As a Freight Forwarding or Logistics Manager, staying up to date on the ever-changing market conditions can be challenging. It is important to stay informed on changes so that you can plan your cargo movements with your freight forwarder and know in advance when rates will be changing. To assist importers and exporters, BCR, a 3PL provider and international freight forwarder publishes this monthly global market update.

Read on to learn about the import sea freight market conditions to Australia for major lanes including North East Asia, South East Asia, the United States and Europe.

North East Asia to Australia

The volatile market conditions continue to plague this troubled trade lane with little sign of recovery in sight.

Unrelenting attempts to increase freight rates via general rate increases (GRIs) over the past few months have again failed to have the long-term effect the shipping lines had hoped for. The independent capacity management programs (blank sailings) that were in place for the first half of the year have ceased. These programs were implemented to manage supply in the market and prevent rate erosion.

In July, carriers’ confidence spiked with demand increasing as traditional peaks in the trade came to life. Carriers announced to freight forwarders a GRI take effect on 1 August. At the same time, port closures in Hong Kong, due to tropical storm Nida meant cargo was left behind at terminals. Despite an increase in demand and poor weather conditions which caused a rolling effect with cargo being loaded on vessels, the GRI has not had traction.

So why are these historically low sea freight rates so hard for carriers to raise? As we have written about before, the problem comes down to an oversupply in the sea freight market.

Recently, the CKA consortium announced to freight forwarders a permanent departure from the trade. This reduces the supply of sea freight space to Australia by 10% per week which is not enough to bridge the gap between supply and demand. This is evident in recent figures posted by the Shanghai Shipping Exchange. A reported 5% drop in spot market rates has been depicted as of 5 August. This basically washes away any increases that were achieved with the early July GRI and any future hope for rate increases this month.

With October National Holidays approaching (1 October – 8 October), we expect carriers to cut capacity in this week as China comes to a grinding halt. Therefore early planning with your freight forwarder is essential as 3 week lead times are required to secure space on desired schedules. We do expect September to be a big month for cargo demand as there will be a rush to get stock away prior to factories closing. Please prepare as late ordering and bookings may lead to disappointment and delays.

AADA members have announced another GRI to take effect 1 September. Carriers hope to gain more success from this GRI as it may be their last chance to increase rates before peak season gets into full swing.Each shipping line will enforce increases in line with their own requirements. They will be closely watching their vessel space and move rates as they see fit.

As a customer focused freight forwarder, BCR will continue communicating market conditions as things change. While we ride this rollercoaster every month we believe it is our responsibility as an expert freight forwarder to ensure that we are informing our valued customers so as to avoid unruly surprises.

Looking farther ahead, we are aware that a few consortiums are revamping their current partnerships with a view to consolidating services. While in the short term this is not affecting the market conditions, we do believe that this may in future assist in stabilising the trade so that carriers can get back in the black before any further shipping line departures are made. We may, therefore, see rates climbing. However, this may not occur until 2017.

South East Asia to Australia

This trade has not had the wave of general rate increases that the NEASIA trade has. That being said, at this time of the year, we traditionally see a peak season surcharge (PSS) introduced. Therefore it is no surprise that in place of this PSS, some carriers have called for a Rate Restoration (RR) to take effect from 15 August.

As there are no planned tonnage cuts, there is little hope to achieve this longed for rate increase. As such, we believe that rates will be extended to cover this month. Fluctuating rates have not affected this trade as rates have remained reasonably stable and will continue to be so for the remainder of the year.

United States to Australia

A new chassis gate fee in Los Angeles and Long Beach terminals is being proposed and scheduled for implementation effective 1 September. Chassis-leasing companies, truckers, and beneficial cargo owners have raised their concerns and opposition to this proposed fee, leading their complaints directly to the Federal Maritime Commission (FMC).

Pressure from beneficial cargo owners, otherwise known in the industry as BCOs are also taking the matter up directly with the shipping lines who are contracted to the terminals and as such have all the contractual obligations directly. All parties above are concerned that this fee will hike their overall costs per annum due to the substantial volumes moved through these large U.S. ports. The fee which was originally scheduled to become effective from 1 August and was filed 30 days prior with the FMC was pushed back due to strong opposition from chassis-leasing companies.

Previously, shipping lines owned the majority of the chassis based at the U.S. ports, and terminal operators charged the shipping lines for storage, stacking, and any EDI services. Since the chassis were sold back to the leasing companies the terminal operators now advise that they receive no compensation from the shipping lines for the continuation of the services still being performed.

The scenario being proposed by the West Coast Terminal Operators Agreement, where all terminal operators are members of, would be to charge this fee to the chassis-leasing companies who would, in turn, pass this onto the truckers who would then pass onto relevant beneficial cargo owners and retailers alike.
No firm or final decisions have yet been made. However the likelihood that the terminals may enforce this next month is increasing.

Europe to Australia

Summer vacations this time of year are prominent in these trades and carriers often take advantage of this as the cargo rush in July leads to a spike in demand. Most of the factories in Italy will close for summer holidays from 8 August until 21 August.
Italy to Australia is the most affected trade lane and one of the most expensive European trade lanes. In line with this, a peak season surcharge (PSS) on the Italy to Australia trade lane was implemented 13 July.

This peak season surcharge, however, is mainly levied by direct carrier vessel operators. Those who offer transhipment services are less likely to impose such surcharges.

If you would like to discuss any items included in this market update or discuss how BCR can assist your business as a customer focused freight forwarder and 3PL provider, contact us today.

For more than a century, BCR has continued to help small, medium and large businesses achieve an optimum logistics solution with warehousing and transportation, including air freight and sea freight services to and from the major ports including BrisbaneSydneyMelbourne, Adelaide and Fremantle (Perth).