Global freight rates reach a tipping point, not so for Australia rates: International freight insights APAC 2024 week 33
Updated: Aug 28
The global ocean container shipping market has reached a tipping point with long-term rates showing signs of life just as spiraling short-term rates begin to soften. The Xeneta Global Index, which covers all valid long-term contracts in the market, edged up 2.5% in July. This coincides with short-term rates on major trade lanes beginning to soften in July from the massive increases seen over recent months.
Increasing long-term rates and decreasing short-term rates means the spread is narrowing between the markets, which presents a delicate balance ahead of long-term contract negotiations between shippers and carriers later this year. Per Xeneta: "This is a pivotal time for the market. The big question is, how high will long-term rates climb before growth is stunted by the falling spot market?”
Spot rates Asia to Australia have not yet showed evidence of reaching a tipping point, with the China Global Export Container Freight Index for the past week to 9th August increasing 6.1%. This is well above the 0.2% increase in the overall China Global Export all routes China Export Containerized Freight Index. As can be seen in the 3-month chart, ocean freight rates have increased far more for all trade lanes than they have to Australia.
This leaves more possibility of increasing rates to Australia as shipping lines monitor their gross profit margins for different routes. It remains to be seen if rates to Australia will continue increasing or level out. My anecdotal information from certain shipping lines is that China -> Australia route is showing a further increase of up to 8% in rates this week.
Pressure on global supply chains eases
Port congestion and tight vessel capacity are easing across the globe as measures taken by terminal and ship operators alike are clearing bottlenecks and dampening spot rate pressures. Consultancy Dynamar said that supply chains have now fully adjusted to the new realities, particularly with Cape diversions. Per Dynamar analyst: “It may just well be that the time needed to adjust supply chains, has been aided by increased vessel numbers and capacity, and is helping to provide that smooth and regular flow of vessels that ports prefer.”
MSC reorganizes its Asia-Oceania service network
The world's largest liner operator said the Wallaby service will be enhanced and reinstated as a standalone service, offering faster and more direct connections between Australia, New Zealand and North Asia.
World Bank deciphers the correlation between disruption and increasing container freight rates
Per Splash247: “The 2020s have marked a period of unprecedented disruption for liner shipping, which in turn has created the conditions for the greatest earnings the sector has ever recorded. Quantifying how this disruption – whether it be covid, the drought in Panama, or the Red Sea shipping crisis – equates to freight rates increasing has hitherto be an inexact science. However, a working paper for the World Bank has managed to crunch the numbers via a newly launched Global Supply Chain Stress Index (GSCSI). The index derives from Automatic Identification System tracking data. It calculates the equivalent stalled ship capacity measured in teu, providing data at the port, country, regional, and global levels. The SCFI increases by $2,300 per teu for every 1m teu coming under stress.”
Thanks for taking the time to read and hope you gained some valuable insights,
Jeffrey Levy CA
Founder
ACCESS ZG
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