant diversions around the Cape of Good Hope.

Unseasonal demand for ocean freight from Asia is rising due to restocking cycles and preemptive peak season demand from importers. This has exacerbated existing capacity shortages, leading to increased ocean rates and port congestion. Southbound trade from Asia to Australia has seen multiple General Rate Increases, New Zealand faces capacity issues despite softer market conditions. Any growth in vessel capacity for Oceania this year appears unlikely.

Australia's rental inflation is projected to hit its highest level since the global financial crisis, driven by strong migration, low rental vacancy rates, and limited dwelling investment. Rental price growth is expected to reach 10% this year and remain elevated until 2026. Concurrently, Australia's unemployment rate rose to 4.1% in April 2024, with increases in both full-time and part-time job seekers. New Zealand's economy is also experiencing a downturn with rising unemployment and declining GDP, leading to expectations of continued restrictive rates to control inflation.

Air cargo demand remains high, particularly from Middle Eastern and Asian markets, driven by disruptions in ocean freight and rising e-commerce volumes from platforms like Shein and Temu. The International Air Transport Association (IATA) reported a 10.3% annual growth in air cargo demand for March 2024. Meanwhile, upcoming observance of the EID Festival and ongoing quarantine documentation processing delays continue to impact supply chains. The introduction of the AusTreat scheme aims to enhance pre-border biosecurity measures, improving treatment consistency and clearance times.

 

Business Tip

Space is King. As both the sea freight and air freight markets continue to be affected by Black Swan events and constant disruptions, price instability and limited supply, and overall uncertainty on capacity deployment, ensuring space contracts or booking in advance are paramount to guarantee uninterrupted supply chains. Maintain this at the forefront of your planning, as there is little room for pricing negotiations as demand escalates and the supply remains virtually unaltered.

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

 

Spotlight

Kerry Asia Road Transport (KART)

Road Transport Solution Connecting China and ASEAN

Our unique cross-border road transportation network connects China to ASEAN, providing cost-effective long-haul trucking and door-to-door delivery services even in the most remote areas. With the largest road transportation network and hub operations across Greater China and ASEAN, we can deliver your products faster than anyone else- on time, on budget and with maximum safety.

Market Trend

The month of May began with yet more announcements of significant General Rate Increases. This spike in spot shipping rates is driven by robust import demand and the renewal of long-term fixed contracts, leading to vessels operating at or near full capacity.

The crisis in the Red Sea region is escalating more rapidly than anticipated. Since the start of May, ocean freight container spot rates have surged on major global trade routes. The market is experiencing a severe capacity crunch due to this crisis, compounded by heavy equipment shortages, particularly for 40ft high cube containers. These disruptions are causing significant bottlenecks and pressure on both Beneficial Cargo Owners (BCOs) and Non-Vessel Operating Common Carriers (NVOCCs). Port omissions and congestion are wreaking havoc on equipment planning, with nearly all carriers, facing equipment shortages. Vessel waiting times at ports now range from three to fourteen days due to congestion, resulting in widespread schedule delays.

Some BCOs are seeking additional quotes from carriers and turning to NVOCCs for assistance, reminiscent of the 2021-22 pandemic period. Carriers have announced blank sailings for June, reducing capacity by 15-20%, which is further exacerbating week-to-week capacity fluctuations. Current market demand is defying all projections made six to nine months ago.

The recent subsidence in spot market pricing suggests the market has stabilized somewhat, indicating that capacity levels are becoming more adequate. However, diversions around the Cape of Good Hope are mitigating the overcapacity burden on carriers but not eliminating it. To maintain previous service levels, more ships are needed. Hence, headline fleet growth is not the sole metric to assess the global supply and demand balance. Effective capacity, which includes fleet growth, changes in operating speed, port productivity, and other variables, must be considered to measure fleet utilization efficiency.

Containership diversions around the Cape of Good Hope have now surpassed the 100-day mark, and a full-scale return to Suez Canal transits is not imminent. Discussions with liners indicate that Suez diversions have provided only temporary relief, necessitating significant capacity cuts as a priority.

Experts predict a 3% increase in market demand for 2025 compared to 2024, with the containership fleet expected to grow by 8% in 2024. More ships will be required to deliver the same level of service as before.

In the face of such disruptions, supply chain resilience is crucial for businesses. Digitization offers significant benefits, including enhanced visibility, streamlined operations, and improved risk management, despite the challenges in its implementation.

You might want to read: freight forwarder's guide to peak and slack seasons: understanding ebb and flow

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

Unseasonal demand for ocean freight out of Asia is rising, driven by the potential start of a restocking cycle and importers pulling forward peak season demand due to concerns over labor issues or Red Sea disruptions later in the year. This increased demand is adding pressure to an already strained container market, exacerbated by diversions around the Red Sea.

Despite fleet growth from new vessels being deployed to rotations and accommodating longer journeys around the southern tip of Africa, carriers still face a capacity shortage. This shortage results in late arrivals and port omissions as carriers skip some port calls to adhere to weekly schedules at major hubs. These delays and omissions are contributing to empty container shortages and congestion, particularly at some ports in China, as well as in Singapore and Malaysia.

The combination of rising demand, tight capacity, and delays is pushing ocean rates up from their already elevated levels, adjusted for Red Sea disruptions in April. These increases in ocean rates and ongoing delays could shift some demand to air freight, though a significant shift has yet to occur.

Significant increases in southbound trade from Asia to Australia have been observed, with four successful General Rate Increases (GRIs) since March and another GRI announced for June by ANL, COSCO, and OOCL. In contrast, the market in New Zealand has been relatively softer. However, recent schedule disruptions have reduced capacity, leading to some overbooked sailings, though not to the same extent as in Australia. There is pressure to increase rates in New Zealand to narrow the gap between Australian and New Zealand market rates, with carriers emphasizing service continuity and equipment availability.

Given these dynamics, an increase in capacity for Oceania this year is unlikely, and the prospect of additional loaders during the peak season remains slim. Regarding RES, you can see our latest update here.

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:

Australia's Rental Inflation Surge

Australia's rental inflation is projected to soar to its highest level since the global financial crisis and remain elevated until 2026. This will intensify the cost-of-living pressure for the one-third of Australians who rent. Investment group Jarden predicts rental price growth will accelerate beyond its current 15-year high of 7.8% due to strong migration, low rental vacancy rates, and limited dwelling investment. Jarden forecasts rental inflation in Australia to reach 10% this year – a peak not seen since the GFC in 2008 – and then stabilize at 8% through 2025, remaining high into 2026.

In April 2024, Australia's seasonally adjusted unemployment rate rose to 4.1%, up from a revised 3.9% in March. This marks the highest unemployment rate since January, with the number of unemployed individuals increasing by 30,300 to 604,200. The rise includes 13,700 more people seeking full-time jobs and 16,600 more looking for part-time work. Despite this, employment grew by 38,500 to 14.3 million, surpassing expectations of a 23,700 increase and reversing a small decline in March. Part-time employment increased by 44,600 to 4.45 million, while full-time employment decreased by 6,100 to 9.84 million. The participation rate edged up to 66.7% from 66.6% in March, while the underemployment rate rose slightly to 6.6% from 6.5%, still 2.1 points lower than in March 2020. Monthly hours worked in all jobs remained unchanged at 1,962 million.

New Zealand's Economic Downturn

New Zealand's economy is experiencing a noticeable downturn, with rising unemployment, declining GDP, and falling economic sentiment. Economists caution that the situation may be worse than the headline figures suggest. GDP has seen four slight contractions in the last five quarters, indicating a possible soft landing as the economy slowed. Despite a record influx of migrants, per capita GDP was down 2% in December compared to September, and 2.8% over the year to December.

The New Zealand central bank is expected to maintain its hawkish stance amid high inflation, despite signs of a cooling economy. Many economists believe the board will emphasize the need for restrictive rates to bring inflation back within the target range of 1 to 3%. Meanwhile, traders are cautiously awaiting the May adjustment of key lending rates in China, a major trading partner. A modest rise in US futures has also been noted, especially after Wall Street's Dow Jones closed above 40,000 for the first time, ahead of the Fed's latest meeting minutes release this week.

Ocean Freight Updates

• Carriers booking utilization is over 100% to AU, 90% to NZ. Space is full in May 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 3 weeks in SIN due to renewed congestion, under their FIFO operational policy.
• ANL is facing equipment shortages from CN/SEA.
• 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.
• The composite Index once again jumped way over 100% YoY, & 16% WoW.
• Despite record newbuilding deliveries this year, and 1.14 million TEUs delivered so far, the Red Sea crisis has soaked up all available tonnage
• Given that blank sailings had been the industry’s prime tool to address sharply declining freight rates, their temporary absence indicated that carriers appeared to have prioritized short-term revenue gains once again.
• It is witnessed that there is much more unstable operating environment in Asia-Europe than on Transpacific.
  • For Asia-North Europe, the ratio of blanked capacity essentially doubled from March to April, from a -12% blank share to -21%.
  • For Asia-Mediterranean we see the opposite, as the share of blank capacity goes from -17% in March to -8% in April.
  • For Transpacific, we see a much more stable development, with a capacity reduction of around -14% to the West Coast, and -11% to the East Coast, for both March and April 2024.
• Per Sea Intelligence’s CEO, Alan’s view “There is sufficient capacity to divert vessels around Africa, but not enough additional slack to deal with other major disruptions. Port congestion therefore needs to be brought under control, or spot rates could escalate even further, and quite quickly”
• Worsening port congestion has removed more than 2% of container vessel supply since March, with Singapore, Dubai and the Mediterranean as congestion hot spots, while Asian box availability remains tight. Shanghai and Qingdao are also experiencing a huge build-up of boxships at anchor. Dwell times at Shanghai, the world’s largest boxport, are now at three-year highs. 
• While we see tightness with all carriers, MSC is the least affected, thanks to its massive fleet expansion.
• There is an update on the Red Sea Crisis (RES), regarding Red Sea Contingency/Emergency surcharges applied by carriers. You can check the latest update here.

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

Port of Singapore reaches critical Congestion

The congestion at the Port of Singapore has reached 2 million TEUs. This has resulted in equipment shortages and a lack of tonnage, leading to potential cargo delays and increased freight rates reminiscent of the pandemic period.

As Singapore, the world’s second-busiest container port, experiences a spike in congestion, carriers are extending charter agreements and ordering new containers in preparation for a potentially prolonged peak season. Currently, 6.8% of the global fleet is impacted, with Singapore becoming a major congestion hotspot.

The Shanghai Containerized Freight Index (SCFI) has surged by 42% over the past month, with further increases expected in June due to new surcharges and rate hikes by carriers. Berthing delays at Singapore have extended up to seven days, with 450,000 TEUs awaiting berthing.

In response to this severe congestion, some carriers have omitted planned calls at Singapore, shifting the burden to downstream ports that will need to manage additional volumes. This has led to vessel bunching, spillover congestion, and schedule disruptions at these ports.

The current situation has already removed over 400,000 TEUs of vessel capacity from circulation in the past week alone, with further critical delays anticipated as the peak season progresses.

Space is King again

The imbalance between supply and demand is ever present. Capacity bought by carriers and new ships are also arriving, but with the ongoing disruptions worldwide, we are not seeing effective capacity deployed. As the momentum goes on, we will see rate increases through slow steaming, blank sailings, GRIs, alternative route costs and service rationalization methods. Trades such as TPEB, Asia-Oceania, Asia-EU are suffering from incremental pricing. Q2 is expected to remain on the high freight side, with a higher focus on SPOT rates. As the capacity is still being deployed, securing space is more important than ever to maintain consistency and time lines in supply chains.

A surprisingly strong market, plus lower vessel capacity due to the Red Sea crisis, is creating a shortage of both ships and containers, specially out of northern China.

You might want to read:

• Should you source directly from carriers or go with freight forwarders?

• Whats the difference between 3pl, 4pl, 5pl?

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

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

Air Freight Updates

Air cargo tonnages and rates from key Middle Eastern and Asian markets remain significantly elevated. Strong demand combined with disruptions in ocean freight services is leading to limited capacity on key lanes, driving up rates on several major intercontinental routes.

According to the latest weekly figures and analysis from WorldACD Market Data, global tonnages increased by an additional 2% in week 20, following a similar rise the previous week, after an 8% drop at the start of May due to the Labour Day holidays. Average global rates have remained relatively stable, increasing by just two cents to $2.48 per kilo in week 20 (13 to 19 May). This represents a year-on-year (YoY) increase of around 2% and is significantly above pre-Covid levels, up 40% compared to May 2019.

Globally, tonnages are up 9% YoY, with particularly strong demand from Asia Pacific (up 15%) and Middle East & South Asia (up 16%) origins. On a week-on-week (WoW) and two-week-on-two-week (2Wo2W) basis, average global and regional rates have remained relatively stable. However, compared to last year, average rates from Middle East & South Asia (MESA) are significantly elevated, up 45%. Rates to European destinations from MESA origins have remained more than double (+119%) their level from the same time last year for the past seven weeks, based on over 450,000 weekly transactions tracked by WorldACD.

Ecommerce continues to impact available capacity and rate levels for Airfreight

The International Air Transport Association (IATA) released data for March 2024, indicating strong annual growth in global air cargo demand. The surge of platforms like Shein and Temu, alongside TikTok's entry into online sales, is significantly disrupting global supply lines, with small and medium-sized shippers particularly affected.

Air cargo demand grew by 10.3% compared to March of the previous year. This contributed to a strong first-quarter performance, slightly exceeding the exceptionally strong first quarter of 2021 during the COVID crisis. With global cross-border trade and industrial production continuing to show a moderate upward trend, 2024 is poised to be a robust year for air cargo.

Volumes are moving away from the spot market, with April's spot market share at 41%, down 4 percentage points from a year earlier. Anticipating a busy Q4, shippers and forwarders are starting to plan ahead to manage capacity and demand effectively.

Air cargo looks to index-linked deals in response to a volatile market

Freight forwarders and shippers are increasingly turning to index-linked deals to navigate the current industry volatility. In a recent webinar hosted by data provider Xeneta and Tiaca, it was highlighted that supply chains are grappling with unpredictability and extended transit times in ocean shipping due to the ongoing Red Sea crisis.

Simultaneously, e-commerce volumes have surged since last summer, driven by the rise of platforms like Temu and Shein. These factors have led to increased volumes and rates on key trade routes from Asia and the Middle East, further contributing to industry volatility. The growth in e-commerce volumes is expected to continue, exacerbating the current challenges.

Melbourne Airport delivers for local jobs as the nation’s biggest air freight hub

 Melbourne Airport has announced that it is leading the nation as the hub for Australian exports, with more than $1.8 billion worth of locally made produce flown out of the airport to foreign markets, surpassing pre-pandemic levels. Data from Maritrade shows top product exported from Melbourne Airport by volume was fresh meat, with 15,649 tonnes delivered to foreign tables. Much of this cargo was delivered in the belly of passenger planes, highlighting the value of Melbourne Airport’s partnership with the Victorian Government to grow international airline capacity.

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

Customs, Inland Transport, Terminal and Regulation Updates

EID Festival Cut Off Dates

In observance of the upcoming EID Festival, Container Freight Stations (CFS) and Container Depots will have limited schedules during the duration (June 16th- 18th, 2024, depending on Moon sighting).

We suggest to take this into account to finalise your orders with suppliers and meet cut off dates to mitigate delays to your supply chain, should you deal with ports in countries that observe the festival.

Quarantine Documentation Processing Delays

Another reminder that delays and increased costs are still present at customs due to document processing delays.

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

AusTreat – A new pre-border biosecurity treatment provider assurance scheme

The Department of Agriculture, Fisheries and Forestry would like to provide notice regarding upcoming policy change. We are introducing a new pre-border treatment provider assurance scheme called AusTreat.

AusTreat is a government-to-industry scheme that will replace the existing Offshore BMSB Treatment Provider scheme and set the conditions for the regulation of pre-border biosecurity treatment providers.

AusTreat will increase the consistency and coverage of Australia’s regulation of pre-border treatment providers, keeping biosecurity risk offshore. 

Notable changes under AusTreat will include:

• Registered treatment providers must submit all treatment certificates, record of treatments and other treatment data into our treatment certificate portal, increasing assurance and improving clearance times for compliant treatments.
• Registration of pre-border treatment providers will change from a 1-year renewal process to a full registration process every 3 years.
• Only some information will need to be provided annually to maintain registration including:
  • calibration certificates
  • stewardship certificates for sulfuryl fluoride

What’s not changing:

• Import conditions
• The list of treatment providers
• BMSB seasonal measures

Note: AusTreat will not replace or impact the Australian Fumigation Accreditation Scheme (AFAS) as this remains unchanged as a government-to-government scheme.

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

• Tech vendors in freight transportation are focusing on AI to improve safety, productivity, and business intelligence, with companies like McLeod Software using machine learning for freight rate forecasting and other AI initiatives to enhance operational efficiency.
• Hai Robotics is revolutionising warehousing with its Autonomous Case-handling Mobile Robot systems and Autonomous Mobile Robots, improving storage density and picking efficiency, notably demonstrated at Anta Sports' warehouse.
• The global drone-powered business solution market is projected to reach $9.4 billion by 2030, driven by surveillance, data collection, and diverse applications in agriculture, logistics, and infrastructure inspection, with North America expected to lead in growth.
• Bear Cognition's Revenue Optimisation System for 3PL providers utilises AI-driven OCR to swiftly analyse competitor invoices, reducing processing time by 92% and boosting margin points by 5 - 7%, demonstrating a commitment to innovation in logistics.
• Snowflake's cloud-based analytics database, featuring multi-cluster shared data architecture and Snowpark ML for end-to-end machine learning, enables secure model deployment and management, enhancing scalability and performance in data analytics.
• Urbx launched a robotic inventory storage and retrieval system with TowerBots controlled by AI, offering speed, density, and scalability for order fulfilment, with double-deep storage and flexible software suitable for urban centres and supported by a global network of integrators.

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.