Freight & Trade Alliance (FTA) and the Australian Peak Shippers Association (APSA) have prepared the following report using practical efforts to ensure that the commentaries are accurate, generally using source intelligence and publicly available data.
JUNE 2024 - SNAPSHOT
- Rates
- Drewry's composite World Container Index (WCI) has increased significantly in the past month, up 25.7% to $5,117.00 per 40ft container as at 20 June 2024.
- Rate levels are up 233% when compared with the same period last year.
- The average composite index for the year-to-date is $3,510 per 40ft container, which is $768 higher than the 10-year average rate of $2,742 (which was inflated by the exceptional 2020-22 Covid period)
- GSL announce a Rate Restoration from South East Asia to AU & NZ of USD$150/TEU effective 1 July 2024.
- CMA CGM / ANL on 17th June announced Peak Season Surcharge (PSS) from AU/NZ/PG to North Europe & Mediterranean effective 1 July 2024.
- ANL announces a General Rate Increase (GRI) for all shipments from NEA & SEA to Darwin of USD$250/TEU effective 1 July 2024.
- Sofrana ANL announce a GRI from Australia & New Zealand to PNG, Solomon Islands & Vanuatu of USD$250/TEU effective 15 July 2024.
- Maersk announce PSS ex SEA to Australia of USD$500/TEU effective 1 July 2024.
- Maersk announce PSS ex Oceania to all North America and Latin America destinations of USD$400/Ctr effective 1 July 2024.
- Cosco on 6 June announced a Rate Restoration on all Southbound services from all POLs to Townsville & Darwin of USD$500/TEU effective 1 July 2024.
- Cosco on 7 June announced a Rate Restoration on their Southbound services from North East & South East Asia to Australia of USD$500/TEU effective 1 July 2024.
- Maersk announce increase to Demurrage & Detention Tariff - Maersk have announced changes to their tariff effective from 1 July 2024, increasing Detention on Dry containers by 20%, and 58% on Reefer containers.
- MSC announce increase to Demurrage & Detention Tariff - MSC have followed Maersk in announcing changes to their tariff effective from 10 July 2024, increasing Detention on Dry containers by 5-16%, and up to 20% on Reefer containers.
- Supply / Demand
- Demand remains much higher than anticipated for 2024, with the Red Sea Crisis continuing to disrupt the market leading to:
- Port Congestion - Europe and Singapore have seen substantial delays, with Singapore for a short while overtaking Shanghai as the most congested port.
- Equipment Imbalances / Shortages - with containers unevenly distributed due to schedule adjustments as a result of the Red Sea Crisis, creating equipment shortages at major hubs.
- Significant Rate Increases - Rates as per the above container index chart are steadily increasing, and expected to continue for the short term at least.
- Surge in demand of goods ex China into the USA - adding to global pressures already placed on the supply chain, is the increased demand in containers from China to the US due to the following ;
- 1) Possibility of strikes on the US East & Gulf Coasts - With unions withdrawing from talks, it's leading to the consensus that there is a high possibility of East and Gulf Coast port strikes in Q4 due to current labour agreements expiring at the end September, leading to increased demand to avoid this period.
- 2) *Tariff increases - tariff increases of up to 75% imposed by the US Government against Chinese goods effective from this year, which has led to a surge in demand in an effort to beat the impending increases.
- Whilst some commentators, including the Hapag Lloyd CEO, suggest this may also lead to an earlier end to the peak season this year, these combined pressures are straining the shipping industry and contributing to a significant rise in freight rates worldwide, With the global fleet at minimum idle capacity and struggling cater for the excessive demand, rates will likely continue to remain high.
* US Tariff Increases on China:
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- Shipping Line Financial Results
- Q1 Results - As reported last month, in Q1 2024 container lines rebounded with a $5.4bn profit reversing a $700m loss from Q4 2023. The following table highlights the performance of Maersk, CMA CGM, and Hapag Lloyd interests as per their financial reports :
- Panama Canal - Drought Recovery
- Panama Canal Authority (ACP) announced that it will increase the current number of daily transits from 32 to 33, effective July 11. Furthermore, this number will increase to 34 as of July 22, following the current and projected level of Gatun Lake for the coming weeks.
With these progressive increases, by July 22 the Canal will have added two transits to the current schedule: one to the panamax locks (raising the daily transits to 25), and one to the neopanamax locks (increasing daily transits to 9).
- Red Sea Crisis
- The Red Sea crisis continues to pose significant challenges to global shipping and trade, with ongoing hostilities, increased shipping costs, and disruptions across multiple supply chains. The situation remains volatile, with active military engagements and geopolitical tensions contributing to the complexity of navigating this critical maritime region.
Following is a summary of incidents and developments during the past month: - Increased Hostilities:
The past month has seen numerous drone and missile attacks on merchant vessels, including containerships and bulk carriers, with significant damage reported and injuries to crew resulting in death in some cases.
US & UK forces have been actively intercepting and destroying Houthi-launched drone boats and missiles, including successful operations against multiple threats. - Significant Incidents:
A merchant vessel in the Arabian Sea reported uncontrolled flooding, leading to its abandonment and subsequent drifting.
The bulk vessel "Tutor" was hit by a drone and a missile, leading to severe flooding and its crew abandoning the vessel.
The general cargo ship "Verbena" was also abandoned after sustaining multiple hits and uncontrollable fires. - Claims and Counterclaims:
The Houthis have claimed several attacks on vessels, including alleged hits on the aircraft carrier "USS Dwight D. Eisenhower" and the bulk vessel "Transworld Navigator," though many of these claims were denied or not corroborated by other sources such as US Central Command (US CENTCOM).
Reports of explosions near merchant vessels in the Gulf of Aden and the southern Red Sea, causing damage but no significant injuries. - Geopolitical Tensions:
US and UK military operations continue in the region, with ongoing airstrikes and naval engagements to mitigate the Houthi threat.
Increased regional instability, with threats from Hezbollah targeting Cyprus if Israel is allowed to use its bases. - Shipping and Trade Impact:
Significant increases continue in shipping rates due to rerouting around the Cape of Good Hope, adding time and cost to shipments.
Port congestion and delays, exacerbated by the ongoing crisis and other global supply chain disruptions such as the Panama Canal drought, US labour strikes in various regions. - Economic and Environmental Effects:
Higher shipping costs and war risk premiums are impacting global trade, with surges in container rates from Asia to Europe and the US.
Increased greenhouse gas emissions due to longer shipping routes.
Port congestion and delays in key locations, including the port of Dammam in Saudi Arabia and European ports affected by strikes and operational issues. - Industry Reactions:
Shipping companies, including Maersk and MSC, have announced new rates and surcharges to cope with the ongoing crisis.Carriers continue to impose surcharges to manage the increased demand and costs.
- Baltimore – Francis Scott Key Bridge Collapse
- Baltimore is now fully operational, with shipping lanes reopened and unrestricted.
- Shipping Competition
- Samsung's US subsidiary has filed a massive complaint with the Federal Maritime Commission (FMC) in the US against HMM, alleging 96,000 erroneous detention and demurrage charges, potentially totaling tens of millions of dollars. The basis of the claim is HMM's repeated failure to maintain reasonable inland transportation practices, leading to increased D&D charges. This complaint, building on previous claims against other carriers, highlights ongoing issues in the shipping industry with unfair D&D practices, despite recent FMC rule revisions aimed at improving billing transparency and dispute resolution.
- FMC in the US have suggested Detention and demurrage (D&D) cases handled by them in the US have tripled since the pandemic, reaching historical highs. FMC Commissioner Carl Bentzel noted that late-stage litigation cases have required the hiring of two more administrative judges, bringing the total to three. Currently, about 56 formal cases and 31 small claims are being heard, with significant incidents like the Samsung Electronics America case (above) involving 96,000 D&D charge incidents with HMM. Despite the surge, only 5%-10% of cases reach litigation, as most are settled through the FMC's dispute resolution process, which has managed $12 billion in billings since the pandemic.
Most current cases involve service refusals or bad faith actions under loosely defined service contracts. Bentzel stated that these contracts are often "aspirational," allowing parties to switch to the spot market when beneficial, making FMC's role more about arbitration than litigation. The threat of FMC litigation has increased D&D cases, with industry cooperation setting precedents. The FMC expects a new wave of cases due to ongoing congestion, especially from Red Sea diversions.
- Mergers/Acquisitions
- GAC (Gulf Agency Company) / Quadrant Pacific - GAC is acquiring the ships agency business of Swire-owned Quadrant Pacific in New Zealand. GAC New Zealand, established in 2008 and previously partnered with Quadrant Pacific, will now directly manage ship agency services across all New Zealand ports. The acquisition will be finalised by July 1, 2024, with Quadrant Pacific's agency staff joining GAC New Zealand.
- Schedule Reliability
- After a steady improvement each month in Q1, latest global schedule reliability statistics show a decline in April, with reliability having reduced by 2.5% month-on-month down to 52.1%. On a year-on-year basis, schedule reliability was 12.1% lower than the previous year.
- The average delay for LATE vessel arrivals has continued to improve, decreasing to 4.74 days. On a year-on-year basis, the April 2024 figure was 0.40 days higher.
- Wan Hai remains the most reliable top-13 carrier in April 2024 with schedule reliability of 59.0%, while Evergreen have improved into second spot. Evergreen and CMA CGM were the only two to improve compared to last month. There are now only 6 carriers above the 50% mark. ZIM was the least reliable carrier with schedule reliability of 44.2%, after a significant decline of 11.9% in the month.
- Cancellations - Blank sailings increasing
- Global - Between week 26 (24 Jun-30 Jun) and week 30 (22 Jul-28 Jul), 61 cancelled sailings out of a total of 668 scheduled sailings, representing 9% cancellation rate which is 3% higher than prior month. During this period, 51% of the blank sailings will occur on the Transpacific Eastbound, 29% on the Asia-North Europe and Med, and 20% on Transatlantic Westbound trade.
- OCEAN Alliance have announced 15.5 cancellations, followed by 2M and THE Alliance with 9 and 8.5 cancellations, respectively. During the same period, 28 blank sailings have been implemented by non-Alliance services.
- Australia - Based on July schedule data ex China to Australia, 8 cancelled sailings have been announced out of a total of 101 scheduled sailings, representing a 7.9% cancellation rate. Up by 3.4% compared to prior month.
- Orderbook / Scrapping
- CMA CGM has signed letters of intent with Hyundai shipyards for a substantial newbuilding order worth at least $3.5 billion. The order includes 20 new container ships, featuring 16,000 TEU and 8,000 TEU vessels, all designed to be LNG dual-fuelled. This strategic move is set to expand CMA CGM's fleet and reinforce its position as the world's third-largest container line. The new builds are part of CMA CGM's ongoing efforts to modernize its fleet and enhance environmental sustainability.
- April set a new record for ship deliveries, with 59 vessels totaling 342,200 TEU, marking the highest number of ships and the largest capacity addition ever in a single month. The trend of new ship deliveries is expected to peak in 2024 before starting to decline in 2025.
- MSC continue to sit atop the orderbook rankings with19.9% market share, while the liner vessel fleet has now reached 30 million TEU for the first time in history :
- Sustainability
- Maersk has joined forces with 15 major shipping companies to advocate for a climate tax on fossil fuels. The proposal, expected to be put forward at the IMO's MEPC82 meeting scheduled for September 30 to October 4 2024, aims to make fossil fuels more expensive and thereby promoting the use of green alternatives.
Maersk's European representative for public and regulatory affairs highlighted the proposal's goal to balance the cost disparity between black and green fuels. The initiative, developed with input from the World Shipping Council, involves imposing fees on ships using fossil fuels. The collected fees would then subsidise green fuel usage, in turn making eco-friendly options more financially viable without causing significant inflation.
The shipping lines involved in this initiative include industry leaders such as MSC, CMA CGM, Hapag-Lloyd, Cosco, and Wallenius Wilhelmsen. These companies are preparing hypothetical price models based on official data to demonstrate the feasibility and impact of the proposed green price mechanism.
The proposed mechanism, termed the Green Balance Mechanism, is designed to equalize fuel costs by charging fees on fossil fuel usage and distributing these funds to support green fuels. The system aims to incentivise investment in low-emission technologies by offering financial rewards based on the lifecycle emissions of different fuels. The IMO's ambition is to reach net-zero greenhouse gas emissions from international shipping by 2050, with intermediate targets of a 20-30% reduction by 2030 and a 70-80% reduction by 2040 compared to 2008 levels.
The proposal, if accepted, could be approved by mid-2025 and implemented by 2027. The success of this initiative is critical for the shipping industry's transition to sustainable energy, as green fuels currently cost at least twice as much as fossil fuels and are not yet available in sufficient quantities. Maersk has already made significant strides by ordering 25 methanol-powered container ships, demonstrating its commitment to leading the industry's green transition.
This collaborative effort underscores the shipping industry's commitment to tackling climate change and aligning with global sustainability goals. The proposed green price mechanism represents a strategic approach to making green fuels more accessible and economically competitive, paving the way for a more sustainable future in maritime transport.
· Terminal and Port Update -
o Patrick terminals
§ Brisbane: Delays approx. 0.5 day
§ Fremantle: Delays approx. 4 - 5 days
§ Sydney: Delays approx. 0.5 day
§ Melbourne: Delays approx. 0.5 day
o DP World Terminals
§ Brisbane: Delays approx. 2 days
§ Fremantle: Delays approx. 1.5 - 2 days
§ Sydney: Delays approx. 1 - 1.5 day
§ Melbourne: Delays approx. 0.5 day
§ DP World experienced vessel bunching in Melbourne and Brisbane terminals throughout recent weeks.
o VICT
§ Melbourne: Delays approx. 1 day
§ Reminder that effective 1st July 2024, VICT will be adjusting the Infrastructure Charge from $177.48 (excl GST) to $194.85 (excl GST) per full container.
o AAT
§ Brisbane: Delays approx. 3-4 days. Expected to ease early July.
§ Port Kembla: Working with minimal delays.
§ Melbourne: Working with minimal delays.
o MIRRAT
§ Melbourne: Working with delays. Congestion expected to continue until end June.
o New Zealand
§ Auckland: delays approx. 0.5 day
§ Tauranga: minimal delays approx. 0.5 day
§ Napier: minimal delays approx. 0.5 day
§ Lyttleton: minimal delays approx. 0.5 day
Source: Maersk
o Global Port Congestion Hotspots
Singapore has seen only a slight improvement in the past month with the congestion issues, with the TEUs at anchorage falling below 300,000 in the past week and the queue to berth ratio also falling down to 0.8 from the recent high of 1.35 vessels at anchorage for every vessel at port.Congestion has since spread to nearby ports assisting with the overflow.
·
- Global Container Throughput
- Global container port throughput is projected to reach an unprecedented 947 million TEU in 2024. This forecast represents a significant upward revision to 4.7% annual growth, following modest increases of only 0.7% in both 2022 and 2023. The surge in cargo volumes during the first half of 2024 has exacerbated port congestion, reaching an 18-month peak. Notable performance gains have been recorded at major Asian ports, including Singapore, which has seen a year-to-date increase of 7.7%, Tanjung Pelepas with a 20.1% rise, and Colombo, which has experienced a 20.4% uptick.
- Equipment
- Equipment shortages in China continue due to strong export demand and disruption to services caused by the ongoing diversions around southern Africa. ANL, YML and ZIM are largely affected in China. Especially for 40GP and 40HC containers. Port congestion in Europe, Singapore, Africa, India, and Middle Eastern ports are compounding the issue with empty containers sitting idle as a result instead of finding their way back to China.
- Container shortage has worsened in many other Asian locations, with all newly manufactured boxes fully booked until August.
- US East & Gulf Coast Ports - International Longshoremen Association (ILA) has suspended contract negotiations with the United States Maritime Alliance (USMX) over the use of automated gates by APM Terminals, Maersk's port company, at the Port of Mobile, Alabama. The ILA accuses APM Terminals and Maersk of circumventing the current contract to eliminate ILA jobs through automation. With the contract set to expire on September 30, the union expresses little faith in resolving these issues in time and has historically opposed automation due to job losses in the 1970s. The suspension occurs just before scheduled talks on June 26, with the ILA demanding a resolution to the automation issue before resuming negotiations. Experts warn a strike, which the ILA has threatened if no agreement is reached by the expiration date, could have severe economic consequences during the final stretch of the presidential elections.
- Canadian Rail - Teamsters Canada Rail Conference (TCRC), representing over 9,000 CN and CPKC railroad workers, has initiated a second strike vote due to stalled contract negotiations. The first strike authorisation was on 1st May with a potential start date of May 22nd, but was paused by Canadian Labor Minister Seamus O'Regan on May 13th, pending a decision by the Canadian Industrial Relations Boards (CIRB) on public safety concerns. The second strike vote began on June 24th and will conclude on June 29th, with the current strike mandate expiring on June 30th. If the CIRB rules that a strike does not threaten public safety, the earliest a strike could occur is mid-July.
- German Ports - The trade union prompted workers to take industrial action at the ports of Hamburg, Bremen, Bremerhaven, Brake and Emden on June 17.
The 'warning strikes' were a response to the union being unable to secure a proposed EUR3 increase in hourly wages for port workers, retroactive from June 1, as well as a corresponding increase in shift bonuses. - French Ports - The surprise announcement by French president Emmanuel Macron in June to call an election has led to dock and port worker unions postponing a series of strikes this month which threatened to bring chaos to ports including Le Havre and Marseille.
A 24-hour stoppage on 7 June saw Le Havre's ro-ro, bulk and container terminals blocked by dock workers, leading to four ship calls being cancelled and a further 18 delayed, while at Marseille-Fos, an estimated 600 dockers and other workers blocked the main entry point to the box terminal.
Further one-day strikes had been called for 21 and 25 June, along with four-hour walkouts on three days of each week this month – all in protest at pension reform that increased the statutory retirement age in France.
The snap election however has left the union with no-one at government level with whom to negotiate its demands until a new administration is formed. - VICT are the next of the major Australian terminals approaching the end of their current enterprise agreement, with negotiations expected to commence from October 2024 :
- Global Air Freight
- Spot Rate Increase: Global air cargo spot rate rose +9% year-on-year in May to $2.58 per kg, marking its second consecutive monthly growth, and up +5% month-on-month.
- Global Air Cargo Growth: The global air cargo market is set for double-digit growth in 2024, following a +12% year-on-year increase in demand in May.
- Spot Rate Increase: Global air cargo spot rate rose +9% year-on-year in May to $2.58 per kg, marking its second consecutive monthly growth, and up +5% month-on-month.
Regional Rate Surges: Notable increases in spot rates include a +110% rise on the Middle East & Central Asia to Europe corridor, +65% from Southeast Asia to North America, and +43% from China to North America. - Potential Market Impact: There is a possibility of downward pressure on air cargo rates if fewer freighters are needed for e-commerce shipments from China, which could shift back into the general air freight market.
- Dynamic Load Factor: Cargo capacity utilisation remained stable month-on-month at 58% in May but increased by +3% year-on-year.
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