FTA / APSA Monthly Shipping Report - October 2023

Monday, October 30, 2023
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. 
 
OCTOBER 2023 - SNAPSHOT
 
  • Drewry's composite World Container Index decreased by 9.29% in the past month to $1,342.00 per 40ft container as at 26 October 2023. It is now 6% below the average 2019 (pre-pandemic) rates of $1,420 and is the lowest for 3 years. 
  • The average composite index for the year-to-date is $1,711 per 40ft container, which is $965 lower than the 10-year average rates of $2,676 (which was inflated by the exceptional 2020-22 Covid period) : 
         
  • Latest analysis from Drewry forecasts a 60% rate reduction in global freight rates (spot & contract combined) for 2023 followed by a further drop of 33% in 2024 : 
          
  • ANL announce Rate Restoration
    • from November 1st, 2023 at USD100/teu for all shipments from North East Asia to Australia East Coast, Fremantle, Adelaide & New Zealand..
  • Alphaliner reports that the market valuation of the top 11 liner companies dropped by $135 billion, with their combined market cap now at nearly $110 billion, down from $243 billion in May 2022. After a record net income of over $200 billion last year, projections for 2023 show an 80-90% decline. The number of major listed carriers with a market capitalisation of more than $10bn dropping from seven to three: COSCO, Hapag-Lloyd, and Maersk. 


                                 
  • The shipping demand outlook forecasted for 2024 is expected to be muted at 2% globally year-on-year, however the Oceania region is expected to be closer to 4% : 
        
  • Latest Purchasing Managers' Index (PMI) data shows trade conditions continue to deteriorate at end of Q3 2023 with the S&P Global Market Intelligence reporting the PMI down for the nineteenth successive month, quantifying the lack of shipping demand globally. India (despite a slight decline month-on-month) still show significant growth month-on-month : 

          

          
  • Shipping Competition
    • Consortia Block Exemption Regulation (CBER) - The EU Commission announced it will no longer exempt container shipping from competition law, with the CBER to terminate on 25 April 2024.
      The Commission concluded that the CBER no longer promotes competition in the shipping sector, which importantly, in an Australian context, provides significant momentum for the repeal of Part X of the Competition & Consumer Act 2010.
    • Federal Maritime Commission (FMC) has dismissed a case brought against MSC, in a ruling that will set a precedent for future cases. The FMC studied a 'congestion fee' MSC charged SOFi Paper Products in a first case of its kind since the passing last year of the Ocean Shipping Reform Act (OSRA). In a four to one ruling among its commissioners, the FMC has ruled that the $1,000 charge was not an unreasonable detention and demurrage charge. 
    • The latest FMC complaint comes not from a shipper but from China's BAL Container Line which has taken SSA Marine Terminal to task over its decision to levy 'congestion' surcharges. The complainant alleges these violations arose from an assessment of a flat rate congestion surcharge without a stated relationship to actual terminal congestion and continued assessment of congestion surcharges while containers were placed in inaccessible terminal areas.
      Most of the cases the FMC, the US's shipping regulator, is dealing with have been brought by shippers, irate at the costs and delays they faced for the period from 2020 to 2022 when liner shipping recorded its greatest-ever financial results.
      The FMC resolved 36 cases during the year to September, almost triple the number of two years earlier.
    • The Ocean Alliance reportedly runs the risk of regulation given it's expected market share growth in coming years. The Ocean Alliance, whose members are Evergreen, CMA CGM, COSCO and its subsidiary Orient Overseas Container Line (OOCL), have an agreement in place to work together until the end of Q1 2027. Based on the orderbooks of its members, the Ocean Alliance is forecast by Alphaliner to experience massive growth in the coming years, with the expansion expected to prompt regulators to re-evaluate and re-define how big mega-alliances will be allowed to become. Whilst to date regulators have never publicly indicated a maximum permissible market share for carrier alliances, ten years ago China decided to block the creation of P3, an alliance of MSC, Maersk and CMA CGM over monopoly concerns. The Ocean Alliance already commands a market share of 34% on the Asia – Europe tradelanes and 35% on Asia – North America routes. 
    • Thailand's government looks to be creating their own state-owned shipping line. The Thai Transport Ministry & Port Authority of Thailand has conducted a feasibility study on the new liner, looking at either a state-run entity or pursuing a public-private partnership model. Initially, the plan is for the new container line to focus on eight domestic routes, before expanding overseas. The national shipping line plans to start with four containerships.
 
  • Mergers/Acquisitions
    • UPS announced that it has entered into an agreement to acquire MNX Global Logistics (MNX), a global healthcare and  time-critical logistics provider. 
    • HMM - recent remarks made by the chairman of the Korea Development Bank (KDB) has raised speculation that a sale may not be a foregone conclusion. The chairman has said that "there is no reason to sell HMM Co. if there is no qualified buyer, and it's only right." The comment matches the grim outlook that has constantly been raised surrounding the sale due to the company's large size and the recession in the shipping industry.
    • DP World has acquired California-based containerised car shipping specialist and freight forwarder CFR Rinken for an undisclosed sum. DP World, which claims to transport one in every ten new cars worldwide, operates 16 roro terminals, shipping over 30,000 cars in containers annually, and offering storage solutions for over 1m cars. 
    • Hapag-Lloyd and the Brazilian shipping and waterway logistics firm Norsul have established a new joint venture to start offering container cabotage and feeder services in Brazilian ports in Q1 2024. The joint venture called Norcoast will be an independent company and based on a 50-50 partnership.
    • Freight forwarder DSV has set up a $10bn joint venture with NEOM, Saudi Arabia's $500bn futuristic city project. The partnership will focus on providing a full suite of ground, sea and air logistics services for NEOM in the coming years.
 
  • Schedule Reliability
    • Global schedule reliability declined by 0.9% month-to-month in August to 63.2%. It is still 17% higher than the same period last year.
    • The average delay for late vessel arrivals increased by 0.07 days month-to-month to 4.67 days, yet is still 1.23 days better than same period last year.
    • MSC again demonstrated the best result of the major carriers with a schedule reliability of 70.9%, making it the top-performing carrier among the top 14. Maersk & Hamburg Sud closely followed with 70.0% schedule reliability. 


 
  • Cancellations
    • Between weeks 44 (30 Oct-05 Nov) and week 48 (27 Nov-03 Dec), 62 cancelled sailings have been announced out of a total of 660 scheduled sailings, representing 9% cancellation rate (down 6% month-on-month). During this period, 52% of the blank sailings will occur on the Asia-North Europe and Med, 35% on Transpacific Eastbound, and 13% on the Transatlantic Westbound trade.
    • Over the next five weeks OCEAN Alliance has announced 24 cancellations, followed by THE Alliance and 2M with 13 and 4 cancellations respectively. During the same period, 21 blank sailings have been implemented in non-Alliance services. 
  • Orderbook / Scrapping
    • MSC has received delivery of a large portion of its mammoth 24,000-plus TEU ships, the largest in the industry, while others including OOCL, ONE, and Hapag-Lloyd have also begun to receive their new ultra large container vessels.
    • Alphaliner's data shows the orderbook for the top carriers  still stands at approximately seven million TEU, representing a further 25 percent gross increase in capacity before scrapping.
    • India's prime minister Narendra Modi has laid out plans to make his country a top-five shipyard hub. Addressing the Global Maritime India Summit 2023, Modi suggested in the next decade, India will become one among the top-five shipbuilding and repairs nations of the world.
    • LNG is the most common of the alternative fuels, with CMA CGM & MSC accounting for 75% of the total fleet (operated & on order). Alternative fuel vessels account for 17% of current & on-order capacity, and 67% of ships currently on order.
                    
 
    • The global supply/demand index is projected to hit all-time lows highlighting a significant overcapacity, with no sign of supply exceeding demand in the upcoming years ahead. Hapag-Lloyd CEO Rolf Habben Jansen quoted in a German newspaper that he expects the next three years to be 'difficult' due to demand for shipping services growing more slowly than available shipping capacity :  
                 

 
  • Sustainability
    • In the EU, the Emissions Trading System (ETS) will apply to the shipping sector starting Jan 1 2024, and will require ocean carries to monitor and report their carbon emissions. By the end of the year, carriers purchase the equal amount of emission "allowances," where one allowance counts for one ton of CO2. Legislation will apply to vessels traveling between EU countries and vessels traveling between an EU and non-EU ports. Some details in the law are still yet to be finalised, such as a list of transhipment ports. The list is expected to be published by the end of 2023 according to an advisory issued by CMA CGM which can be found HERE.
      • List of ocean carriers and their estimated 2024 carbon pricing under the ETS can be found HERE. 
    • The United Nations Conference on Trade & Development (UNCTAD) released the 2023 Review of Maritime Transport. From highlighting the latest trends in containerised flows, to how shipping lines are evolving and changing their offerings, the report calls for a "just and equitable transition" to a decarbonised shipping industry. The report can be accessed HERE. 
 
  • Terminal and Port Update - 
    • Patrick terminals
      • Brisbane: Working with minimal delays approx. 0-0.5 day 
      • Fremantle: Working with delays approx. 1.5 days
      • Sydney: Working with minimal delays approx. 0.5 day
      • Melbourne: Working with minimal delays approx. 1 day
    • * DP World Terminals  (*protected industrial action)
      • Brisbane: Working with delays approx. 5-6 days
      • Fremantle: Working with delays approx. 3.5 days
      • Sydney: Working with delays approx. 5-6 days
      • Melbourne: Working with delays approx. 5-6 days
    • VICT
      • Melbourne: Working with minimal delays of 0-0.5 days
         
    • AAT
      • Brisbane: Working with minimal delays.
      • Port Kembla: Working with minimal delays.
      • Melbourne: Working with minimal delays.
    • MIRRAT
      • Melbourne: Congestion at present. 
         
    • New Zealand 
      • Lyttleton: Approx. 0.5-1 day delay
      • Napier: Working with minimal delays approx. 0-0.5 day
      • Tauranga: Working with minimal delays approx. 0-0.5 day
      • Auckland: delays approx. 2-5 days
 
  • Enterprise Agreements -
    • DP World (Australia)  - Maritime Union of Australia (MUA) commenced protected industrial action on 6th October 2023 at all main terminals in Sydney, Melbourne, Brisbane & Fremantle. Stoppages have affected service since, with current reports citing delays of vessel turnaround times of approximately 5-6 days on the east coast. The MUA suggesting proposed changes to rostering as a key topic of contention. As of today, stoppages continue until at least 13th November 2023 with a high likelihood of subsequent impacts effecting service for the foreseeable future. 
    • Hutchison Ports fast approaching the end of their current enterprise agreements.
 
  • Global Air Freight  
    • The average air cargo spot rate for the month was USD$2.23 per kg in September, a rise of 2% month-on-month. 
    • September air cargo volumes were on par with the same period last year but global air cargo capacity grew at its slowest pace in the past 11 months, up 5% from a year ago.
    • Qantas Freight issues arising from a failed system cutover created mayhem at Qantas Freight terminals around Australia, requiring Qantas Freight to resort to manual processes. Qantas Freight seemingly failed to have a viable contingency plan in place and as a result lost control of data integrity. The issue created significant delays through September & October, leaving customers incurring significant damage and losses, while also having to incur significant additional costs.
 
TRADE DATA UPDATES
  
AUSTRALIAN PART X SHIPPING NOTICES

APSA is the designated peak shipper body granted status by the Federal Minister for Infrastructure and Transport under Part X of the Consumer & Competition Act to represent the interests of Australian shippers generally in relation to liner cargo shipping services. Notices have been received and are available for members' reference HERE (FTA / APSA LOGIN REQUIRED)
 
FTA / APSA IN THE MEDIA

5 OCTOBER 2023 :     Sydney Morning Herald - Qantas IT blunder leaves corpses in  coffins on the tarmac
6 OCTOBER 2023 :     FreightWaves - Qantas Freight fumbles IT rollout, stranding cargo shipments
6 OCTOBER 2023 :     Airways - Qantas Freight Ops to Struggle for Another Two Weeks    
7 OCTOBER 2023 :     FreightWaves - Qantas says freight backlog in Australia could last 2 more weeks
10 OCTOBER 2023 :    FreightWaves - Qantas Freight makes progress on cargo pileup     
17 OCTOBER 2023 :    DCN - Services decline while fees increase     
18 OCTOBER 2023 :    Freightwaves - Qantas cargo customers seek fee waivers after shipping disruption
         
Tom Jensen - Head of International Freight & Logistics - FTA / APSA

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