Navigating the Challenging Oceania Importing Landscape 09/07/21

At this point in the year, we would normally be talking to customers about the upcoming peak import season. In today’s environment, however, the reality is that the term “peak season” feels quite irrelevant.

In this article, Managing Director for Australia Dean Neville reflects on the current market, the challenges faced and the best ways to navigate such disruptive times.

An Unprecedented Landscape

Import volumes through H1 2021 are reportedly stronger than ever before, and shipping lines and other stakeholders involved in import supply chains to Oceania are taking full advantage of servicing such a buoyant market.

Since Chinese New Year, we have seen no drop off in import trade, indicated by lengthy rollover lists at most of the main origin loading ports, full advance booking queues and full import vessels calling into Australia and New Zealand. The import market remains heavily congested.

Rates also continue to rise. Based on GRI trends throughout the year, and with assessment of prevailing trends witnessed from Asia to UK / Europe / US markets, it will not be surprising to see the FAK SCFI pushing through the USD 5,000 TEU ceiling. In trades such as China to UK, we are already seeing market FAK rates pushing upwards of USD 20,000 per 40’ container, and there are no signs of these volatile freight rates trends easing to pre-COVID levels before at least 2023.

Key International Trading Challenges

While this list is not comprehensive, these are some of the most significant challenges we are currently facing:

• Short-notice blank sailings (more than 5,000 TEU per week of capacity withdrawn)
• Short-notice port bypasses, further consuming capacity and adding to carrier rollover pools
• Shipping line schedule volatility (ETD / ETA irregularities, daily vessel scheduling changes)
• Shipping line tracking websites unable to cope with the volume of physical disruptions, making it difficult to reliably track and trace cargo in transit
• Lack of suitable container equipment at key loading ports
• Lack of equipment generally at various inland / upstream origin ports, such as those in China, Vietnam, Thailand and India
• COVID-19 outbreaks at key origin ports impacting loading terminals, CFS facilities and supplier factory workflows
• Impact of the Suez Canal blockage
• Impact of port closures in southern China
• Full FAK and Premium rate level bookings made in advance resulting in further capacity shortages
• Withdrawal / reduction of extended free time periods on exiting NAC / BCO contracts at loading and destination ports
• Port congestion continuing to increase supply chain transit times, further impacting sailing schedules and predictability
• Rolling industrial actions and work stoppages
• Shipping lines closing / dramatically reducing weekly booking capacity levels from key origins

This is an overly dynamic and challenging international landscape to navigate, even without considering home market conditions. These conditions are unprecedented, but it is highly likely that shipping will remain disrupted for the foreseeable future.

We’re Here to Help

Concentrating on several fundamental components of your international supply chain will put you in the best position to move forward with some semblance of control and visibility:

• Work closely with your key suppliers 6-8 weeks in advance of forecast cargo ready dates (CRD or ETD dates). Ask your suppliers for timeline commitments and visibility of their production planning for each of your purchase orders (POs); encourage them to be transparent and factual with you in terms of their own material sourcing and any local supply chain challenges they are navigating.
  • Share your PO schedules and any prioritized POs with us – we will track your order from the time you share it with us up until that PO is delivered into you warehouse at destination
• Recheck the above at the forecasted CRD. Has anything changed? If so, communicate that with us so we can factor it into our planning windows you’re your container / cargo shipments. Encourage your suppliers to be transparent and cooperative with our origin port teams so we can monitor this milestone status for you locally.
  • Include your Ligentia Customer Success Manager (CSM) in your communications with factories during this status check. Trough our on-ground teams at origin and their contact points with your suppliers, we will do the same locally for you as an additional validation step in parallel with the supplier.
• Wherever possible, your key suppliers should book with Ligentia’s origin offices a minimum of 4 weeks in advance of predicted CRD (ideally 6 weeks in advance for best planning practice). Booking after this time, unfortunately, is likely to result in shipping schedules with ETDs well after CRD, potentially risking late arrival of cargoes into Australia and New Zealand destination ports.

We continue to monitor the situation during these unprecedented and challenging times. Please don’t hesitate to contact our Customer teams if you have enquiries relating to specific bookings.