Sea Air aerial

Asia westbound market update

Aug 7, 2024 | , , , , , ,

Air and sea freight from Asia continues to demonstrate remarkable resilience and growth, fuelled by robust demand, strategic capacity management, and dynamic trade routes, with India recording significant increases, driven by pro-industry government initiatives, eCommerce, and manufacturing growth.

Air Freight
The latest data from the International Air Transport Association (IATA) for June highlights significant demand for airfreight out of Asia, which has continued, potentially extending well into 2025, fuelled by sustained eCommerce demand.

For exports from the Asia-Pacific region, the World ACD index reported a 25% year-on-year increase, with Asia-Pacific to US shipments up by 67%. However, China-US tonnage declined by 8%, with China-Los Angeles experiencing a 23% drop, marking a three-month trend of decline.

Despite the LA drop, airfreight has largely remained impervious to political and economic challenges, with US customs crackdowns on eCommerce deliveries from China not dampening the market.

India’s air cargo market is particularly bullish. Total volumes at Indian airports in Q2 2024 rose by 14% year-on-year, with international flows up 20%. This growth can be partly attributed to a modal shift from widely disrupted ocean services due to the Red Sea crisis, especially for urgent or time-sensitive shipments. 

Sea Freight
As we progress through the traditional container shipping peak season, analysing demand, prices, planned levels of blank sailings and capacity deployment provides valuable insights into carriers’ confidence in the 2024 peak season.

Ex Asia freight rates are anticipated to stay high until the end of the peak season, at least until the Golden Week, while strong increases in outbound demand from India have led to increased rates and equipment shortages.

For the Asia-North America West Coast route, carriers have planned to blank 4% of capacity, similar to pre-pandemic averages and 2020 levels. This is significantly lower than during the pandemic years when blank sailings were forced due to port congestion.

Capacity growth for the same period in 2024 is set to be 25% higher than in 2023, and 10% higher than in 2020, which saw peak capacity deployed in terms of TEUs. This strong capacity growth and relatively low level of blank sailings suggest that carriers are optimistic about the peak season.

On the Asia-North Europe route, the planned blanked capacity is 6% for the next 10 weeks, slightly higher than in 2020 and pre-pandemic averages, but not by much. There is no year-on-year growth in deployed capacity for 2024. However, in 2023, the trade saw a 13% year-on-year capacity growth, which was high compared to historical averages and exceeded the demand levels at that time.

The willingness of carriers to maintain this elevated capacity level in 2024, along with the relatively low number of blank sailings, indicates a strong and confident outlook.

However, with ocean supply chains still under significant pressure, concerns remain about a capacity crunch in the coming months, especially if disruptions such as the ILA East Coast strikes and China tariffs occur. Carriers flor now have opted to keep capacity elevated.

Port Congestion
The latest port congestion data reveals extensive dwell times as the Red Sea crisis continues to impact operations. The top five congested ports globally include Durban with an average 8 day wait time, Ningbo with 6 days, Vancouver with 4 days, Los Angeles with 4 days, and Chittagong which worsens each day.

Over 60% of the South-east Asian ports analysed saw rising congestion over the quarter, while in Europe, 12 of 18 analysed ports reported increases.

Singapore congestion is improving as ships are skipping the port, though Barcelona and Valencia are still congested and there is an ongoing risk of strikes in Hamburg and Bremerhaven.

With ongoing shortages in empty equipment, high vessel utilisation and port congestion, further exacerbated by shippers front-loading to avoid delays, rates are likely to stabilise at high level in the coming months.

The unprecedented demand for ocean freight, combined with ongoing challenges in equipment, capacity, and costs, suggests that the next few months will be complex and potentially turbulent. 

We encourage you to contact us now if you have any urgent or high-priority orders on the horizon. Sharing your shipping forecasts with us will enable us to secure space on the best services to meet your deadlines and at the most competitive rates.

To discover how we can enhance your ocean freight solutions, please EMAIL our Chief Commercial Officer, Andy Smith.

CMA CGM Montmarte

Record volumes raise concerns for peak season

Jul 24, 2024 | , , , , , , , , , , , , ,

Global demand for ocean freight container shipping has surged to unprecedented levels, surpassing even the peak during the Covid pandemic and comes when available capacity is already strained due to diversions around Africa, leading to concerns that any peak season demand could be calamitous.

Chinese exports reached a record high of 6.2 million TEU in May and while there is hope that early shipments will reduce volumes during the traditional peak season in the third quarter, other factors could keep demand high. 

Nervous shippers are re-stocking and seeking to avoid potential future tariffs on imports from China, which could sustain high demand in the coming months.

Approximately 19% of US shippers and 26% of European customers are advancing their shipping schedules due to fears of supply chain disruptions.

Planned US tariff increases on goods, including electric vehicle-related materials, battery parts, and solar cells, could further elevate freight costs as exporters rush to front-load shipments. The Hong Kong Small and Medium Enterprises Association noted that many manufacturers are struggling with tighter deadlines and increased overtime pay in mainland China, jeopardising profitability.

With importing customers asking for orders to be shipped earlier than usual, Chinese manufacturers are increasingly struggling to meet the shortened schedules necessary for timely festive season deliveries. The average cost of moving a 40ft container between Asia and northern Europe has more than doubled in two months, with a roughly fivefold increase from the same period last year.

Recent spot rate indexes for sea freight have shown the smallest gains in months, with some main east-west routes seeing a pause in growth. The slowdown suggests the market might be reaching an equilibrium of supply and demand. However, it remains unclear whether this is a temporary early peak season or if demand from front-loading shippers will persist, particularly with potential US tariff increases looming.

While Asia-to-Market routes have stabilised, others continue to show week-on-week rises, with the WCI’s Shanghai-Rotterdam leg and XSI’s Asia-Europe component both increasing. Monitoring space availability closely, there are reports that vessel utilisation might be slipping, potentially making bookings easier to acquire. However, rates are expected to remain high throughout the peak season, especially for shipments ex-China.

Equipment shortages
Please be aware that we are seeing more reports from carriers that intra-Asia routes are experiencing equipment shortages, particularly out of China. This is an industry-wide issue that initially affected long-haul shipping but now has extended to intra-Asia routes. The demand for export containers in China means that carriers have to decide whether to prioritise carrying empty containers back to China or carrying laden containers to other destinations.

We are monitoring the station closely, as it could possibly push rates up, potentially cascading into the backhaul trades to Asia and regional trades.

The unprecedented demand for ocean freight and ongoing challenges in capacity and costs suggest a complex and potentially turbulent peak season ahead.

We recommend talking to us now, if you have any urgent or high-priority orders forthcoming and sharing your shipping forecasts, so that we can secure your space, on the services that meet your deadlines, at the best possible rates.

To learn how we can enhance your ocean freight solutions, please EMAIL our Chief Commercial Officer, Andy Smith. 

computer down 1440x1080 1

Global IT outage disrupts supply chains

Jul 23, 2024 | , , , , , , , , , , , , , , , , ,

On Friday, a faulty update to Microsoft software by cyber-security firm Crowdstrike, saw global supply chain operations significantly disrupted, with the fallout expected to take weeks to fully resolve.

Thousands of flights were grounded or delayed at major air freight hubs in Europe, Asia, and North America, creating severe impacts on the complex air supply chains.

Experts warn that planes and cargo are not where they should be, leading to extended recovery times and depending on the scale of the IT failure and current market conditions, these disruptions could take much longer to resolve than the duration of the outage itself.

This situation is further exacerbated by limited airfreight capacity, with global demand increasing by 13% in June compared to 2023, with the surge in demand largely driven by traffic from China to Europe and the US, putting additional strain on already limited available capacity.

While sea port operations were less affected, initial disruptions were reported in several European container terminals, including Poland’s Baltic Hub, Felixstowe and Rotterdam. These ports have since recovered, but the main issues could lie inland with truck and rail services, potentially increasing congestion if containers cannot be moved in or out of the ports efficiently.

Some air cargo operations are gradually returning to normal, with ground handler Swissport and Lufthansa Cargo reporting only minor impacts. However, Schiphol Airport and US airlines such as Delta, United, and American Airlines faced significant disruptions, with hundreds of flights cancelled or delayed, including 700 cancellations by Delta on Monday.

While most airlines have resumed operations, residual delays are anticipated due to the sheer number of disrupted flights.

Supply chain experts are concerned about the long-term effects of the Crowdstrike outage on global deliveries. The Chartered Institute of Export & International Trade warned that the disruption could create further problems in planning and scheduling for importers, exporters, and consumers globally. Time-sensitive air freight is particularly affected, with one thousand flights cancelled worldwide, by mid-morning on Friday.

Although a fix has been deployed by Crowdstrike, the full resolution of the outage issue may take some time, as IT staff may need to access individual machines to remove the faulty update.

The fallout from the outage has once-again highlighted the vulnerability of global supply chains and as the industry works to recover, the importance of robust contingency plans and marine insurance cannot be overstated, ensuring protection against financial risks and maintaining supply chain resilience in the face of unforeseen challenges.

To learn how we can develop and support your supply chain resilience or for more information about our Marine Insurance products, please EMAIL our Chief Commercial Officer, Andy Smith.

container ship and naval escort

SECURITY UPDATE: Red Sea

Jul 22, 2024 | , , , , , , , , , , , ,

The recent sinking of the Prestige Falcon oil tanker, following a Houthi attack, marks the deadliest incident involving these strikes to date.

The vessel capsized near the Omani coastal city of Duqm, and while the Indian Navy rescued nine of the 16 crew members, one was found deceased, and six remain unaccounted for, feared to have gone down with the ship.

The Prestige Falcon, flagged under the Comoros, was targeted approximately 5 nautical miles southeast of Ras Madrakah, Oman, closer to the Persian Gulf than the typical Red Sea and Bab al-Mandeb strait attack zones. With at least 100 Houthi attacks on merchant ships so far, resulting in the deaths of four seafarers, this incident could significantly increase that toll.

These Red Sea attacks have contributed to elevated containership charter and freight rates. Industry experts predict continued Cape of Good Hope diversions until at least 2025, keeping rates high.

Recent escalations include Israel’s attack on the Hodeidah port in Yemen, following a Houthi drone strike on Tel Aviv. The method of the Houthi drone attack remains unclear, raising concerns about potential threats to shipping in the Eastern Mediterranean.

Speculation suggests the drone may have been launched with the aid of militants closer to Israel, highlighting the risk of supply chain disruptions if drones can be deployed from nearer locations or if groups like Hezbollah become involved.

The Houthi’s have already warned that they plan to expand their campaign of attacks on commercial shipping, to include vessels in the Mediterranean. While the Pentagon has stated that the US has seen no sign of the Iran-armed rebels attempting to do so yet, it has admitted to being worried about the possibility.

“The Houthis have an advanced array of weaponry and they have weapons that could reach the Mediterranean. It definitely is of concern that they have that capability.”

According to some projections, the current Houthi attack campaign will continue for at least the rest of this year, and many commercial vessels will keep avoiding the Gulf of Aden and southern Red Sea until 2025 or beyond. In fact, it could get much worse with some of the new developments this week between Israel and The Lebanon also. We will endeavour to keep you updated as frequently as news is issued and on the impact associated with your supply chain and logistics requirements.

Experts warn that until the Houthis are deprived of the weapons they are using to conduct these attacks at source, we should expect more attacks and damage to international trade.

If you have concerns or questions about the issues covered here, please EMAIL our Chief Commercial Officer, Andy Smith.

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