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Demand for new Melbourne warehouse capacity remains high 

The industrial property sector in Australia, particularly in Melbourne, Sydney and Brisbane, is facing a challenge due to a significant shortage of available and new warehouse space. Driven by increased demand from e-commerce and the logistics industry, the vacancy rates of industrial properties remain extremely low (between 1% -2%) in Melbourne and Sydney. This situation has left investors and developers struggling to meet the rising demand for warehouse space. Additionally, the rising costs of land and construction have made it more challenging to build new industrial properties to meet the increasing demand. 

Adding to the issue is the recent supply chain disruptions caused by the COVID-19 pandemic, which has had a profound impact on warehouse demand. With the shortage of available warehouse space, many businesses have been forced to store their inventory in suboptimal facilities, leading to operational inefficiencies, increased costs and unhappy customers. 

The shortage of available warehouse space has also led to higher rental costs, in most cases more than 20% – 30% compared to 12 or 18 months ago in Melbourne and Sydney, making it difficult for small and medium-sized businesses to enter the market.

As a result, some businesses may be forced to relocate to less desirable areas or forego expanding their operations altogether, ultimately hurting the economy. 

Harders is aiming to meet this challenge head on by offering third-party logistics / contract logistics services with its first Truganina, Melbourne site. The site will accommodate 12,461 pallet positions from October 2023. 

Many companies are currently refining their sales and inventory forecasts for the coming financial year and peak period. 

If you need additional warehouse capacity or are not happy with your current third-party logistics provider solution, reach out to your Harders key account manager or sales representative for a confidential conversation. 

Our new 12,461 pallet storage facility is currently being built in Melbourne and will be ready to receive customer pallets before this year’s peak season. 

Auckland Container VBS Increase

Please note Auckland depots are increasing the container booking slot fees effective from the 1st of June 2023. The increase from the depots allows for upgrades and investment in machinery and infrastructure future-proofing of these sites. The overall cost increase will be around NZD 15.00 – NZD 20.00 per container VBS booking.


General Updates 

Volatility escalates this month as we once again find ourselves at the cusp of a possible rate increase on the North East Asia to Australasia Trade Lane with news that major shipping lines are planning on implementing a RR (Rate Restoration) to restore unsustainable spot freight rates in order to maintain reliable services. 

Will they succeed in their plight, or will this be another futile exercise? 
We have witnessed the market decline to historical lows in recent months while minimal capacity adjustments were made as carriers were trying to maintain their market share and ensure that any sailings during the May labour day holidays would have enough cargo.

As pressure on freight rates mounted amidst a depressed global economy it was evident that the major carriers led the charge on the “how low can you go” short term spot deals, trying to squeeze the newcomers out of the game. We need to remember that the last few years of the “historical freight rate high phenomenon” was extra ordinary and it has been suggested that we are merely slowly clawing our way back to “normality”. 

With services temporarily being suspended (A3X – ANL/OOCL), CA3 (TSL) withdrawn carriers have taken further action this month by finally implementing a string of blank sailings to aid in their quest to stop the freight rate erosion reacting swiftly to weak demand. 

No doubt an ever-changing market will continue as disparity amongst carriers will be evident some pushing to forego negative freight rates while others will continue to dive into their record-breaking profits of these previous years and continue to fund low freight rates with the hope that this will push their competition to breaking point and pull services out completely. 

A quick summary of the World Container Index as at May 2023:

  • Index has shown a decrease of 1% this week
  • Rates overall seeing a drop of 77% when compared to same time 2021
  • The latest index of USD 1741 per/ 40’ is 83% below the peak of over USD 10,377 per 40’ reached in September 2021
  • However it is 35% lower than the 10 year average of USD 2692 but remains 23% higher than the average 2019 (pre covid) rates of USD 1420
  • These all point to a return to more normal prices and stability 

Freight rates on all East to West trades are showing signs of stabilising in the coming weeks with the biggest fall seen this week on the Rotterdam to New York lane. 

We continue to see shipping lines adjusting their capacity to meet the market demand. Below we can see that out of a total of 675 sailings, 35 cancelled voyages are being implemented equating to 5% of voyages being removed during the weeks commencing 8th of May and 5th of June 2023. 

We are seeing a return to normality in freight rates as well as in schedule integrity on these routes however as the market is constantly changing shipping lines will ensure they adapt to market demand by easing off the blank sailings if there is a hint of an increase or they will not hesitate to cancel voyages to compensate for the low demand. 


Highlights

  • OKARGO – training and additional Internal Sales login have been provided proving valuable tool for quoting.
  • MAERSK– New Zealand East and Westbound contract set up with competitive offers and rebate program
    Hapag Lloyd assisting to reduce Europe rates in line with the market
  • COSCO – We are now on their T1 rate structure which is USD 200 better than the
    normal FAK rates
  • ANL CMA CGM – Continue to reduce direct rates in a bid to offer better than MSC
    Direct rates 

Airfreight Update 

Asia 
Demand is set to remain soft in June with sufficient capacity across most markets and general rates will continue to be competitive and stable. 

North America
Compared to the same period in 2019, direct passenger flights between the United States and China have decreased by 73% so far this year. U.S.-based airlines are currently allowed a total of 12 round-trip flights per week, while China-based airlines had been permitted 8—this number was increased to 12 in early May. 

The most efficient flight path between China and the United States passes through Russian airspace, which U.S.-based airlines are not allowed to enter, but China-based airlines can. This gives them a significant cost advantage. As a result, ticket prices on China-based airlines are approximately 40% cheaper than those offered by their U.S. counterparts. 

Demand for air freight between the two countries remains relatively low and manageable with current capacity. However, when additional capacity does return, it is expected to lead to further air rate declines, although it is unclear when this will occur. 


Global Freight Update 

Ocean freight demand on most trade lanes is generally flat. To compensate on the supply side, steamship lines continue to void sailings to balance the supply. They are also slow steaming on the backhaul legs of major East-West services. This allows them to allocate more vessel/capacity per service and save on bunker costs. 

Average speed – all containerships

While congestion is mostly gone, the need for some flexibility remains as blank sailings and service adjustments continue to impact lead times. 

As congestion eases globally, ocean carrier schedule reliability improved to 62.6% in March 2023. It is interesting that carrier schedule reliability on the U.S.-Asia trade lane is far below the average, at only 42.4% to/from U.S. West Coast (USWC) ports and 44.6% to/from U.S. East Coast (USEC) ports in March. 


Global Schedule Reliability

The Panama Canal is imposing lower draught restrictions due to drought conditions/falling water levels at nearby lakes that form part of the waterway. The restrictions went into effect at the end of April. This means container delivers seeking to cross the canal connecting the Atlantic and Pacific Oceans must reduce their payloads. This will have the impact of tightening vessel space as carriers will have to load less cargo on these routes. 


Asia

Carriers successfully implemented the mid-April general rate increase (GRI) on Transpacific and Asia-Latin America trade lanes, however rates are under continued pressure. 

With the inactive fleet continuing to shrink, carriers are reversing the slow steaming programme introduced in the first quarter. The active containership fleet has reached a new record high this spring as the new ships delivered have added more than 360,000 TEUs of incremental capacity. 

Asia-Europe spot rates are still holding steady, despite the high-capacity utilisation and relatively healthy demand on European routes. 

The frequency of blank sailings on the export trade, especially on the USWC, increased in April. On many service strings, the sailings are reduced to almost fortnightly. 


Europe

There is generally more capacity supply than space demand on trade lanes out of Europe. There are many national holidays in Europe in May, which will only reinforce the current imbalance. 

The backhaul trade to Asia has reached very low-rate levels, while export rates to North America are almost back to pre-pandemic levels.

Dockworkers in France have reached a new agreement, so no further labour strikes are expected. The daily four-hour strikes, which had been ongoing for weeks, are now over. It will still take some weeks for the ports in France to clear out the congestion and completely resume normal operations. However more union workers continue to participate in the general strike action over the increase in the retirement age. 


North America

Imports remain soft year over year due to inflation and normalising demand from the largest importers, including retail, furniture, electronics and do-it-yourself, which represent over 50% of U.S. imports. 

Many shippers are waiting to order more, while seasonal shippers have not yet started to increase their volumes. 

April U.S. container import volumes increased over 2 million TEUs (~9%) from March. This is up 5.3% from pre-pandemic April 2019. If the curve keeps following the 2019 trends, May should see an increase over April, even if it is small. 

While Los Angeles and Long Beach terminals spot slowdown actions are not significantly affecting cargo flow, shippers keep looking to USEC and Gulf ports as alternatives. This solidifies the shifts occurred during the pandemic. 

U.S. export capacity is generally open and rates continue their downward trend. Expect additional capacity entering the market in the coming months to support increased travel demand. 


Oceania

Trans-Tasman 
The trans-Tasman market has softened. Space and equipment availability is open. Rates are dropping with the introduction of new options on this trade lane. 

U.S. to Oceania 
The market continues to soften. Rates will continue to slowly decline as carriers compete for market share. Space continues to be tight on the USEC but easing on the USWC.
Port calls to New Zealand for exports from the USWC have been upgraded to weekly and transshipment service options are increasing with reduced congestion through Asian ports. 

Europe 
The Europe export market remains stable, with space and equipment readily available for dry cargo. Rates are still gradually being reduced by all carriers as supply continues to outweigh demand. 

Asia
Ocean carriers operating between Northeast Asia and Oceania still experience bottom rates. To prepare for the upcoming GRI in mid-May, they have begun to implement certain measures—increasing blank sailings (cancelling entire vessel sailings) or even temporarily suspending services to bolster their position. 


Southeast Asia

The Southeast Asia rate decline has slowed. There is no inclination of a potential GRI, but there may be one if the increases in Northeast Asia rates hold. Blankings on Southeast Asia (origin to transship port) continue to be the main issue. 

Carriers caution that vessels are approaching full capacity due to increased blank sailings, despite no reports of congestion in Singapore or Malaysia. This has resulted in some delivery delays, caused by both origin service and port of destination blanking, which means that the vessel will not be calling at that port. 


South Asia, Middle East, and Africa

The recent political unrest in Pakistan continues to evolve. The city of Karachi is under control. In the north, (Lahore, Faisalabad, Islamabad and Sialkot) the situation is slightly elevated and suppliers/shippers are exercising caution to ensure the safe transportation of goods. Expect more updates as they become available. 


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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