Significant shifts and challenges have marked the maritime shipping landscape in Oceania. Blank sailings, which peaked at 21% early in 2023, have since stabilized, indicating a more consistent shipping schedule for the region.
However, the upcoming China's Golden Week, starting October 1st, is expected to influence global supply chains, with potential disruptions in production and logistics due to factory shutdowns and limited freight services. Oceania's ocean freight updates highlight tight space with carriers' booking utilization reaching up to 100% for some destinations, emphasizing the need for businesses to place bookings well in advance.
Additionally, the introduction of the Green Shipping Corridor by ports in Los Angeles, Long Beach, and Shanghai aims to reduce emissions on major container shipping routes, reflecting a broader industry move towards sustainability.
Shipping companies sometimes cancel or adjust their planned trips due to various factors such as changing seasonal demands, trade imbalances, port overcrowding, labor disagreements, harsh weather conditions, or unexpected events like the COVID-19 outbreak. During 2021-2022, even though carriers introduced additional trips to cater to the surging demand, supply chain disruptions led to ships being trapped in port lines. This resulted in many cancellations, even with the expanded capacity. However, these "blank sailings" played a pivotal role in preventing a sharp decline in spot rates, ensuring that freight rates remained above the carriers' break-even levels. Today, blank sailings are more systematic than the random cancellations of the previous year. They serve as a tool to balance market rates and apply upward price pressure on specific trade routes, driven by booming market demand and strategic decisions by carriers.
The shipping industry is witnessing a rapid capacity growth, primarily due to the launch of new mega-ships. This growth is surpassing the current demand, putting pressure on trade lanes that are already saturated. After reaching a low in August 2021, blank sailings saw a resurgence in 2022 as carriers fine-tuned their capacity in line with market dynamics. The blockage of the Suez Canal in March 2022 by the Ever Given container ship led to significant delays across the industry. At the same time, the Chinese New Year celebrations in February 2022 saw a dip in China's exports, prompting carriers to cancel trips for better capacity management. Moreover, ports on the U.S. West Coast grappled with issues like congestion, decreased efficiency, increased import volumes, labor conflicts, and equipment scarcity. This forced carriers to modify their sailings to sidestep further delays and additional expenses.
Blank sailings peaked at 21% early in 2023 but then dropped to 10% in weeks 8 to 12, indicating industry stabilization. Throughout the year, blank sailings have remained low, reaching 4% in weeks 25 to 29, signifying a more consistent schedule.
Zooming out to the global perspective, the worldwide order book for ship capacity is approaching 30% of the current active fleet, crossing the 7 million TEU mark. According to forecasts by Drewry, by the end of this year, there will be a delivery of 2.5 million TEUs, with an anticipated addition of 3 million TEUs in 2024. Experts in the field predict that supply will outpace demand for the upcoming 18 months.
Current projections indicate a 2% rise in global demand this year, whereas supply is expected to grow by 4%. By 2024, the industry predicts a 7% surge in capacity, contrasting with a 3% increase in demand. It's significant to highlight that about 65% of the new orders are for ships with a capacity of over 15,000 TEUs, mainly targeting the Asia-Europe routes. The industry is currently seeing the arrival of these colossal vessels, including OOCL's ships with a 24,188 TEU capacity and Ocean Network Express's vessels boasting 24,136 TEUs. Additionally, the 2M Alliance, a collaboration between Maersk and Mediterranean Shipping Co., introduced two of these giant ships to their fleet in early June.
To handle the excess capacity of container ships, carriers are expected to adopt a mix of strategies. These include slow steaming, retiring older ships, and implementing blank sailings. Slow steaming means reducing ship speeds to save on fuel, aligning capacity more closely with demand. By scrapping older, less efficient ships, carriers can permanently cut down on surplus capacity.
However, blank sailings present considerable hurdles for businesses dependent on sea freight. They can disrupt product shipments, leading to potential stock outages, production hold-ups, and unhappy customers. This unpredictability makes stock management tricky, and the ambiguity around missed ports and scrapped schedules hikes up the costs for shipping firms, underscoring the wide-ranging effects on supply chain operations. Such unpredictability pushes businesses to either order products earlier or keep larger stockpiles, as the just-in-time supply model becomes less reliable. These changes can drive up operational expenses, potentially fueling inflation in the wider economy.
Moreover, the ripple effects of blank sailings touch the return trade as well. When headhaul sailings are blanked, the ships and containers that usually come back loaded with goods are absent. This unexpected trade disruption, which wasn't the primary concern when deciding on blank sailings, adds another layer of challenges for shippers, making it even harder to maintain a streamlined supply chain.
Opting for shipper-owned SOC containers during blank sailings can offer advantages over carrier-owned COC containers. SOCs provide better control over container schedules, cutting down on the extra charges that often pile up during port delays. They also allow for more flexibility in rerouting and prioritizing shipments, streamlining logistics, reducing rerouting expenses, and cutting down on overall container leasing costs, leading to faster container turnaround.
For container providers, blank sailings can throw off container turnaround times, resulting in imbalances like container shortages in some places and overstocks in others. To navigate these issues, firms might need to keep a bigger fleet to offset these unpredictable disruptions, leading to higher operational costs and more expenses related to repositioning containers for balanced stock levels. Moreover, decreased fleet usage can result in lower revenue, putting financial pressure on shipping companies. It's crucial, therefore, to adeptly manage and adjust to the effects of blank sailings in the container shipping sector. The implications of blank sailings are vast and deeply felt across the maritime shipping landscape.
The composite index is the weighted average of all routes: the average spot freight rate of the specific route is divided by average price of its base period. The result multiplies its weighting and its base period index to obtain a value of each route.
The composite index has decreased by 5.2% last week and 67% YOY. The average composite index for the ytd is sitting at $1756/F which is $923/F lower than 10 year average.
A reminder on the upcoming China's Golden Week, starting on Oct 1st through Oct 7th. This holiday can influence global supply chains, affecting businesses worldwide.
From Oct 1st, there is a weight mis-declaration fee applicable to any import containers with a weight variance greater that one metric tonne compared to the declared weight. This is related to VGM.
By September 2023, Jakarta's Soekarno-Hatta Airport is set to become the busiest airport in Southeast Asia, closely competing with Singapore's Changi Airport, according to data from the Official Airline Guide (OAG). The report showed that during September, Soekarno-Hatta Airport served 3.13 million passengers, a 2% decrease from the previous month, while Changi Airport in Singapore served 3.12 million passengers. Kuala Lumpur Airport in Malaysia ranked third. Several airports from Indonesia, including Bali's I Gusti Ngurah Rai Airport and Makassar's Sultan Hasanuddin Airport, also made the list.
Given the interconnected nature of global trade, changes in one region can have cascading effects on others. Oceania businesses engaged in international trade should stay updated on these changes to ensure compliance and to strategize effectively.
The Australian Department of Agriculture Fisheries and Forestry advised on 14 September that two treatment providers, Fumigation Pest Management (AEI: SG4016SB) and National Fumigation (Charleston) (AEI: US4024SB), associated with the Brown Marmorated Stink Bug (BMSB) treatment during its risk season, are currently under review due to signs of non-compliance. Both companies are now listed as ‘under review’ in the Offshore BMSB Treatment Providers Scheme. Consequently, they are restricted from treating consignments headed for Australia and New Zealand. Any consignments they've treated, including those in transit, may undergo actions deemed necessary by the department to manage biosecurity risks. See the full notice here.
The UK government announced further postponements for a mandatory UKCA label, allowing the European CE marking to continue being valid in 2023 and can still be used until December 31, 2024. Oceania exporters to the UK might benefit from this extension, giving them more time to adjust to the new labeling requirements.
Starting from October 2023, the EU will introduce levies for the import of certain goods that cause high carbon emissions during production. Oceania exporters dealing with such goods might face additional costs when trading with the EU.