Another week, another spike: International freight insights APAC 2024 week 38

Another week, another spike in ocean freight rates from Asia to Australia. Spot freight rates China to Australia had a 5% increase in the past week (rates are up 26% in the past month). Contrast this to rates from China to all global routes, which decreased 5% in the past week (global rates ex China is down 12% in the past month).

Spot ocean freight rates over a longer year-to-date chart period show rates from China to Australia and China to all routes inverting over the past weeks:

This spike for the Australia route will likely end soon, as Australia being an outlier can’t remain for long. This prediction is also supported by ocean rates on the China to South East Asia route, which has overlap scheduling with Australia, also declining 5% this week. Rates to Australia should steady / start to decline within the next few weeks. I have seen one carrier discretely decreasing rates by as much as 7% this week.

There is an increased probability of steep rate falls in the medium term as Australia belatedly follows with the global trend, although carriers may increase blank sailings in an attempt to delay / limit this.

Global airfreight rates have been unusually steady this year, decreasing 1% in the past week, after increasing 6% in the prior few weeks. Increased air cargo demand with capacity not keeping up means that there is a reasonable risk of airfreight rate increases in the coming weeks. Although these will likely be nothing like the dramatic shifts in the spot ocean freight market.

Shipping Lines margins hit post-Covid peak

A recent Alphaliner report stated that margins for the nine largest liner operators topped 20% in Q2 2024, the highest since the Covid-19 pandemic, being assisted by the Red Sea crisis. As in the early days of the pandemic, carriers with strong spot exposure to Asia exports performed best. Taiwanese operator Evergreen Marine Corporation (EMC) has the highest margin, at 31% with an operating profit of US$1 billion. Margins for Maersk Line and other European carriers were also comparatively lower due to their focus for long-term shipping contracts.

Surging volatility in vessel capacity

Sea-Intelligence data shows that volatility in vessel capacity globally has significantly increased over the past decade. Data from the Asia-North Europe trade route was used to show this. Previously, the fluctuation was relatively stable at around 10% before the pandemic, but it has now tripled. This suggests that shippers can no longer rely on a consistent level of ocean freight capacity.

Forwarders and shippers push for longer term air cargo deals

This is per Air Cargo News, which says these parties are continuing to push for longer term air cargo deals as they look to avoid potential rate hikes due to the risk of supply chain disruption. Data from Xeneta shows that contracts of more than six months accounted for 54% of the market in the second quarter of 2024 compared with 30% a year earlier.

Air cargo rates to drive up through the end of 2024

This is per DHL’s report which “looks at the potential impact of demand, capacity, rates, economic growth and service disruption in the fourth quarter.” The report said that unrest in the Middle East and Ukraine, coupled with possible strikes at US ports, are likely to affect trade routes and help drive up air cargo.

“In addition to the usual rise in seasonal demand in the final months of the year, air cargo looks set to experience an additional seasonal spike from e-commerce shipments, especially from China and Hong Kong, as it has in the last two cycles.”

China’s Exports Jump to Two-Year High

Per Bloomberg, China’s exports unexpectedly accelerated in August, reaching their highest value in nearly two years and “providing a rare boost to an economy weighed down by deflationary pressures”. Exports climbed nearly 9% from a year earlier. “However, the influx of cheap goods to global markets has sparked backlash in the US and Europe, casting doubt on the sustainability of this growth strategy.” China’s economy continues to show diverging trends with weak domestic demand and strong export competitiveness.

Access ZG (access-zg.com) is an Australian company that provides fourth party logistics (4PL) services to international logistics & trade participants, specialising in connecting with Asian markets. Access ZG’s 10 value- ads assist with alleviating issues & navigating this new paradigm of heightened freight & supply chain risks for the international logistics industry.

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