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Henning Harders January Newsletter

Ports Of Auckland Price Schedule Update

Ports of Auckland have recently announced a significant increase to its Vehicle Booking System (VBS) charges effective from 1st January 2024.

There will also be the introduction of a Rail Handling Fee for containers transferred into and out of
Port of Auckland effective 1st January 2024.


The Red Sea Disruption’s Effect on Supply Chains

In the wake of the ongoing conflict in the Red Sea, global supply chains are facing unprecedented challenges, far-reaching implications, cascading disruptions, and a complex environment for logistics.

Here are key delivery considerations amidst this evolving situation:

1. Ocean capacity and equipment is constrained around the world
The interruptions in transit and vessel re-routing from the Suez Canal are placing strain on global ocean capacity. While the Asia-Europe trade lane is currently most affected, the impact is extending to other lanes as carriers adjust routes based on delivering demand. Meanwhile,

as vessels and containers face longer transit times, expect a shortage of empty containers in Asia.

To secure space in this competitive market, book ocean freight well in advance—at least 3-4 weeks. Exploring Less than container load(LCL) ocean delivery can be a viable option to keep your freight moving. 

2. How other events contribute to further delays
The Suez Canal disruption, coupled with ongoing challenges in the Panama Canal due to low water levels, has further complicated the global delivery situation. The high number of vessels rerouted to the Suez Canal—which only handles 29% of global ocean traffic on average—and the ongoing drought in Panama limits alternative options. 

The Cape of Good Hope, with an average transit time increase of 14 days, has become the primary alternative route. Additionally, the approaching Lunar New Year is expected to intensify delays, as increased exports precede the traditional holiday shutdown across Asia.

3. The role of air and LCL freight in coming weeks
While different, it’s possible to draw parallels to the challenges faced during the COVID-19 pandemic in that today’s shippers are focused on contingency plans to ensure the movement of their freight. Global logistics providers with scale and expertise play a crucial role in strategizing and implementing these plans. 

While traditional air freight is an obvious alternative, a combination of sea and air solutions, expedited inland services, transloading at ports and LCL delivery should be considered. Monitoring the spot market will provide insights into industry-wide shifts to alternative modes. 

4. Anticipate Ocean to Air conversions
As disruptions unfolded during the holidays, contingency plans rolled out slower than usual. However, as businesses resume operations, swift implementation is expected. Although air and LCL capacity is currently more accessible, long-term availability may change as shippers activate contingency plans. 

Proactive measures, such as blocking additional air capacity on core trade lanes, can assist in keeping freight moving. Shippers are encouraged to engage in conversations with logistics providers like Henning Harders to develop comprehensive risk mitigation strategies across their entire supply chain. 

Keep your freight and supply chain on track
In conclusion, proactive engagement with logistics providers, strategic planning and flexible contingency plans are imperative for navigating the evolving geopolitical climate and ensuring supply chain resilience amidst ongoing disruptions.



Airfreight Update

Asia

There are no foreseen capacity issues for most of the Asia trade lanes, but some flight cancellations are expected leading into Lunar New Year holidays in early February. 

Demand is expected to pick up gradually in the second half of January before manufacturing activities in most parts of Asia, especially China, are set to close prior to full resumption after 

mid-February, with demand remaining soft for the rest of February. 

Rates are expected to hold up and can turn volatile due to the ongoing Middle East conflict situation, which has an impact on fuel prices and freight rates with a potential shift in demand for more air services converted from ocean.

Latin America (LATAM)

The first month of the year is an important time for the flower industry in Colombia and Ecuador, as they export large quantities of fresh flowers to the United States and Europe. This is known as the flower high season. It coincides with the high demand for flowers during Valentine’s Day and other celebrations. Meanwhile, the rest of the markets in Latin America maintain a stable level of supply and demand, as they start the year with no major changes in their capacity or customer preferences. 

The rates for air cargo are also fluctuating according to the supply and demand conditions in each market. The airlines are trying to optimise their capacity utilisation by adjusting their schedules and routes to maintain their profitability and competitiveness. 

North America

The United States’ export market remains stable to most destinations. Capacity is suitable to handle demand and there is little reason to expect much change in the short term. 

Most U.S. import lanes are in a similar position, as the first quarter is typically a low demand period. With Chinese New Year coming, there is potential for increased demand at the end of January and early February. The short-term wildcards are challenges coming on the ocean market, where Panama and Suez Canal issues are looming. If the ocean market tightens dramatically, there could be significant volumes shifts from ocean to air, creating an unstable market for air freight that is not typical for this time of year.

Oceania

The market narrative of a return to pre-Covid conditions continues to run on track for Q1 2024. Capacity to Oceania continues to grow, with demand building as shippers look for alternatives amidst the ongoing disruption in the Red Sea. Shippers are encouraged to revise ordering patterns/demand throughout the disruption and consider alternative delivery options.

South Asia, Middle East, and Africa

The Red Sea conflict’s impact on Suez Canal delivery is leading to an increase in air freight demand. The increased ocean freight rates and higher transit times due to the volatile situation in the Red Sea has squeezed air freight capacity. There is an immediate effect and significant price hike on major trade lanes, including a 35-40% increase on the Europe sector from SAMA.

A similar increase is being experienced in the U.S. sector as well. The prices from China had cooled down due to the holiday season in late December, but the prices may increase again until the Chinese New Year, further compounding the price escalation seen due to the Red Sea conflict. It is difficult to offer long-term validity on rates as the airlines are quoting on ad hoc basis only.


Ocean Freight Update

Ocean freight demand on most trade lanes is not meaningfully increasing and space continues to trend higher than demand. In parallel, additional capacity continues to be added to the global fleet as the record number of new vessels ordered by steamship lines over the past few years continue to get delivered.

However, the current low water level of the Panama Canal and its effect on capacity, is another reminder of how external events affect the industry. More details on this to follow.

Asia

The current Red Sea blockade continues without any clear timeline on when it will be resolved. All major delivery lines have extended their decision to divert via the Cape of Good Hope route. This results in an expected capacity shortfall of up to 40% on Asia-Europe lanes and Trans-Pacific East Coast from four weeks to six.

Ocean freight rates have increased sharply on Asia-Europe trade lanes and carriers have announced a general rate increase (GRI) on other trade lanes, like Trans-Pacific, Asia-LATAM and Asia-Oceania. The increase in spot rates and tight capacity is expected to continue through Chinese New Year.

The diversions to the Cape route have also delayed the repositioning of empty containers back to Asia. There is a sharp jump in demand for lease equipment in Asia and new container prices have also jumped by over 20% in the past month.

Latin America

For all services, capacity is open, and carriers are finalising the big tenders to regulate the rates of the main export commodities. No increases are projected, apart from the increase due to the Panama Canal surcharge for ocean freight. Carriers aim to maintain the same levels as Q4 2023. 

North America / Exports

United States-Asia

  • Growing demand via USWC
    Carriers are starting to see more demand for services via the U.S. West Coast (USWC) due to the continued challenges with obtaining appointments through the Panama Canal and in preparation for possible labour disruptions on the U.S. East Coast/U.S. Gulf Coast (USEC/USGC) with the ILA labour negotiations coming up later in 2024.
  • Increased blank sailings expected
    Blank sailings between the USEC/USGC and Asia will be significant during Q1 2024 due to the serious disruption in vessel schedules caused by diverting first from the Panama to the Suez Canal and then from the Suez Canal to the Cape of Good Hope.
  • Upcoming China barge suspension
    Temporary China barge suspension will occur again during Q1 2024 prior to Chinese Lunar New Year from 5 February to 18 February 2024. As usual during the barge suspension period, shippers will need to terminate deliveries bound for Pearl River Delta ports at the China base ports called directly by ocean carriers, such as Hong Kong and Yantian. 

United States-Europe

  • ETS is in effect
    The EU implemented a carbon tax system that will apply to the delivery industry, called the Emissions Trading System (ETS). Carriers have announced their ETS charges went into effect 1 January 2024. Analysts advise ETS could also cause ocean carriers to adjust their delivery schedules into and out of Europe, but no significant changes have been seen yet on the Trans-Atlantic lane.

United States-LATAM

  • LATAM GRIs
    Carriers are further announcing planned general rate increases (GRIs) for deliveries to the Caribbean in early 2024 in addition to the PSS surcharges during Q4 2023.

United States-South Asia, Middle East, Africa (SAMA)

  • India and Middle East space is tight
    Space at ports (namely USEC and USGC) to India and Middle East trade lanes have been significantly affected due to the risks of transiting through the Suez Canal because of piracy attacks by Houthi rebels in Yemen. Most carriers are diverting their vessels via the Cape of Good Hope, which is increasing transit times and the frequency of blank sailings.
  • Red Sea port services suspended
    Services into Red Sea ports are currently suspended with many carriers and for those carriers still offering service, significant surcharges are being added to the freight costs with immediate effect.
  • Surcharges planned for India and Middle East
    Carriers have announced planned GRI’s to India and Middle East locations effective February 2024 due to the tightening capacity and general instability on this lane.
  • Congestion in South Africa
    South Africa ports are severely congested currently due to recent historic flooding that destabilised the port infrastructure, followed by severe reductions in productivity at the ports, such that they are handling more cargo than the port terminals can efficiently handle. The consequence is that vessels are dwelling up to 19-20 days at Durban port and 6-7 days at Port Elizabeth. Ocean carriers have announced port congestion surcharges to help address the costs incurred.

Imports

The Canal Authority plans to maintain the current draught but increase the number of vessels transiting per day, “because the November rains were not as deficient as those in October, coupled with the results of the water-saving measures and restrictions implemented”:

Steamship lines are maintaining the Panama Canal surcharges starting 1 January 2024 and forward. While The Alliance is so far not using the Panama Canal anymore, the other steamship lines are trying to resume their usual service routings via the Canal, though some exceptions remain. 

The alternatives are to route via the Cape of Good Hope (transit time increase of about 14 days) or the Suez Canal (transit time increase of about 14 days). As ships are delayed, transit time is affected but also capacity: more ships are needed to cover a longer route on a weekly basis. Therefore, space availability on services typically routed via the Panama Canal has become a challenge and supported rate increases in most trades. 

The situation around the Suez Canal will continue to be fluid. Since 15 December 2023, most maritime carriers have announced they are temporarily pausing or rerouting vessel traffic through the Red Sea and Suez Canal following a sequence of attacks on container vessels launched from a part of Yemen. 

A permanent re-routing of all services will require 1.4-1.7 million TEU, due to a roundtrip transit time increase of about 30% of capacity, equal to absorbing up to 6-9% of global container vessel capacity. 

Most of the vessels will travel around the Cape of Good Hope, which adds, on average, 14 days to transit time. Rerouting or pausing even a portion of those vessels can have a significant impact, not just to trade that moves via the Red Sea, but across all global trade lanes. Blank sailings and rate increases are expected to continue across many trades into Q1 2024. 

As capacity continues to tighten, carriers will likely reshuffle vessels to trade lanes with the most demand; in some lanes this is already happening. The industry could also experience an equipment imbalance, particularly in Asia, as delays in backhaul services will reduce the number of empty boxes available. It is highly recommended that bookings are made four to six weeks in advance to provide space and equipment. 

Supply and Demand

  • Demand momentum of pre-Chinese New Year
    On TPEB and Asia-Europe, pre-Chinese New Year high season is starting. This demand momentum, combined with the global capacity pressure caused by disruptions on the Panama and Suez Canals is causing market levels to increase drastically as of January 1.
  • Trans-Atlantic Westbound and India to North America rate increases
    On Trans-Atlantic Westbound, steamship lines are also trying to push rate increases pointing to the indirect impact of the Suez Canal disruptions. India-North America trade is another lane directly affected by the Suez Canal disruptions and is also seeing large increases.
  • Capacity is volatile
    Continuous blank sailings, service reshuffles and equipment shortages due to Suez and Panama Canals disruptions will keep estimated time of departures (ETDs) volatile.

Oceania

The Trans-Tasman market has continued to soften. Space and equipment availability is still widely open. Rates are still being reviewed regularly with the introduction of new options on this trade lane.

The Europe to Oceania market is affected by disruption in the Red Sea with most carriers implementing contingency surcharges with ongoing ripple effects causing port congestion and an increased demand on air freight.

Northeast Asia supply continues to tighten as carriers increase blank sailing/port omissions and implement GRIs all due to issues surrounding the Red Sea and local Protected Industrial Action at DP World, nationally. Further impact may be felt leading up to the Chinese New Year.

Export rates are under pressure with load factors strong creating competition and rate increases.

SAMA

The recent Suez Canal strike has forced delivery lines to reroute vessels, decreasing capacity and causing carriers to restructure schedules. Despite this, cargo demand is rising, especially in key sectors due to the approaching Indian financial year end. 

Equipment shortages at inland container depos (ICDs) have led carriers to prioritise premium freight, while increased ocean freight rates and additional charges contribute to a volatile market. Blank sailings and schedule instability persist in certain trade routes, with overall market dynamics expected to remain uncertain until normalcy is restored at the Suez Canal. 


Inland Drayage Update

Asia

In January, the transportation market is relatively stable and freight rates are fluctuating slightly. It is expected the

transportation market will not grow significantly due to the impact of the Chinese New Year

holiday while the freight will be higher given the tight capacity during Chinese New Year.

Transit time in the Ping Xiang port from China to Southeast Asia is now around 1-2 days. With Chinese New Year approaching, demand rises in the short term while the port has increased its traffic capacity with no serious congestion in Ping Xiang port. Meanwhile, there is no congestion situation for import trucking from Southeast Asia to China after fruit season.

Europe

Germany: Road toll increase

A CO2 emissions tax of €200 per ton in road tolls for heavy good vehicles began on 1 December, 2023, under an agreement by the ruling of the German Federal Ministry of Transport and Digital Infrastructure (BMDV).

This increase will affect all cargo movements carried out by vehicles over 7.5 tons, such as:

  • Full truckload movements within Germany
  • Pre- and on-carriage for container transportation
  • Groupage/part-load movements within Germany
  • International transport where Germany is a transit country (e.g., Austria-Holland)

Henning Harders will continue to monitor further developments and distribute updates in case of any major changes.

North America

Southeast
The Atlanta market is experiencing growth, but also facing some major challenges related to capacity constraint and driver shortages. However, the good news is there has been ongoing infrastructure improvements and sustainability initiatives that are expected to drive further development and efficiency in this vital market.

Many carriers are actively adopting greener practices such as using alternative fuel, electric vehicles (EVs) and optimising route planning to minimise emissions impacts.

Similarly, carriers in Savannah are pushing to increase their fleets by using different incentives to entice drivers into their ranks in preparation for what they are hoping will be a significant first quarter in 2024. The driver shortage has led to increased competition with brokers and asset-based carriers, potentially increasing rates in 2024 to help support these incentives.

Northeast

  • Baltimore                                                                                                                  
    Motor carrier capacity is high. The market itself has been flat with small flutters of activity increases. No major market conditions to report. 
  • NY/NJ
    Looking to the year ahead, there is some concern that the ports of NY/NJ are congested but volumes are low. Volumes are down year over year (Y/Y) and chassis capacity remains worrisome. The cost of goods is high, but everyone is looking for aggressive rates. Shippers do not understand the cost of maintaining a fleet; for example, replacing a tyre with road service is running over $800, depending on tyres. 

Central/Ohio Valley
Carriers in the Ohio Valley are seeing major pressure from beneficial cargo owners (BCOs) to reduce rates, even to the point of moving freight at a loss. This is not sustainable as once the market shifts again, rates will have to increase. 

Volumes within this region increased in 2023 even with the downturn in other markets. While carriers have seen a decline with larger high-volume shippers, they see a tremendous increase with smaller historically lower-volume shippers as well. 

Some of their major concerns going into 2024 are rate sustainability and potential bankruptcies with retailers that do not do well through holiday sales. Carriers are excited to see more diversity in their customer portfolios and the focus on productivity and innovation over the past year has allowed them to stay competitive in the ever-increasing tech market. 

West/Gulf

  • LA/Long Beach
    Drivers at the ports of Los Angeles and Long Beach report chronic problems securing appointment slots for container moves, which is particularly frustrating now when there’s little to no congestion at the gateway’s marine terminals.
  • To help relieve some of frustrations, the Harbour Trucking Association and Yusen Terminals agreed to a pilot project that will shorten the window for receiving containers. This will allow for more appointment slots during the day, potentially reducing driver wait time in the port.
  • Port of Houston Terminals-Turning Basin, Babours Cut and Bayport Terminals These ports announced a 3.2% increase in tariff charges, including dockage, wharfage, throughput charges, container storage rates, container crane and private crane rental rates, water hook-up rates, freight handling rates and miscellaneous other charges. This increase went into effect 1 January 2024.

Oceania

Australian port logistics and landside container transport services are operating at levels below optimum with the continued Planned Industrial Action at DP World Terminals across Australia. 

Work bans and stoppages are scheduled to continue throughout the month of January continuing into Q1 affecting Brisbane, Sydney, Melbourne and Fremantle terminals. Henning Harders will continue to monitor the situation and provide updates.  


Customs Update

Oceania

Australia is experiencing delays with the processing of quarantine entries and longer delays where inspections of cargo is required. In New Zealand, customs and processing times are currently operating at levels within capacity with no reported delays.


We will continue to evaluate all market options and work with you to provide individual solutions for your business. 

For more details on any of these articles please contact your Henning Harders Key Account Manager. 

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