As we transition deeper into 2024, the ocean freight market continues to face significant disruptions. Freight rates have experienced sharp declines on key trade routes, with Shanghai to the U.S. spot rates dropping by over 30% since mid-year due to reduced demand and increased capacity. However, regions like South and Central America are forecasted for robust growth, with trade volumes expected to rise by up to 6.5%. Global shipping capacity is set to expand by 10%, though challenges like port strikes and rerouted vessels around the Cape of Good Hope have caused longer shipping times and higher operational costs.
Regional disparities in trade growth have become more pronounced, with South and Central America leading the way, while the Eurozone and North America grapple with weaker demand and ongoing port congestion. Upcoming industrial actions in the U.S., notably a potential strike on the East and Gulf Coasts, could disrupt nearly half of the country’s imports. For businesses in Oceania, this could result in longer transit times and increased shipping costs, further straining operations across key trade lanes.
In Oceania, economic outlooks in Australia and New Zealand reflect sluggish growth. Australia is experiencing a stagnating economy with rising fuel costs and subdued consumer spending. Similarly, New Zealand’s recovery from recession remains fragile, with rising inflation and weak retail sales. The broader trade landscape in the region is also slowing, impacted by softer global demand for exports, such as iron ore and agricultural products, and a trade imbalance in New Zealand.
On the regulatory front, new IMO regulations aimed at reducing carbon emissions are pushing carriers to adopt greener technologies, increasing operational costs in the short term. In parallel, the air freight market has seen price increases, particularly from Asia Pacific and North America, alongside capacity constraints due to the slower growth of the widebody aircraft fleet. Looking ahead, businesses should prepare for continued volatility and disruptions in both ocean and air freight markets as 2024 progresses.
Embrace Flexibility: the key to mitigating these disruptions and black swan events will be flexibility. Strategies such as rerouting through less congested ports, utilizing air freight for high-value goods, and building inventory buffers will help navigate these unpredictable times.
Our Team of experts can help you craft a strategy that will work for your business:
Kerry Logistics Network was delighted to receive the ESG Benchmark Award – Silver Award and the Outstanding Sustainability Dividend Award at the ESG Achievement Awards 2023/2024, which marked the third consecutive year that KLN has been recognised by the Awards for its exceptional Environmental, Social and Governance and sustainability performance.
As we move further into 2024, the ocean freight market is navigating a series of ongoing disruptions. Freight rates, while volatile, are declining on key routes such as Shanghai to the US, where spot rates have dropped by over 30% since mid-2024. This decline is largely driven by weakening demand, excess capacity, and rerouting challenges around the Cape of Good Hope. However, certain regions, particularly South and Central America, continue to show strong growth, with trade volumes projected to increase by up to 6.5%.
A key factor behind these disruptions is the unexpected rise in demand for certain routes, such as those leading to South and Central America. These regions are forecast to experience trade volume growth between 5.5% and 6.5% throughout 2024, positioning them as some of the fastest-growing markets globally. In contrast, the Eurozone and North America are expected to see weaker growth, hindered by persistent port congestion and labor shortages.
As 2024 progresses, the ocean freight market faces a complex environment of shifting demand, capacity constraints, and regulatory changes. Freight rates are witnessing notable declines on some key routes, particularly between China and the US. For instance, spot rates from Shanghai to the US have plummeted by more than 30% from July to September, surpassing traditional trends. This significant drop stems from weakened demand in the latter half of 2024 and increased shipping capacity. Despite some improvements in port congestion, trade lanes like the Far East to Europe still reflect uneven demand. On specific routes, such as the Far East to South America East Coast, spot rates have surged by over 50%, driven by robust demand and increased carrier capacity.
Global shipping capacity is expected to grow by 10% in 2024 as carriers reroute vessels around the Cape of Good Hope, bypassing continued instability in the Red Sea and Suez Canal. This detour, however, extends shipping times, increases fuel consumption, and inflates operational costs. Compounding these issues, strike actions in major European and US ports are causing further delays, leading to blank sailings and disrupted carrier schedules worldwide. One of the most pressing threats to global supply chains is the scheduled US East and Gulf Coast port strike on October 1, 2024. The International Longshoremen’s Association (ILA) is set to halt operations at over 36 ports, which could disrupt nearly half of the US's monthly imports. In response, carriers have introduced contingency surcharges of $500 to $1,000 per TEU to mitigate potential costs.
This strike holds significant implications for businesses in Oceania. Australian and New Zealand companies, which are heavily reliant on US imports and exports, are likely to experience longer transit times and increased shipping costs. The strike may also prompt shippers to redirect cargo through West Coast or Canadian ports, but congestion at these alternative gateways is expected to rise, further complicating operations.
Beyond operational disruptions, the shipping industry is also grappling with regulatory changes aimed at reducing carbon emissions. New International Maritime Organization (IMO) regulations are pushing carriers to adopt greener technologies, with industry leaders like Maersk and MSC heavily investing in sustainable solutions. While these innovations are expected to enhance efficiency and reduce environmental impact in the long term, they are contributing to higher operational costs in the short term. Oceania-based businesses should prepare for fluctuating freight rates as carriers adapt to these new regulatory standards.
Looking ahead to the remainder of 2024, the ocean freight market is expected to remain challenging. While demand on trade lanes to South and Central America remains robust, weaker economic performance in regions like the Eurozone and China may suppress overall shipping volumes. For businesses in Oceania, delays and higher costs are anticipated, particularly with the looming US port strike and growing congestion along alternative routes.
Australia's economic outlook in September 2024 continues to reflect a prolonged period of stagnation. The Reserve Bank of Australia (RBA) has opted to maintain interest rates, citing a lack of consumer confidence and subdued household spending. While inflation remains elevated, hovering around 4%, the primary drivers are rising fuel costs and persistent supply chain disruptions. Retail sales saw little improvement from July's flat figures, with electronics, motor vehicles, and household goods sectors being particularly affected. Despite strong population growth, which typically boosts demand, consumer spending has remained conservative, and businesses are reluctant to invest amidst this uncertainty.
In New Zealand, the economic landscape presents similar challenges. Inflation is expected to rise further in the third quarter, with the Consumer Price Index (CPI) forecasted to increase by 3.3% by the end of September. Retail activity in the country has been weak throughout 2024, with second-quarter retail sales posting a significant decline. Sectors such as food and beverage services, clothing, and electronics have been hit the hardest. While the country has technically emerged from a recession, the recovery remains tenuous, marked by minimal GDP growth and a volatile export market. Economists are particularly concerned about high household debt levels and the impact of ongoing inflation on consumer purchasing power.
On the trade front, the Oceania region continues to experience moderate growth, although there are signs of deceleration compared to earlier in the year. Australia's trade relationship with China remains pivotal, but softening global demand for key exports like iron ore and agricultural products has slowed overall export growth. At the same time, imports from Asia, especially China, have seen modest growth. In New Zealand, trade imbalances remain a concern, with imports consistently outpacing exports. The combined effects of inflation, high import prices, and a fragile global economic environment have dampened the region’s overall trade prospects for the rest of 2024.
An impending strike on U.S. East and Gulf coast ports is set to disrupt the global supply chain, with scores of ships en route forced to anchor offshore until operations resume. Even if the strike lasts just a week, the effects are expected to ripple into 2025, as ships delayed at U.S. ports will affect global shipping schedules, especially for routes returning to the Far East. Some vessels might reroute to Canada or Mexico, but most will wait out the strike, causing significant port congestion.
The first vessels expected to be affected include major containerships, such as the Monte Tamaro, which is slated to arrive at Port Elizabeth, New Jersey, on October 1, the expected strike start date. Delays could escalate, further straining U.S. importers and exporters, as 16% of global container ships serve the U.S. East and Gulf coasts. This potential strike adds to the existing pressure on an already fragile supply chain, compounding economic concerns.
While government intervention may avert a prolonged shutdown, any strike of this scale could cause toxic congestion, disrupting U.S. trade flows and damaging the broader economy. Some experts suggest that President Biden may invoke the Taft-Hartley Act to end the strike if it persists, but the uncertainty has already put shippers and carriers on edge.
The US Federal Maritime Commission (FMC) has warned carriers and terminal operators against profiteering from unfair detention and demurrage (D&D) charges amid the disruption from an east and Gulf coast port strike.
If you would like to discuss potential workarounds to these disruptions or explore alternative logistics solutions, please get in touch with us.
Chittagong Port, Bangladesh's main trade hub, is experiencing severe delays due to a customs system failure caused by a software update. The malfunction has left customs officials unable to process import and export documents, significantly slowing port activities. As a result, several ships are now queuing at the outer anchorage, waiting for clearance.
The issue has led to a backlog of import bills and is causing demurrage costs for importers. Local industries are facing supply shortages, and if the problem persists, disruptions could worsen as customs agents threaten to halt their work. A solution, including the creation of a backup server, is being sought to avoid further economic impacts.
Check our snapshot for a quick glance on space, rate, equipment and transit times for Oceania
Air cargo rates have surged in the first half of September, fueled by rising spot rates from Bangladesh and Japan and an uptick in tonnage from Dubai, as reported by WorldACD Market Data.
Global air cargo volumes increased by 4% during week 37 (September 9-15), compared to the previous week, with a 5% rise in shipments from Asia Pacific, 6% from Central and South America, and a 10% rebound from North America following Labor Day on September 2. The average global shipping rate reached $2.58 per kilogram, reflecting a 1% increase from Asia Pacific, although this was partially offset by a 2% decline from the Middle East and South Asia.
Despite these fluctuations, rates from both regions remain significantly higher year over year, up 24% and 53%, respectively. Overall, global air cargo prices have risen 14% compared to last year and are more than 50% above pre-pandemic levels from September 2019.
Australia has implemented new air cargo security regulations for shipments from European and CIS countries, following similar moves by the US and Canada. Effective from September 26, air cargo on passenger flights bound for Australia must originate from shippers with an Established Business Relationship (EBR). Cargo from unknown senders cannot be transported on passenger flights and must be moved on freighters, subject to extra security measures. These changes could impact small and medium-sized enterprises in the affected regions due to the heightened compliance requirements.
The airfreight sector is grappling with a shortage of capacity as the growth in widebody aircraft deliveries has slowed significantly. Supply chain disruptions and issues with aircraft engines have impacted both passenger and freighter fleets, limiting the availability of planes for cargo conversions. As a result, prices for widebody aircraft, such as the A330ceo and Boeing 777, have surged. This has led to heightened competition for freighter capacity, as the global demand for air cargo continues to outpace available supply.
Cairns Airport has once again been named 'Airport of the Year' at the Australian Aviation Awards, marking the second consecutive year it has received the honor. Key factors behind this achievement include their rapid flood recovery in December 2023 and significant infrastructure improvements, such as a $55 million international terminal redevelopment. Other noteworthy initiatives include carbon-neutral targets, cargo capacity growth, and their active role in community partnerships and sustainability projects.
The airport’s CEO, Richard Barker, attributed this success to the team's dedication to both the industry and the local community. Among their impactful projects are a sustainability-linked loan focusing on biodiversity, a waste recycling program, and training initiatives like the Licensed Aircraft Maintenance Engineers cadetship. Cairns Airport’s continued progress exemplifies its commitment to fostering aviation while supporting the region.
Etihad Cargo and SF Airlines have announced plans to further expand their partnership through a joint venture that will offer a “unified logistics solution”. The new partnership will see the two carriers offer increased aircraft capacity, improved transit times, interconnected networks and the expanded distribution of SF Express’s international express services. The two companies said that the next phase of the partnership will involve finalizing the scope of the collaboration, with “updates to be provided in the near future and a definitive agreement to be signed shortly”. The agreement was announced at SF Airlines’ headquarters in Shenzhen on September 18 where key representatives from both airlines formalized the joint venture plans.
The online shopping-fueled surge in air cargo demand looks set to continue despite US government attempts to tighten import regulations for e-commerce. Xeneta figures show that e-commerce demand is up by around 30% this year while this summer there were more than 37m new downloads of the TEMU app alone in a single month. Xeneta figures also show that the average air cargo spot rate from China to the US in the week ending 8 September was up 30% year-on-year at $4.53 per kg.
An IT systems update released in September had unforeseen consequences across DPW terminals in VIC, SYD and Fremantle. During the outage, truck turnaround times were affected, creating a backlog and extra shifts to sort new operational slots. Road congestions worsened delays, making the backlog worse and taking several days to recover.
During September, high winds in VIC and NSW caused operations to halt on different days, resulting in disruptions, delays and truck processing. Special care was taken at terminal facilities to guarantee minimal damages to containers and cargo during the unforeseen circumstances.
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The United States has introduced an Emergency Amendment (EA) requiring new data to be transmitted to U.S. Customs and Border Protection (CBP) before cargo is loaded onto aircraft bound for U.S. territories under the Air Cargo Advance Screening (ACAS) program.
Key Changes
The U.S. CBP now mandates additional elements to be included in the supply chain information provided. However, current systems, capabilities, and industry standards across the supply chain are not yet equipped to verify and communicate this information to CBP effectively. It’s important to note that this is an industry-wide requirement, affecting all air operators, freight forwarders, known consignors, regulated agents, and 3PL entities (including self-reporters).
Air New Zealand Cargo is collaborating with its Cargo Management Service provider to develop a phased implementation plan to upgrade the current system in line with the EA’s requirements. The International Air Transport Association (IATA) is also involved, working with U.S. CBP to adapt messaging formats and standards to meet these new compliance needs and maintain consistency across the industry.
The Freight & Trade Alliance (FTA) and the Australian Peak Shippers Association (APSA) announced the Federal Government's approval of Melbourne Airport’s third runway. This key development will significantly enhance the freight and air cargo capacity in Victoria, positioning Melbourne to better meet the growing demands of the industry. The runway, scheduled to be operational by 2031, will offer new opportunities for exporters, logistics providers, and related businesses.
Melbourne Airport plays a pivotal role in the nation's freight exports, handling over 40% of Australia’s air cargo. With $1.8 billion in goods, including time-sensitive exports like fresh produce and pharmaceuticals, moving through the airport annually, the new runway will support this demand by enabling simultaneous take-offs and landings. This expansion will reduce delays and improve service levels, ensuring Melbourne remains a critical hub for air cargo, especially as its population and market demand grow.
The third runway will further strengthen Melbourne’s position as a curfew-free, 24/7 operation valued at $6.5 billion annually. As demand for air freight continues to rise, particularly with the surge in e-commerce, this expansion is essential for maintaining competitiveness. New direct routes to global markets such as Asia, North America, and the Middle East will create fresh opportunities for Victorian exporters, ensuring Melbourne stays at the forefront of Australia’s air freight logistics industry.
The New Zealand Customs Service is currently reviewing the fees for goods entering the country, a move that could bring significant changes to importers, exporters, and businesses involved in eCommerce. While this proposal is still under review and pending ministerial approval, it is essential for businesses to understand the potential impact and take part in the consultation process.
For many Kerry Logistics Oceania customers, particularly those involved in traditional freight, the proposed changes could reduce entry costs, bringing notable savings. However, businesses engaged in eCommerce may face a significant rise in costs, making it crucial for those affected to stay informed and consider making their own submissions on the proposal.
NZ Customs has convened an advisory group made up of industry leaders to offer technical insights into these changes. Our team is directly involved in this process, with one of our leaders chairing the group, ensuring that the interests of the logistics and freight sectors are well-represented. We encourage all customers to review the details of the proposed changes and take advantage of this opportunity to have a say in how the new fee structure may affect your business.
For further details, including submission guidelines, visit the NZ Customs website here.
The Australian government has announced the successful conclusion of negotiations on the Australia-United Arab Emirates (UAE) Comprehensive Economic Partnership Agreement. This significant trade pact is set to boost Australian exports by an estimated $678 million annually and further strengthen Australia's trade relationship with the UAE, already valued at $9.9 billion in two-way trade in 2023.
Key Australian exports to the UAE, such as alumina, meat, dairy, seafood, and agricultural products, will see over 99% of these goods enter the UAE tariff-free. This is projected to result in tariff savings of $135 million in the first year, increasing to $160 million annually as the agreement is fully implemented. This deal opens up new opportunities for exporters and is a key step toward expanding Australia’s reach in the Middle East.
Additionally, the agreement will benefit Australian importers by reducing tariffs on goods from the UAE, including furniture, copper wire, and plastic. Households and businesses alike can expect annual savings of around $40 million, making this a win-win for both countries and all sectors involved.