FTA / APSA Monthly Shipping Report - February 2024

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. 
 

FEBRUARY 2024 - SNAPSHOT

• Rates
• Drewry's composite World Container Index (WCI) has decreased steadily in the past 4 weeks to $3,659.00 per 40ft container as at 22 February 2024. This after reaching a high of  $3,964.00 per 40ft container at 25 January 2024 after 8 consecutive weekly gains.
• Despite the recent reductions, rate levels are still up 164.4% in the past 3 months since the seizure of the Galaxy Leader at which time the WCI was $1,384.00 per 40ft.
• Rate levels are up 93% when compared with the same week last year.
• The latest Drewry WCI composite index of $3,964 per 40ft container is the highest since October 2022 and is 158% more than average 2019 (pre-pandemic) rates of $1,420. 

• Panama Canal
• After the Panama Canal Authority (PCA) revised up the allowance to 24 vessels from January onward, the PCA have confirmed they see no need to impose further restrictions until at least the end of the dry season in April. 
• If rains arrive in May as expected, the canal plans to progressively increase daily slots, aiming to return to about 36 vessels per day, its normal number during the rainy season. If however rains are short of expectations, the authority could apply further restrictions to either daily passage or draft.

• Red Sea
• Carriers continue to avoid the Red Sea due to the ongoing disruptions. Freight rates peaked in late January and have started declining as demand eases post-Chinese New Year with new ships introduced adding capacity.
• Houthi rebels still continue attacks on vessels transitting the Red Sea. Houthis have launched at least 57 attacks on commercial and military ships in the Red Sea and Gulf of Aden since November 19, with the pace picking up toward the latter half of February. An environmental disaster has also unfolded as the result of a Houthi attack on bulk carrier Rubymar on February 18. The crew were forced to abandon the vessel after the attack, which has caused a 29 kilometre oil slick and the US military warned of the danger of a spill from the vessel's cargo of more than 41,000 tons of fertiliser.
• The US & UK, with support of a wider coalition group including Australia, Bahrain, Canada, Denmark, the Netherlands and New Zealand, continue attacks on Iran-backed Houthi targets in Yemen.
• By the first half of February 2024, container tonnage crossing the Suez Canal had fallen by 82 per cent. The drop in transits reflects the response by many shipping companies to the new security threat. Many have opted to divert ships to alternative routes, notably around the Cape of Good Hope. Ship tonnage entering the Gulf of Eden declined by over 70 per cent between the first half of December 2023 and the first half of February 2024. Meanwhile, vessel tonnage passing through the Cape of Good Hope increased by 60 per cent. By 18 February 2024, some 621 container ships have been rerouting through the Cape of Good Hope :

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• The United Nations Conference On Trade And Development (UNCTAD) in February release a report titled Navigating Troubled Waters - Impact To Global Trade Of Disruption Of Shipping Routes In The Red Sea, Black Sea And Panama Canal. The report discusses the unprecedented simultaneous disruptions in the Suez and Panama Canals, significantly affecting global maritime trade, with potential for inflationary pressures and challenges to food and energy security. It covers the causes, including attacks in the Red Sea and climate-induced droughts, the decline in canal transits, rerouting of ships, and the broader economic and environmental impacts. The report can be accessed HERE.
• UNCTAD estimates that the trade volume going through the Suez Canal and Panama Canal have decreased by 42% & 49% respectively: 

• Shipping Competition
• Following on from the EU's decision in October last year to not extend the Consortia Block Exemption Regulation (CBER), the UK has followed suit with the Competition & Markets Authority (CMA) on 9 February publishing its final decision that it will not recommend renewing the CBER to the UK Secretary of State. In reaching the decision, the CMA took into account 2 additional factors: 
  First, many liner shipping companies already have to self-assess their consortia because their combined market share exceeds the thresholds allowed under the block exemption.
  Secondly, liner shipping services to the UK currently call at ports in the EU as part of the same overall service. Liners operating these services will also need to consider compliance with EU competition law, following the EU's decision to let its own block exemption lapse, alongside needing to consider compliance with UK competition law. So given that no automatic exemption will apply in the EU, the value of an automatic exemption under UK law was seen to be significantly reduced.    
• The US Federal Maritime Commission (FMC) has imposed new billing standards on ocean carriers and terminal operators in an effort to crack down on abusive container late fees. Between 2020 and 2022, nine of the largest carriers serving the US container trades charged approximately USD$8.9 billion in demurrage and detention. New billing standards include :
• Effective May 26, container ship carriers and marine terminal operators will be required to issue detention and demurrage invoices within 30 calendar days from when charges were last incurred.
• Shippers and other billed parties will have at least 30 calendar days to request that charges be refunded. 
• Carriers and terminal operators must try to resolve the matter within 30 calendar days unless the parties agree to a longer timeframe.
• Minimum information required on all Demurrage & Detention invoices. Failing to include any of the required information in a detention or demurrage invoice eliminates any obligation of the billed party to pay the applicable charge," the rule states.
• Demurrage or detention invoices can be issued to a consignee - that is, the ultimate recipient of the cargo - as an alternative to the shipper.

• Mergers/Acquisitions
• HMM / Harim Group - the $4.9 billion deal has fallen through due to irreconcilable differences over management rights. In Dec Harim Group had been selected by state creditors as the winning party to take a majority stake in South Korea's HMM. 
• Bolloré Logistics / CMA CGM - the European Commission announced it has approved the purchase of Bolloré's logistics business by the CMA CGM, with certain stipulations suggested by the involved firms.
  The body responsible for monitoring competition laws within the 27-member EU mentioned that the deal received the green light following an inquiry that identified several issues.
  To address the issues, the entities consented to sell off all operations of Bolloré Logistics in Guadeloupe, Martinique, Saint Martin, and French Guiana, along with various assets in mainland France associated with these operations.

• Schedule Reliability
• Global schedule reliability decreased by 5% month-on-month in December 2023, largely attributed to the Red Sea crisis. On a year-on-year basis, schedule reliability was only 0.4% higher than the previous year. 
• Due to the surge in vessels navigating the alternate route around the Cape of Good Hope, the average delay for LATE vessel arrivals deteriorated, increasing by 0.3 days month-on-month up to 5.35 days.
• With the global schedule reliability declining rapidly, only two carriers remain above the 60% mark with Evergreen the most reliable top-13 carrier in December 2023 with schedule reliability of 63.6%, followed by CMA CGM. 6 carriers had schedule reliability of 50%-60%, while the remaining 5 carriers all had schedule reliability of 40%-50%. Yang Ming the least reliable carrier with December 2023 schedule reliability of 45.6%. None of the top 13 carriers recorded a month-on-month improvement. 

• Cancellations
• Between week 09 (26 Feb-3 Mar) and week 12 (25 Mar-31 Mar), 55 cancelled sailings have been announced out of a total of 650 scheduled sailings, representing a 8% cancellation rate. During this period, 42% of the blank sailings will occur on the Transpacific Eastbound, 40% on the Asia-North Europe and Med, and 18% on Transatlantic Westbound trade.
• In the Australian market, while January saw a cancellation rate of 19% on China to Australia trade, it has since reduced down to 12.66% based on February schedule data, with 10 of 79 scheduled sailings cancelled. The CAT (China-Australia-Taiwan) service operated by YML/EMC/PIL/TSL/SNL is the major service affected by cancellations in February, with their service alone at a cancellation rate of 45.45%. However in comparison to last month, it too has vastly improved, down from a January high of 70%.
• Over the next five weeks, 2M have announced 15 cancellations followed by OCEAN Alliance and THE Alliance with 13 cancellations each. During the same period, 14 blank sailings have been implemented by non-Alliance services.

• Orderbook / Scrapping
• Latest figures from DNV's Alternative Fuels Insight (AFI) platform in January saw another strong month for alternative fuel orders. Methanol-fuelled ship sector is experiencing rapid growth, with 228 ships on order set to expand the existing global fleet from 29. Concurrently, the LNG-fuelled ship count has doubled from 2021 to 2024, reaching a new milestone with a record number of deliveries in January. Additionally, the interest in ammonia-fuelled ships is gaining momentum, with two new orders placed in January, indicating a growing trend towards diverse alternative fuels in the maritime sector :

• Sustainability
• Nuclear Propulsion - speaking at a press conference hosted by the World Shipping Council, Jeremy Nixon and Rolf Habben Jansen, the CEOs of Ocean Network Express (ONE) and Hapag-Lloyd, discussed the possibility of nuclear propulsion. Habben Jansen mentioned to journalists that it's still the beginning stages for nuclear propulsion, saying, "We should not rule anything out." He indicated that any significant use of this technology in shipping might start "from the second half of next decade."
  Meanwhile, Nixon from ONE believes that green hydrogen will emerge as the primary fuel for shipping. He pointed out that producing green hydrogen would need a huge supply of electricity, a demand that nuclear power could fulfill.
• The World Shipping Council (WSC) submitted a proposal to the IMO ahead of next month's gathering of the Marine Environment Protection Committee (MEPC), to address the industry's challenge to bridge the price gap between the cleanest fuels and fossil fuels. Through the proposed Green Balance Mechanism (GBM), fees are taken from fossil fuels and allocated to green fuels used, so that the average cost of fuel is equal and allowing for a relatively low fee at the start of the transition.
• Maersk has achieved an industry first, having validated its decarbonisation targets to be in line with the Paris Agreement's goal to hold the global average temperature increase at 1.5C above pre-industrial levels. They have seen its goals verified by the Science Based Targets initiative (SBTi) – a group that has become the go-to judge of corporate climate targets globally.

·         Terminal and Port Update - 

o    Patrick terminals

§  Brisbane: Delays approx. 0.5-1 day 

§  Fremantle: Delays approx. 2-3 days

§  Sydney: Delays approx. 1-2 days

§  Melbourne: Delays approx. 0.5-1 day

§  A reminder that Patrick TAC charges are set to increase effective 4 March 2024.

o    DP World Terminals

§  Brisbane: Working with delays approx. 5 days

§  Brisbane terminal is affected by protected industrial action (PIA) by the Electrical Trade Union (ETU) effective mid-February. DP World management have suggested disruptions may occur due to the action and there has been a significant spike in equipment issues of late with their semi-automated modules. DP World management suggest issues should subside in a matter of weeks, however truck turnaround times have been reported to be anywhere between 2.5 to 7 hours. FTA / APSA have raised concerns with DP World over the issues. 

§    * as at 21 Feb-25

§  Fremantle: Working with delays approx. 3 days

§  Sydney: Working with delays approx. 6 days

§  Melbourne: Working with delays approx. 2 days

o    VICT

§  Melbourne: Working with nil delay

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o    AAT

§  Brisbane: Working with minimal delays.

§  Port Kembla: Working with delays due to yard congestion until approx. 1 March.

§  Melbourne: Working with minimal delays.

o    MIRRAT

§  Melbourne: Working with congestion up until at least 17 March. Early February saw noticeable delays at Mirrat with terminal management overwhelmed by the vehicles sitting idle post inspection at the terminal.

o    New Zealand 

§  Auckland: delays approx. 0.5 day

§  Tauranga: Working with minimal delays approx. 0-0.5 day

§  Napier: Working with minimal delays approx. 0-0.5 day

§  Lyttleton: Approx. 0.5 day delay

• Equipment
• Reports of empty container parks still near or at capacity. 
• In response to the Red Sea crisis and the need to accommodate additional chartered ships due to the longer transit around Africa, several ocean carriers have temporarily stopped selling containers and halted the return of equipment to leasing companies. Despite this, carriers have generally maintained an adequate supply of equipment throughout their networks at present. Nonetheless, equipment availability continues to be tight in some areas.

• Enterprise Agreements -
• DP World (Australia) and the Maritime Union of Australia (MUA) on Friday 2 February finally reached an in-principle agreement through "facilitated negotiations", leading to the immediate withdrawal of protected industrial action (PIA) which had been ongoing since 6th October 2023. Workers reportedly offered a pay increase of 23.5% (8+7+4+4.5% each year) over 4 years for their 1800 staff, as well as a sign-on bonus of $2000. It is also alleged that part of the agreement includes allowing the new rosters to operate alongside 'work-life balance' conditions such as six-month notice for roster changes. The 4 year deal is yet to be voted on by the workforce, and local "Part B" negotiations about issues relating to individual ports are still taking place. It is expected the Fair Work Commission (FWC) will take approximately 45 days to approve any deal once lodged, with expectations the agreement should be approved in April at this stage. 
• DP World, Brisbane Terminal, on Tuesday 20 February announced that their Brisbane terminal is experiencing disruptions to some of their modules and equipment as a result of protected industrial action (PIA) involving the Electrical Trades Union (ETU). Talks between DP World and the ETU seemingly have stalled, with the ETU reportedly missing a scheduled meeting on Friday 23 February and DP World demanding an end to PIA before discussions can proceed. The negotiation only affects 16 electrical trade workers who are responsible for maintaining and fixing the terminal's equipment, including the ASC modules. 
  The company is said to have proposed pay raises of 6%, 4%, 4% and 4.5% respectively over 4 years, however it's believed the ETU is holding out for a deal similar to that of the MUA. 
• VICT are the next of the major terminals fast approaching the end of their current enterprise agreement, with negotiations expected to commence later this year.
• The following chart shows that the economy could go through another difficult period from 2025 to 2026 due to several agreements ending within months of one another. Should existing enterprise agreements expire prior to any in-principle agreement being reached with the respective terminals, it could disastrously culminate in industrial action occurring at several terminals simultaneously :                   
• 

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• TasPorts pilots on 7 February reached an in-principle agreement with the Australian Maritime Officers Union (AMOU). The agreement provides marine pilots a 12% increase over 3 years and provides measure aimed to improve productivity.
• In the US, labour contract between the International Longshoremen's Association (ILA) and the United States Maritime Alliance (USMX) is set to expire at the end of September. The ILA represents some 70,000 dockworkers, while the USMX represents employers at 36 coastal ports including three of the US' five busiest ports in the Port of New York and New Jersey, the Port of Savannah, Georgia, and the Port of Houston.
  Contract negotiations between the ILA and the USMX began in February 2023 but quickly stalled on the issue of wage increases, with developments since not showing any sign of compromise.

• Global Air Freight  
• Market data for January shows rates declined 12% month-on-month to an average USD$2.27 per kg, consistent with the trend of the global dynamic load factor. January's global average spot rate continued to show a double-digit year-over-year decline of 21%.
• Despite the rates continuing to drop, air cargo volumes rose 10% year-on-year in January. 
• Shippers' concerns about the Red Sea supply chain delays plus an early Lunar New Year have pushed up air cargo volumes, although spot rates continue to decline.
• Delta Air Lines announce they will commence a Brisbane-Los Angeles service later this year.
  Starting 4 December, Delta will launch three weekly flights between Brisbane and LAX using 306-seater A350-900s. This will give Brisbane services from four major North American carriers in Delta, United, American, and Air Canada and boost its US capacity to 144 per cent of pre-COVID levels.

TRADE DATA UPDATES
 

• Latest Updates as at 26 February 2024 (FTA / APSA LOGIN REQUIRED)

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

22 FEBRUARY 2024 : DCN - DP World and union meeting in doubt 
16 FEBRUARY 2024 : ABC Country Hour - Biosecurity Protection Levy 
15 FEBRUARY 2024 : DCN - Shippers call for protection against supply-chain charges 
9 FEBRUARY 2024 : ABC - Joe O'Brien interviews Paul Zalai FTA / APSA 
6 FEBRUARY 2024 : Herald Sun - DP World wharfies amid highest paid in the world after months of industrial action 
4 FEBRUARY 2024 : Sky News Australia - the international logistics sector continues to grapple with numerous challenges and cost pressures
2 FEBRUARY 2024 : The Australian Business Review - DP World dispute and attacks on shipping abroad forcing up prices for customers 
2 FEBRUARY 2024 : The LoadStar - Strikes at DPW ports across Australia exacerbating empty box shortage
2 FEBRUARY 2024 : Journal of Commerce - Australian shippers welcome end to four-month DP World - dockworkers dispute
2 FEBRUARY 2024 : The Loadstar - Dock workers down under end strike at DP World
1 FEBRUARY 2024 : ABC NSW Country Hour - Michael Condon interviews Paul Zalai FTA / APSA 
1 FEBRUARY 2024 : The Loadstar - Strikes at DPW ports across Australia exacerbating empty box shortage
 
Tom Jensen - Head of International Freight & Logistics - FTA / APSA

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