Welcome to the first edition of the BCR Market Update for 2018.
2017 has seen the worst peak season since pre-GFC and we are still feeling the aftermath. With only 4 weeks to go until Chinese New Year (CNY), sea freight carriers are trying to maintain high rates and keep implementing GRIs resulting in record rates for this time of the year.
Read on to learn about the current condition of the International sea freight market. For this Market Update we put our focus on the North East Asia and South East Asia trade lane, as these will be severely impacted by CNY.
North East Asia to Australia
Despite a slight decline in rates prior to Christmas the rush to prepare for orders before Chinese New Year (CNY) has already started to emerge with strong booking forecasts being presented as anticipated.
Confidence is higher than ever. Shipping lines are once again looking to capitalise by aggressively hiking rates due to increased demand prior to CNY. Space is already proving to be challenging.
Most shipping lines announced their intentions to levy a GRI from 15 January 2018. However, some have enforced higher rate hikes per port pairs in accordance with their specific space requirements.
Whilst this increase in our opinion will be short lived it is once again an opportunistic tactic employed by the carriers to increase revenue while supply is affected.
There are various factors that will assist carriers to achieve these higher rates. One is that the A3 C consortium will deploy three smaller vessels in weeks 2, 3 and 4. All carriers in this consortium will be affected as their weekly space allocation will be reduced. This will no doubt have a rollover affect onto other carriers as these vessels sail before CNY holiday – a time with typically high demand. Further, we can expect the cancellation of voyages, i.e. blank sailings during this period. Carriers hope to continue managing the oversupply to combat rate erosion.
The central question is: will this be enough to prevent the trade from going into panic mode (as it is traditionally seen after CNY) and a return to lower spot rates to fill slots may re-emerge? We will keep a close eye on the prevailing market conditions. Your BCR Customer Service Team member or Account Manager will keep you informed as a return to volatile conditions will be rife.
South East Asia to Australia
This trade continues to surprise as a longer than expected peak is maintained. Space is a continuous struggle and forecasting remains a priority.
Most carriers have enforced rate hikes or aptly advertised these as “rate restorations” as this trade has finally seen rates in some instances to record four-digit figures.
There has been little reprieve on this trade regarding space relief. Like for the North East Asia trade, current forecasts are proving to be strong at least until CNY.
GRIs in December and 1 January 2018 have been 100% implemented. Carriers are gaining the desired momentum and have another rate hike planned to take effect on 15 January 2018.
This may again be short-lived. However, with no apparent blank sailings on the cards, if demand remains strong rate levels may be maintained for longer than anticipated before the slack season commences.
Rates and space are still reasonably under control for the export market out of Australia.
We should now see the trade picking up again as the commodity exports will commence. There may still be pressure on space and 20’ food quality equipment, especially in Melbourne and Brisbane due to the lack of 20’ import units coming into these sea ports.
Therefore, we recommend every customer and reader to plan their shipments early. Provide forecasts of your shipments as much in advance as you can to save you disappointment and additional costs.
For more specific information relating to your supply chain or to advise us of future international sea freight or air freight shipments, please contact BCR.
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).