Australia rates stable but a global outlier: International freight insights APAC 2024 week 43

Australia rates stable but a global outlier; spot ocean freight rates China to Australia fell 1% over the past week (rates are down 7% over a 1-month period).

Rates for China to all global routes decreased 5% over the past week (all global rates ex China have declined 19% over a 1-month period).

This is according to the China Containerized Freight Index (which is the best index for guidance about spot ocean freight between Asia and Australia). Here’s a three-month chart:

Why is Australia a global outlier? All 13 routes of the Index declined in the past week, but rates to Australia had by far the lowest decline of the 13, which averaged 5% down.

Comparing ex China to Australia & New Zealand rates, South East Asia, and all rates ex China; Australia & NZ rates cut below all rates ex China for the first time in 2024 last week, after a big divergence throughout 2024. South East Asia rates have been trending down consistently for the past two months (down 25%). This route can be a leading indicator of Australia rates due to geographic closeness and voyage sharing.

Anecdotally looking forward, some carriers this week are offering largely unchanged ocean freight rates to Australia from the previous week. The Index lags the information Access ZG sees in quoted rates. This suggests the recorded index rate to Australia may steady for the next few weeks. In other words, sustained large rate falls should not be expected immediately (they may come closer to year end/ early in the new year).

Air freight rates (full-market mix of spot rates and contract rates) within Asia Pacific increased 3%, while overall worldwide rates held steady for the past fortnight. Air freight faces a capacity challenge especially for the peak season. There is a strong risk of air freight rate increases in the coming weeks.

Overseas may be the most vulnerable, least controlled part of your company’s international supply chain. Access ZG provides Australia & Asia on-the-ground specialist staff, expertise & resources. Reply to arrange a proposal for your company’s specific needs with a no obligation information session via your choice of phone call, Zoom online or face to face (for those based in Sydney).  

Shipping lines increase blank sailings as rates fall

Per the Loadstar, container spot freight rates on the main trades out of Asia continued to fall this week, as the resumption of operations at US east and gulf coast ports eased industry congestion fears. However, carriers have also begun to increase the number of blanked sailings on the main east-west trades as demand slackens. Drewry’s weekly bank sailings tracker stated there were 69 sailings cancelled for the coming one-month period across major trade lanes.

Look out for blank sailings to Australia when rates from Asia to Australia start a continually falling pattern.

Capacity squeeze will ease as more newbuilds arrive

Per the Loadstar, additional tonnage being introduced to the ocean shipping market next year presents “an opportunity for shippers” to use the broad spectrum of carrier alliance strategies to their advantage. In Xeneta’s 2025 ocean shipping forecast, the analytics platform says “a large-scale return to the Red Sea seems inconceivable at present”, but a partial return could be on the cards for some carriers. “This situation creates an opportunity for shippers, as long as they understand how to use the varying carrier and alliance strategies to their advantage.” 

Indeed, Xeneta predicts teu-mile demand will “continue to be a key factor in understanding shifting freight rates”, but assured shippers that capacity tightness would ease as more new ships are delivered. Xeneta predicts additional available tonnage will continue to ease freight rates in 2025. Newbuilds being introduced to supply chains next year could cause a supply and demand imbalance. This will be particularly prevalent in the case of a partial or full return to the Suez Canal.  

Air cargo spot rates hit 2024 peak, while Vietnam becomes a hotspot

Per The Loadstar, air cargo spot rates have risen to their highest level this year, despite the recent Golden Week holiday in China.

Tonnages fell by 7% week on week out of Asia Pacific, in the week to 6 October, WorldACD said. But worldwide spot rates went up +1% in the week to $2.84 per kg – their highest level this year. Asia Pacific rates rose 1%. Contract rates out of Asia Pacific rose 2%.

One current hotspot is Vietnam – and it has not gone unnoticed by carriers. A spokesperson for Qatar Airways Cargo told The Loadstar: “We certainly have seen a big demand for ecommerce from Asia and recently implemented increased capacity into markets including India, China and Vietnam… We see big potential in China, India and Vietnam due to the rising ecommerce boom.” Lufthansa Cargo also cited Vietnam in its winter schedule. Vietnam is certainly seeing a lot of attention. Capacity out of Ho Chi Minh to North America last week saw 359% growth, year on year.

Shippers told to delay air cargo tenders until after peak season turmoil

Per Air Cargo News, air cargo shippers have been told they should delay their 2025 tenders until after what is expected to be a tumultuous peak season. In a series of recommendations on how to manage current market conditions, Xeneta said companies should make sure terms and conditions (T&Cs) are firmed up, avoid air hubs sensitive to the e-commerce boom, take advantage of the lack of backhaul demand, utilise data and delay tenders to avoid the upcoming peak season.

“Recency bias gives greater importance to the most recent event, so both shippers and vendors discussing the market in 2025 are going to be influenced by what is happening around them in the here and now. As long as you have your T&Cs in place, you can bide your time and wait out the storm. The market may look very different in early 2025 and you will be much better placed to enter negotiations with clarity and decisiveness.”

Overall, Xeneta painted a gloomy picture for the peak season. “Storm clouds are gathering as the air freight market heads towards what is expected to be an extremely challenging year-end peak season,” it said. The data provider pointed out that its dynamic load-factor – Xeneta’s measurement of capacity versus cargo flown – is already four percentage points higher than 2023 with freight rates out of Asia Pacific up 25-40%.

The roaring twenties and volatility

Slash 247 explains that the 2020s are by some considerable margin the most disruptive for shipping over the past decades – covid, the Red Sea, Ukraine, and the Panama Canal. UK consultancy Maritime Strategies International (MSI), discussed the accumulating black swans in recent years and their links to growing volatility – encapsulated in this great chart.

Black swan events increase volatility, noting that the last five years have been the most volatile of the century to date. Research carried out earlier this year by Evercore ISI, an investment bank, also highlighted the extreme volatility seen across five shipping segments. “With geopolitics, extreme weather conditions, and an uncertain macro backdrop continuing to play a greater role in shipping demand and trading routes, we would expect the already robust volatility across bulk shipping segments to remain elevated for the foreseeable future.”

Access ZG (access-zg.com) provides services to international logistics & trade participants, specialising in connecting with Asian markets.  

Thanks for taking the time to read and hope you gained some valuable insights,

Jeffrey Levy CA 

Founder

ACCESS ZG 

_______________________________

Web: access-zg.com

Email: jeff@access-zg.com 

Phone: 0417 275 262           

           +86 18813902084

WhatsApp: +61 417 275 262

WeChat: Jiefu888Jeff