Welcome to the October edition of the BCR Global Market Update on international sea freight going to/coming from Australia.
With peak season being upon us, space keeps being tight and rates keep going up on many trade lanes. Northeast Asia is feeling the aftermaths of Golden Week and the carriers are trying to use it to their advantage.
In this quick update learn about the current conditions of the international sea freight market for major trade lanes including Northeast Asia, Southeast Asia, the United States and Europe.
Northeast Asia to Australia
Last month we advised that AADA (Asia-Australia Discussion Agreement) member line’s confidence grew to such a level that an ambitious GRI was to take effect on 15 October 2017 and capitalise on the market conditions. As a result, depending on the carrier and port pair to port pair, different GRIs were applied.
The aftermath of Golden Week has left the international sea freight market with a false sense of demand which is often seen this time of the year. This year, however, it is more prevalent. The high demand has instilled confidence to hike rates as the shortage of space has been evident.
Adverse weather conditions have continued to cause delays as vessels bypassing ports are adding to congestions. We have received notices of cargo being rolled as a consequence of carriers coping with the backlog. Carriers continue to book in excess cargo over their weekly allocations with no cancellations. This results in cargo being short-shipped and an additional backlog to mount.
Deployment of smaller vessels in Week 39 resulted in Melbourne and Sydney cargo being re-routed on transhipment services via Singapore adding to the delays.
Further, the AASS service (Asia Australia South Loop Service) implemented a blank sailing in Week 41 which affects Southern China cargo. Arrangements with other consortiums were made to have some slots on their ships to maintain a weekly rotation. However, this still was not enough to cope with the demand at this time.
Some carriers reported excess cargo to be rolled after the Golden Week holidays. We expect to see rates rising in the short term.
With the level of confidence mounting, carriers have announced another GRI to take effect from 15 November 2017.
This rate hike is speculative. We should see a decline in demand end of October early November when pressure on rates may result in volatility in the market.
Southeast Asia to Australia
GRIs have gained traction to a once stable trade as peak season has certainly caught the market by surprise.
A huge influx of commodity shipments continues to flow putting pressure on space especially from Vietnam, Thailand and Malaysia.
As a consequence carriers have ceased to accept bookings in October from Week 41 as lead times for new bookings are now at minimum three weeks notice. November vessels are already starting to become full.
Congestion in Singapore has eased with some carriers as delays of up to four weeks were being experienced. This is now down to 2-3 weeks meaning a small improvement only. Early planning and forecasting continue to play an important role to achieve best outcomes.
These factors certainly set the stage for an opportunity to continue to increase rates.
The GRI announced for 15 October 2017 has been implemented. However, each carrier has adopted their mitigated levels in accordance with their respective requirements and available space.
A GRI has been announced for November 2017. Expected incremental rate hikes will have some impact, but not to the levels of the China trade.
The United States to Australia
One thing shipping lines have in common is the need to continually increase revenue. Therefore, GRIs keep rearing their head and another trade is affected.
We have received notice that some shipping lines will attempt to apply another GRI effective 1 November 2017 from East Coast USA to Australia.
It is expected that other shipping lines may follow suit mid-November.
Europe to Australia
In last month’s edition, we advised that Asia congestion was affecting cargo transhipping from Europe. The congestion has eased, but currently, there is still a two week backlog. We therefore suggest direct routes if freight is urgent.
Rates remain reasonably stable on this trade with no announced GRIs. Bunker Adjustment charges will continue to fluctuate month to month based on each carrier’s own requirements.
Currently, the demand for space is extremely high, which is why we recommend booking your shipments three weeks ahead with your appointed freight forwarder to secure your spot and to save you any disappointment.
Do you currently not have a freight forwarder or are you unsatisfied with the freight forwarding company you are working with?
For more than a century, 3PL and Freight forwarding service provider, 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 Brisbane, Sydney, Melbourne, Adelaide and Fremantle (Perth).