October Oceania Market Update 02/10/24

As we enter the last quarter of 2024, we would like to share with you our October Oceania Market Update, summarising the shipping market conditions and observations to assist you with your import and export planning.

Port strikes across the USA East and Gulf Coasts **Updated 04/10/24**

As you may be aware, dock workers have gone on strike indefinitely across the US East and Gulf coasts.  Members of the International Longshoremen's Association (ILA) walked out at 14 major ports along the East and Gulf coasts, halting container traffic from Maine to Texas.

A total of 14 ports involving some 25,000 workers are affected by the strike, according to the United States Maritime Alliance (USMX), which represents the ports and ocean carriers: Baltimore; Boston; Charleston, South Carolina; Jacksonville, Florida; Miami; Houston; Mobile, Alabama; New Orleans; New York/New Jersey; Norfolk, Virginia; Philadelphia; Savannah, Georgia; Tampa, Florida; and Wilmington, Delaware.  The action marks the first such shutdown in almost 50 years. The US government has stated that they are not intending to take action to suspend the strike action.

Latest update: As of 04/10/24, the International Longshoremen's Association (ILA) has now agreed to suspend its strike while negotiations continue. The ILA says its has reached a tentative agreement on wages and will go back to work on Friday until 15 January, when they will begin to negotiate “all other outstanding issues”.

Port congestion and equipment shortages

As global container movements begin to ease, we are observing a decrease in dwell times at key Southeast Asia transshipment ports, including Singapore, Port Kelang, Busan and Tanjung Pelepas.  The average dwell time is now around two weeks.  While port congestion challenges persist, we anticipate that current dwell times will remain stable and potentially improve over the coming weeks.

In Northeast Asia, terminal congestion is also showing signs of improvement. Wait times for trucks to gate in laden containers are decreasing, and the availability of empty equipment is gradually increasing.

However, congestion across Southeast Asia remains high due to sustained booking volumes. This is leading to longer wait times for containers to be gated into origin loading terminals, adding pressure on origin trucking services in the region.

Equipment shortages, particularly for 40' HC containers, continue to be a challenge, reducing the time available for suppliers to access, load, and deliver containers to terminals before Close Out.

Red Sea situation

Unfortunately, after a 29-day period of no attacks on merchant vessels sailing through the Red Sea, two ships were targeted by Houthi rebels on October 1.  Given the recent escalation in attacks from both sides of the conflict, the risk to merchant vessels operating in the region is expected to rise throughout October.  This development further underscores the highly unlikely resumption of commercial sailings through the Red Sea and via the Suez Canal in 2024.

Capacity reduction for Oceania

As demand continues to decline from Northeast and Southeast Asia to Europe, the Mediterranean, and the USA, we are now seeing the first signs of easing demand for space to Oceania. In response, carriers are maintaining their fleets in higher-yield markets, and no significant increase in capacity for the Oceania region is expected in the short term.  Shipping lines will continue to manage any reduction in demand through blank sailing and port omission programmes – a strategy aimed at maintaining the currently high freight rates. This approach has become common practice as market conditions fluctuate.

We are seeing a reduction in backlogs to Fremantle and Adelaide.  While capacity to these two destinations remains limited, easing transshipment congestion, particularly in Singapore, is contributing to this improvement.  Despite this progress, we expect continued disruption to shipments destined for both Adelaide and Fremantle through the first half of October.

An update of the relevant impacts from these actions and which are important for you to be aware of with your shipping planning:

• Rollover at origin ports:  While rollover volumes are decreasing, they continue to affect origin loading ports for southbound sailings to both Australian East and West destinations.  This situation is expected to slightly improve but persist throughout October.
• Advance bookings recommended:  We strongly advise suppliers to make bookings 3-4 weeks in advance of predicted cargo-ready dates.  This allows our teams to accurately assess weekly volumes and ensure adequate container allocation for your shipments.
• Reduced BCO and NAC allocations:  Shipping lines are continuing to reduce BCO and NAC space allocations in favour of higher-yield SPOT/FAK container freight rates.
• Preference for SPOT/FAK rates:  Shipping lines are ‘encouraging’ shippers to use SPOT/FAK rates over long-term BCO and NAC contracts.  Shippers who do not switch may face significant reductions or complete withdrawal of their space allocations.

These developments highlight the need for proactive booking and planning in this dynamic market environment.

Peak season and Golden Week

As the Golden Week Spring Festival holiday in China is upon us, we experienced a significant surge in bookings over the past two weeks.  Shipping lines were highly accommodating in accepting our bookings (and those of others), and released considerable space.  This has enabled them to build a rollover pool, sufficient to dispatch near-capacity vessels both during the holiday week and the following immediately after Golden Week.  We expect capacity to remain tight in the short term as a result but as mentioned previously there are signs starting to emerge of a general slowing for demand into our region.

We do continue to witness increased booking volumes from South East Asia, Indian Sub-Continent, Europe, Mediterranean, Middle East and US origins.  Importantly, for urgent orders, promotional orders and new season orders which may be time critical, we encourage you to please be cognisant of the above notes and factor the same into your planning. Please do reach out to your Ligentia support team for further discussion and planning options for same.

October GRIs and PSS

In recent months, all carriers servicing the Oceania region have been implementing rate increases in some form.  However, October marks the first month where we are seeing divergence among shipping lines.  While some have maintained their late September rates into early October, others have increased rates, and some have begun reducing their published FAK and SPOT rate offerings.  It is important to note that these reductions do not apply to surcharges already in place, but rather to the "all-in" freight rate payable.  This trend is reflected in our H1 October rate card, where rates for most trade lanes have seen a slight decrease.

It remains uncertain how carriers will proceed with their General Rate Increase (GRI) and Rate Restoration programs if demand continues to soften. We are closely monitoring the situation and will provide updates as conditions evolve.

The Peak Season Surcharge (PSS) enforcement from Northeast and Southeast Asia, as well as the Indian Sub-Continent origins, on BCO, NAC, and FAK ocean freight container contracts remains in effect.  Similarly, PSS enforcement from Europe, the UK, and Middle East origins on these contracts continues unchanged.

We would like to thank you for your continued support. Should you have any questions at all, please do not hesitate to reach out to our Ligentia Customer Success Team.