KONNECT - MARCH 2025

Contents

• Executive Summary & Business Tip
• Market Trend
• Spotlight
• Ocean Freight Updates
  • Ocean Freight Snapshot
• Air Freight Updates
  • Air Freight Snapshot
• Customs, Inland Transport, Terminal & Regulation Alerts

Executive Summary

Our first issue of Konnect is here! 2025 has started and hit the ground running.

The container shipping industry enters 2025 with a mix of stability and uncertainty. Despite an 11% fleet expansion in 2024, unexpected disruptions like Red Sea diversions and port congestion allowed carriers to maintain strong profitability. Now, a ceasefire in the region could prompt a return to Red Sea routes, reducing transit times but triggering volatility in freight rates. Overcapacity remains a key concern, with carriers likely to respond through fleet reductions, vessel scrapping, and blank sailings to manage supply-demand imbalances.

Shippers must also navigate significant geopolitical and economic shifts. The incoming U.S. administration’s trade policies, including new tariffs on imports from the EU, Canada, and Mexico, could reshape global supply chains. Additionally, concerns over multilateral trade agreements raise the risk of increased protectionism, prompting businesses to reassess sourcing strategies and explore alternative trade routes. Meanwhile, a restructuring of global shipping alliances, particularly the formation of the Gemini Cooperation and MSC’s standalone network, will redefine service patterns across major trade lanes.

Air cargo markets continue to evolve, driven by booming e-commerce and shifting capacity trends. China’s airfreight volumes surged nearly 20% in 2024, fueled by growing online retail demand. However, supply chain disruptions, sustainability regulations, and airline fleet limitations pose ongoing challenges. Contract and spot rate disparities are widening, making it crucial for shippers to balance long-term agreements with flexible options in response to market fluctuations.

In Oceania, economic conditions show signs of cautious recovery. Australia’s inflation outlook is improving, with the Reserve Bank of Australia adjusting its forecasts downward. New Zealand’s economy, while still fragile, is seeing a rise in business confidence and lower interest rates. Trade agreements with the UAE and Vietnam highlight continued efforts to diversify trade relationships and strengthen regional ties, offering businesses new opportunities for growth.

Sustainability remains a central focus, with ongoing discussions about carbon taxation and emission reduction strategies in the shipping industry. While environmental regulations push for greener supply chains, economic constraints and infrastructure limitations create barriers to large-scale adoption. As businesses navigate these complexities, staying agile with contract negotiations, capacity planning, and sustainability commitments will be essential for long-term resilience in a shifting global market.

 

Business Tip

Adapt to Shipping Market Volatility with Flexible Contracts: With freight rates and trade policies in flux, shippers should incorporate flexibility into their contract strategies. Consider a mix of short-term rate agreements and long-term commitments to balance cost stability with market responsiveness. Proactive planning and collaboration with logistics partners can help mitigate risks and maintain supply chain efficiency. KLN Oceania can help you discuss strategies and support you in negotiations.

Spotlight

Less Than Container Load (LCL) is a flexible and cost-effective solution for your logistics needs, saving costs and reducing carbon footprint. 

We offer tailored solutions that adapt to your needs, ensuring smooth and efficient shipping.

For New Zealand as a destination, we offer our own consolidation service.

 

Market Trend

Entering 2024, the container shipping industry was bracing for capacity oversupply, but instead, carriers thrived, posting profits that exceeded expectations outside of the pandemic years. Several factors contributed to this, including:

• Red Sea diversions that effectively removed capacity from the market.
• Increased port congestion, limiting operational efficiency.
• A surge in container demand helped offset the anticipated oversupply.

Despite the containership fleet growing by 11% in 2024, the impact of diversions and supply chain inefficiencies meant that carriers managed to maintain stability. This raises questions about how they will navigate 2025 with continued geopolitical uncertainties on the horizon.

Global freight rates (spot and contract combined) are expected to decline slightly in 2025, but volatility will persist.

 

Red Sea Ceasefire & Shipping Market Impacts: What Lies Ahead?

The recent ceasefire agreement between Israel and Hamas has sparked discussions about the potential return of container ships to the Red Sea, offering a glimmer of hope for more stable ocean freight routes. However, this development does not guarantee an immediate return to normal operations. Carriers will approach this cautiously, prioritizing crew safety and long-term security assurances before making significant shifts.

Cautious Return to the Red Sea Route

Carriers are expected to phase in their return, gradually increasing vessel sizes through the Red Sea. Industry experts predict that:

• Initial test runs will involve ships below 10,000 TEU.
• Larger 18,000-24,000 TEU containerships may take 1-2 months before resuming Red Sea transits.
• A full-scale return could disrupt current Cape of Good Hope routings, causing congestion at European ports and ripple effects across global supply chains.

The shift back to the Suez Canal could significantly impact freight rates, which have surged since the crisis. Spot rates on Far East-North Europe routes were up 426% in July 2024 compared to pre-crisis levels. If a transition happens faster than expected, rates will become highly volatile, initially dropping sharply before stabilizing.

*Number of containerships transiting Suez Canal

*Total capacity transiting Suez Canal

The Challenge of Overcapacity & Fleet Adjustments

If carriers revert to Red Sea transits, the overall global sailing distance will shrink, leading to a projected 11% drop in TEU-mile demand in 2025. This could create a significant overcapacity issue, requiring carriers to adjust their fleets to maintain balance. Some of the anticipated responses include:

• Fleet reductions: Carriers may need to remove 1.8 million TEUs from the market to stabilize rates.
• Ship scrapping: Older vessels retained during the crisis may be phased out. The containership demolitions-to-deliveries ratio has dropped to 3% in recent years, compared to 25% in the previous decade. This trend may reverse as carriers fight overcapacity.

Shippers must also recalibrate their supply chains, adjusting to revised transit times as vessels return to pre-crisis routes.

*Ocean Freight risk map. Source: Drewry

Market Volatility & Freight Rate Implications

From a pricing perspective, a large-scale return to the Red Sea could lead to freight rate collapses—a welcome relief for some customers but a challenge for those negotiating long-term contracts. With the market still adjusting, shippers face uncertainty on when to secure new tenders and which rate benchmarks to use.

The latest WCI composite index dropped 11% to $3,445 per 40ft container, significantly lower than the pandemic peak of $10,377 in September 2021 but still 143% higher than 2019's pre-pandemic average of $1,420.

The Suez Canal Authority has confirmed that 47 previously rerouted vessels have returned to the canal since early February. Additionally, the Houthis have announced limits on attacks, excluding vessels not linked to Israel, further easing concerns for shippers. However, carriers like Maersk and Hapag-Lloyd remain cautious, with Maersk indicating it may delay a full return until late 2025.

What Shippers Should Do Now

With shifting trade routes and uncertainty in freight pricing, businesses must adopt flexible contract arrangements that allow for:

• Rate adjustments based on market fluctuations.
• Collaborative strategies with carriers and freight forwarders to manage risk.
• Transparent communication to navigate unpredictable conditions.

The Suez Canal Authority is also planning a 10-kilometer canal extension to increase vessel capacity, allowing an additional six to eight ships to transit daily. This could provide further stability in the coming months.

Shippers should stay informed on transit changes, rate trends, and contract negotiations as the situation unfold.

KLN Oceania can help you with alternative strategies and risk management solutions tailored to your business.

 

Impacts on Global Trade from Changes in U.S. Trade Policy

Changes in U.S. trade policy are set to impact global supply chains, with new tariffs and trade measures affecting imports from key trading partners. Planned tariff increases on goods from the European Union, Canada, and Mexico could lead to higher costs and potential disruptions in international trade. Businesses engaged in cross-border logistics should stay informed and assess their sourcing strategies to mitigate potential risks.

Trade negotiations are also expected to take a more assertive direction, focusing on reshaping international agreements and trade balances. The possibility of adjustments to multilateral trade commitments may lead to shifts in regulatory frameworks, requiring companies to remain adaptable in their global operations.

With these evolving conditions, supply chain managers should explore diversification strategies, monitor policy developments closely, and consider alternative trade routes or suppliers where necessary.

Escalation of Tariff Measures

In early 2025, the U.S. Administration announced plans to impose a 25% tariff on imports from the European Union, citing economic disparities and aiming to address perceived imbalances. This move has raised concerns about a potential trade war, as the European Commission has pledged to "react firmly and immediately" against these tariffs.

Additionally, the administration has targeted North American trade partners, with a 25% tariff on imports from Canada and Mexico set to take effect on April 2, 2025. These measures are intended to address issues such as undocumented immigration and fentanyl trafficking.

Potential Withdrawal from Multilateral Trade Agreements

The administration has also signaled a possible shift from multilateral trade commitments, including potential pressure to reform or withdraw from the World Trade Organization (WTO). Such actions could lead to significant changes in the global trade framework, affecting international supply chains and trade relations.

Implications for Global Supply Chains

These policy directions suggest a move towards increased protectionism, which may lead to heightened trade tensions and disruptions in global supply chains. Businesses engaged in international trade should prepare for potential volatility by evaluating their supply chain strategies, considering diversification of sourcing, and staying informed on policy developments to mitigate risks associated with these changes.

 

Carrier Alliances 2025

*Carrier Alliances Share Ration pre and post

Managing overcapacity will be the biggest challenge for carriers in 2025. Every new vessel delivery adds pressure while the masking effects of supply chain disruptions are fading.

Carriers have a threshold they will not allow the supply/demand balance to fall below, meaning they will aggressively use scrapping, idling, and blank sailings to prevent market collapse.

Meanwhile, discussions around the Emission Trading Scheme (ETS) carbon taxes will intensify, as shippers, carriers, and forwarders negotiate how costs will be distributed.

Gemini Cooperation Update

As of February 27, 2025, the Gemini Cooperation, a strategic partnership between Maersk and Hapag-Lloyd, has been operational since February 1, 2025. This collaboration aims to enhance the global shipping network by improving schedule reliability, connectivity, and sustainability.

Operational Overview

The Gemini Cooperation encompasses approximately 340 vessels, offering 57 services, including 29 mainline routes and 28 intraregional shuttle services. The network is designed around a hub-and-spoke model, focusing on key ports to streamline operations and reduce transit times. The transition period is expected to last until late May, with vessels phasing into the new network and out of the expiring agreements that Maersk and Hapag-Lloyd have with other carriers. June will be the first full month in which the network is fully phased in with all vessels sailing on Gemini schedules.

Strategic Adjustments

In response to ongoing security concerns in the Red Sea, the Gemini partners have opted to reroute services via the Cape of Good Hope. This decision prioritizes the safety of crew, vessels, and cargo and acknowledges the dynamic situation in the region. While this adjustment may extend transit times, it underscores the commitment to operational integrity and reliability.

Implications for Global Shipping

The formation of the Gemini Cooperation signifies a significant shift in the container shipping industry, particularly with Maersk and Hapag-Lloyd exiting their previous alliances to establish this new partnership. This move is anticipated to enhance service offerings, providing customers with more reliable and efficient shipping solutions across major trade routes.

As the Gemini Cooperation continues integrating its operations, stakeholders are encouraged to stay informed about further developments to navigate the evolving logistics landscape effectively.

MSC Standalone Network

Replacing MSC's current 2M VSA agreement with Maersk on East/West trades. As of February 2025, MSC will provide an independent network for East/West trades.

5 trades with 34 loops incorporating:

• 7 loops for Asia - North Europe
• 6 loops for Asia - Mediterranean
• 4 loops for Asia - North America West Coast
• 6 loops for Asia - North America East Coast
• 11 loops for the Transatlantic Network
• Option for weekly services via Suez with more than 1,900 direct port pairs or the Cape of Good Hope with more than 1,800 direct port pairs

Other Carriers

The remaining members of THE Alliance, ONE, HMM, and Yang Ming, have confirmed they will continue to operate closely under a new alliance name: Premier Alliance (PA), effective for five years in 2025. The cooperation comprises mainline services across the major East-West Tradelines: Asia—North America West Coast, Asia—North America East Coast, Asia—Mediterranean, Asia—North Europe, and Asia—Middle East. 

The newly formed Premier Alliance and MSC also announced a slot exchange cooperation covering 9 services from Asia to Europe, effective 1 February 2025.

ZIM and MSC have announced a new long-term Operational Cooperation (Vessel sharing) on Asia - US East Coast and Asia - US Gulf trades effective 1 February 2025, subject to regulatory filing.

 

Key Forecasts for 2025

Market Growth & Capacity Adjustments

• Global port throughput grew 6.1% YoY in Q3 2024 and is expected to maintain similar growth for the full year. However, analysts predict growth will cool to 2-3% annually over the next five years.
• The containership fleet will expand by 5% in 2025, a moderation from 2024’s record 3 million TEU increase. However, fleet growth is projected to outpace the 2.8% rise in global port handling even at this lower rate.
• Carrier strategy: To manage this overcapacity, carriers will likely increase scrapping rates. 300,000 TEUs are expected to be demolished in 2025. If market conditions worsen, demolitions could reach 900,000 TEUs per year by 2026.

Key regions absorbing additional capacity in 2024:

• Asia- Europe Trade absorbed 59% of excess capacity, as rerouted ships around the Cape of Good Hope required additional vessels.
• Middle East & Indian Subcontinent saw a 13.9% increase in deployed capacity due to Red Sea disruptions.
• Latin America trade grew significantly, with a 22.4% YoY rise in liner service capacity, accounting for 15% of the global fleet.

Trade Shifts & Economic Uncertainty

• Southeast Asia’s trade share is rising, benefiting from the U.S.-China trade war. Vietnam, in particular, has seen its exports to the U.S. surge, but concerns are mounting that China may use Vietnam as a backdoor to bypass U.S. tariffs.
• Oceania trade demand slowed to just under 2% YoY in Q3 2024, after strong growth in the year's first half.
• The number of roundtrip services between Southeast Asia and Oceania dropped from 18 to 14 due to shipping line consolidations.

 

Developments in Oceania

Australia's Economic Outlook

As of February 2025, Australia's economic trajectory shows signs of gradual improvement. The Reserve Bank of Australia (RBA) has revised its inflation forecast downward, anticipating underlying inflation to return to the 2–3% target range by the end of the year. This adjustment reflects a combination of easing price pressures and a still-tight labor market.

Gross Domestic Product (GDP) growth is projected to pick up over 2025, supported by increased public spending and a modest lift in net exports, partly due to the depreciation of the Australian dollar. However, household consumption growth remains subdued, influenced by previous interest rate hikes and global economic uncertainties.

The RBA has initiated monetary easing, with a recent rate cut bringing the cash rate to 3.85%. Despite this, financial markets anticipate further reductions, citing stable inflation data and a strong labor market as key factors.

New Zealand's Economic Developments

In February 2025, New Zealand's economy exhibited signs of recovery. Business confidence has risen, with 58.4% of firms expecting economic improvement over the next year. This optimism is attributed to declining interest rates and robust export commodity prices.

The Reserve Bank of New Zealand (RBNZ) has reduced the official cash rate by 50 basis points to 3.75%, aiming to stimulate economic activity. Governor Adrian Orr notes the nation is experiencing low and stable inflation, with optimistic projections for GDP and employment growth in 2025.

The housing market is also poised for growth. Forecasts indicate a 5.0% rise in home prices in 2025, driven by lower interest rates. However, affordability challenges persist due to high property prices relative to household incomes.

Trade and Industry Highlights

Australia and New Zealand continue to enhance their trade diversification efforts. In January 2025, New Zealand signed a comprehensive economic partnership agreement with the United Arab Emirates, eliminating tariffs on 98.5% of New Zealand exports to the UAE. This move aims to boost trade relations and open new markets for exporters.

Additionally, in February 2025, New Zealand and Vietnam elevated their bilateral relations by signing a Comprehensive Strategic Partnership. This agreement focuses on cooperation in defense, education, economics, climate change, and science, reflecting New Zealand's commitment to strengthening ties within the Asia-Pacific region.

These initiatives underscore both nations' strategies for building resilient and diversified trade networks, which will ensure economic stability amid global uncertainties.

Ocean Freight Updates

• RR, GRI and PSS notices from Carriers with effect on  1^st of March 2025.
• Carriers booking utilization sits at 85%-95% to both AU and NZ, with space remaining tight and cargo rolling. We suggest placing bookings at least 3-4 weeks in advance.
• COSCO shipments to AU Transshipment via Singapore keep waiting times around 2-3 weeks in SIN, under their FIFO operational policy.
• Blank Sailings expected with 12-20% capacity cuts for March 2025.
• New Zealand: KIX Service - Kota Lembah 241 change of rotation.

Schedule reliability on the Asia-Oceania trade lane

Asia – Oceania (Imports)

We saw a slight improvement in December/January 2025, with reliability rising by 1.1 percentage points month over month (M/M) to 55.5%. Compared to the same period in 2024, reliability was 18.5 percentage points higher year over year (Y/Y).

Vessel delays also improved:

• The average delay for late vessel arrivals dropped by 0.66 days M/M, reaching 4.62 days in December/January 2025. Y/Y, this was 3.01 days lower than in 2024.
• The average delay for all vessel arrivals decreased by 0.20 days M/M, reaching 1.77 days.

Among carriers, PDL was the most reliable, with a schedule reliability of 69.2%, followed closely by NPDL, at 68.8%.

Oceania - Asia (Exports)

We saw an improvement in December/January 2025, increasing by 1.8 percentage points month-over-month (M/M) to 55.6%. Compared to the same period in 2024, reliability was 10 percentage points higher than the 45.6% recorded last year.

Vessel delays also improved:

• The average delay for late vessel arrivals dropped by 0.56 days M/M to 4.93 days, which was 2.64 days lower than in 2024.
• The average delay for all vessel arrivals decreased by 0.28 days M/M, reaching 2.01 days.

Among carriers, MSC was the most reliable, with 67.1% schedule reliability, followed by Swire at 64.3%.

 

Carriers Must Reduce Capacity to Sustain March Rate Increases

Container freight spot rates on major trade routes have declined, prompting carriers to announce General Rate Increases (GRIs) for March, especially on Asia-Europe lanes. However, to ensure these GRIs are effective, carriers need to implement further capacity reductions. Recent data indicates that while carriers have introduced new Freight All Kinds (FAK) rates for shipments from Asia to North Europe and the Mediterranean, spot rates continue to fall. For instance, the Shanghai-Rotterdam route saw an 8% week-on-week decrease, bringing rates down to $2,887 per 40ft container.

Industry analysts suggest that these planned GRIs may not hold without significant capacity management, as the current supply-demand imbalance exerts downward pressure on rates. To counteract this, carriers are encouraged to strategically withdraw capacity through blank sailings, aligning supply more closely with demand to stabilize and potentially increase freight rates.

 

Carriers Implement Blanked Sailings to Counteract Rate Declines

In response to the continuous decline in spot freight rates across major trade routes, ocean carriers are intensifying their use of blanked sailings to manage capacity and stabilize the market. Recent data indicates that spot rates have continued to fall despite efforts to balance supply and demand, prompting carriers to take more aggressive measures.

The Shanghai Containerized Freight Index (SCFI) reported declines across all major trade routes, except a 10% week-on-week increase on the China-Mexico route. Notably, the China-North Europe and China-Mediterranean routes experienced significant rate reductions, underscoring the need for carriers to adjust capacity to prevent further rate erosion.

Industry analysts suggest that carriers may struggle to maintain rate levels without substantial capacity management, including the implementation of additional blanked sailings. Proactive capacity adjustments are essential to align supply with the current demand and support rate stability in the volatile shipping market.

 

Vancouver Port Congestion Intensifies Amidst Multiple Challenges

The Port of Vancouver is currently experiencing significant congestion, which is attributed to severe winter weather affecting rail operations and ongoing disruptions in shipping schedules due to alliance restructurings. In response to harsh winter conditions across Canada, both Canadian Pacific Kansas City (CPKC) Rail and Canadian National (CN) Rail have implemented operational restrictions, including shorter trains and reduced speeds. These measures have led to minor delays, which are expected to persist in the coming weeks.

Terminal utilization rates have reached critical levels. The GCT Delta terminal operates at 102% capacity and experiences berth delays of up to nine days. Similarly, the DP World Center terminal is at 83% utilization, with berth delays ranging from four to nine days. Rail restrictions have further exacerbated the situation, resulting in average dwell times of 4.1 days for import containers at GCT Delta and 5.9 days at DP World Centerm.

These challenges are compounded by broader issues such as vessel bunching at Asian load ports and a surge in cargo volumes preceding the Lunar New Year, leading to increased rail dwell times and operational constraints. The port and associated stakeholders are actively working to address these issues through infrastructure upgrades and the implementation of new technologies to enhance capacity and efficiency.

 

Ocean Freight Snapshot (up to March 31st, 2025)

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

 

 

Air Freight Updates

E-commerce Surge Propels China's Air Cargo to New Heights

In 2024, China's air cargo industry experienced unprecedented growth, with volumes soaring nearly 20% to reach 20.06 million tonnes, up from 16.8 million tonnes in 2023. This surge is attributed mainly to the booming e-commerce sector, which has significantly increased the demand for air freight services. Shanghai Pudong Airport led the charge, handling 3.77 million tonnes of cargo and mail, marking a 10% increase from the previous year. The airport expanded its reach by adding 10 new destinations and reinstating eight routes, further enhancing its capacity to manage the escalating cargo volumes.

The e-commerce boom has elevated cargo volumes and intensified competition among logistics providers. Companies are striving to enhance their air freight capacities to meet the growing demand for rapid delivery services. This trend is evident as forwarders and airlines adjust their operations to accommodate the surge in e-commerce shipments, particularly those originating from China.

However, this rapid growth presents challenges, including capacity constraints and increased pressure on existing logistics infrastructure. Industry stakeholders are urged to invest in technological advancements and infrastructure development to sustain this growth trajectory and maintain efficient service levels. Collaborative efforts between e-commerce platforms, logistics providers, and regulatory bodies will be crucial in addressing these challenges and capitalizing on the opportunities presented by the expanding e-commerce market.

At KLN, we have access to SF Global Airfreight infrastructure. This positions us in an  unparalleled position to offer solutions to your business needs, particularly for the route China – Oceania. If you are interested in discussing possibilities,

 

E-commerce Growth Expands Gap Between Air Cargo Contract and Spot Rates

The rapid expansion of e-commerce has led to a significant divergence between contract and spot rates in the air cargo industry. E-commerce shippers increasingly secure dedicated freighter capacity through long-term contracts, aiming to ensure reliable service amidst fluctuating demand. This strategic move has resulted in more stable contract rates, while spot rates remain volatile and often higher due to capacity constraints. Consequently, shippers without long-term agreements, particularly those on transatlantic routes, find themselves more exposed to the unpredictability of the spot market.

Industry experts highlight that several factors, including sudden shifts in demand, geopolitical events, and operational disruptions, influence the spot market's volatility. In contrast, long-term contracts offer shippers rate stability and guaranteed capacity, which are crucial for planning and budgeting. However, these contracts require a commitment to minimum volume levels, which may not be feasible for all shippers. As a result, the decision between engaging in spot or contract agreements depends on a company's specific logistics needs and risk tolerance.

The widening gap between contract and spot rates underscores the importance of shippers carefully assessing their supply chain strategies. Companies with consistent shipping volumes might benefit from the predictability of long-term contracts, while those with variable needs may opt for the flexibility of the spot market despite its inherent risks. Collaborating closely with logistics providers can help shippers navigate these complexities, ensuring that their chosen approach aligns with their operational requirements and market conditions.

What This Means for You

• If you rely on spot rates: Expect fluctuating prices, particularly on high-demand routes like transatlantic trade lanes. Rates may surge unexpectedly due to capacity constraints or disruptions.
• If you secure contract rates: You gain pricing stability and guaranteed capacity, but contracts often require volume commitments.
• If your shipping needs vary: A hybrid approach (a mix of contract and spot agreements) may provide flexibility while mitigating cost spikes.

At KLN, we’re here to help you navigate these changes. Whether you need advice on contract negotiations, capacity planning, or strategies to avoid peak season surcharges, our team can support your business in making the best freight decisions. Contact us to explore the best approach for your supply chain.

 

Air Cargo Capacity Challenges Persist Amid Fleet Limitations

The air cargo industry is confronting significant capacity constraints due to an aging fleet and delays in new aircraft deliveries. In 2024, demand consistently surpassed supply growth each month, a trend that is expected to continue, posing a substantial threat to industry expansion in the coming years.

Contributing to this issue are supply chain disruptions affecting aircraft manufacturing, leading to a limited number of widebody freighters entering the market. This shortage is further intensified by the International Civil Aviation Organization's (ICAO) 2028 sustainability targets, which may restrict the production of certain aircraft types, potentially exacerbating capacity limitations.

Industry experts warn that these capacity challenges could persist until the end of the decade, necessitating strategic planning and investment in fleet modernization to address the imbalance between air cargo demand and available capacity.

 

E-commerce Platforms Adjust Air Cargo Strategies Amid Market Fluctuations

In February 2025, e-commerce companies began reducing flight operations and capacity in response to declining airfreight rates, a trend that persisted even after the Lunar New Year—a period typically associated with rate increases. This unexpected market behavior has led to a complex environment in which some airlines, like Air China, are raising rates while others, such as Etihad and Lufthansa Cargo, are decreasing them. Consequently, Chinese shippers holding contracts are requesting shifts to spot rates to capitalize on the current market conditions.

 

Temporary Reinstatement of De Minimis Exemption for Chinese Shipments

In early February 2025, the U.S. government temporarily reinstated the de minimis exemption, allowing duty-free imports of packages valued under $800 from China. This decision came after the exemption was initially suspended, which had led to significant disruptions in the processing of low-value shipments. The reinstatement aims to provide relief to consumers and businesses relying on affordable goods from Chinese e-commerce platforms. However, this measure is temporary, pending the implementation of systems to efficiently process and collect tariffs on these shipments.

The de minimis provision has been instrumental in facilitating cross-border e-commerce, enabling consumers to receive low-value goods without incurring additional duties. The initial removal of this exemption had caused operational challenges, including a brief suspension of package acceptance from China by the U.S. Postal Service. The temporary reinstatement seeks to mitigate these issues while authorities develop mechanisms to manage the high volume of de minimis shipments, which have seen a substantial increase with the rise of platforms like Shein and Temu.

Businesses importing low-value goods from China should stay informed about further policy developments. The status of the de minimis exemption may change once new processing systems are in place. To navigate the evolving trade environment effectively, proactive adjustments to supply chain strategies and close monitoring of regulatory updates are advisable.

 

Cargo Operations Disrupted by Strikes at Munich Airport

Lufthansa Cargo has warned customers about significant disruptions to cargo operations at Munich Airport (MUC) due to planned strikes on February 27 and 28, 2025. The German trade union ver.di has organized these 'warning strikes,' involving security and ground handling staff, as part of ongoing public sector wage negotiations. Consequently, cargo transport to, from, or via Munich on Lufthansa Group passenger aircraft is anticipated to be severely affected during this period.

The airport has alerted passengers and cargo operators to expect substantial impacts on flight operations, including a significantly reduced schedule and potential delays. Approximately 830 flights were scheduled during the two-day strike, many of which are likely to be canceled or delayed. Travelers and cargo clients are strongly advised to verify the status of their flights and shipments with the respective airlines before proceeding to the airport.

In light of these developments, carriers recommend that customers make alternative arrangements for their cargo shipments during the strike period to mitigate potential disruptions. The situation remains dynamic, and stakeholders are encouraged to stay informed through official channels for the latest updates.

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

 

Customs, Inland Transport, Terminal and Regulation Updates

 

Brisbane to Get a New Mega Freight Hub

Charter Hall Group, an Australian property development and funds management company,  has announced plans to transform a recently acquired 17.5-hectare site in Darra, Brisbane, into a state-of-the-art industrial estate valued at approximately $350 million. The site is strategically located 12 kilometers southwest of Brisbane's Central Business District, at the junction of the Ipswich and Centenary Motorways.

The development will feature around 100,000 square meters of Gross Lettable Area (GLA), designed to accommodate flexible configurations tailored to meet diverse tenant requirements.

With bulk earthworks already completed, CPIF is poised to offer the site immediately to prospective tenants, aiming to capitalize on the strong demand for 'shovel-ready' industrial spaces. The estate's prime location and readiness make it particularly appealing to third-party logistics providers, direct-to-consumer businesses, and high-end manufacturers seeking modern, efficient facilities.

 

New Illegal Logging Rules

The Australian Government is reinforcing its commitment to preventing illegally logged materials from entering the country’s wood supply chain. New regulations will take effect on 3 March 2025, strengthening confidence in the integrity and sustainability of Australian timber products. This transition marks a significant step for the government, industry, and consumers in ensuring responsible forestry practices across the supply chain.

Understanding the New Regulations

The Illegal Logging Prohibition Amendment Act 2024 and the Illegal Logging Prohibition Rules 2024 were finalized in December 2024 and will officially take effect on March 3, 2025. These updates introduce new due diligence requirements for timber product importers and processors. While the current requirements remain in place until March, businesses are encouraged to familiarize themselves with the upcoming changes to ensure a smooth transition.

To support compliance, the government has committed to providing clear and accessible guidance, acknowledging that adapting to the new requirements will require adjustments in internal processes.

Compliance & Support During the Transition Period

For the first six months following the implementation of the new rules (March – September 2025), audits will focus on education and guidance rather than strict enforcement. While regulatory authorities will still take action on serious non-compliance issues, the emphasis will be on assisting businesses in understanding and applying the updated due diligence measures.

Businesses will also have an opportunity to provide feedback on the updated regulations to ensure compliance materials remain practical and fit for purpose.

What This Means for Importers & Processors

Due diligence requirements will change on 3 March 2025, impacting how timber imports and processing activities are assessed for compliance. E-update 49 provides practical details on these changes and insights for businesses preparing for the transition.

KLN Oceania can help you make the necessary arrangements to mitigate these processes.

 

Port Botany Stage 2: Major Rail Investment to Boost Efficiency

The Port Botany Stage 2 On-Dock Rail Investment Program, a collaborative effort between NSW Ports and DP World Australia (DPWA), will enhance rail capacity and efficiency at Port Botany. Scheduled to commence in June 2025, this ambitious project will take two years to complete and significantly increase the terminal’s rail-handling capabilities.

Key Features of the Investment

• New Rail Terminal at DPWA’s Port Botany Container Terminal – The project will introduce a 600-metre rail siding, serviced by rail-mounted gantry cranes, aiming for an ultimate throughput of 1 million TEU annually.
• Joint Investment – NSW Ports will contribute $148 million toward constructing four rail sidings. In comparison, DPWA will invest $250 million in an additional rail siding, operational equipment, and extensive upgrades to its adjacent logistics park.

Impact on Operations & Industry Collaboration

The new infrastructure is expected to enhance landside efficiency, improve rail freight capacity, and reduce truck congestion. While construction is ongoing, CTAA Alliance companies operating in Sydney are committed to working alongside NSW Ports and DPWA to minimize disruptions to terminal operations and the logistics park.

The success of Stage One at Patrick’s Port Botany Terminal has already demonstrated the value of on-dock rail improvements, reinforcing cost-effective and efficient landside container movements. With this second phase, Port Botany will take a significant step forward in meeting future trade demands and strengthening supply chain resilience.

This investment is a long-term win for businesses reliant on Port Botany. It will ensure smoother, more efficient operations and improved freight connectivity.