Freight rates & demand
Freight rates as recorded by the Drewry World Container Index have dropped by 8 per cent to USD$4,775 per forty foot container this week. That’s the composite index rate and, as ever, rates differ by trade. Rates from Shanghai to Rotterdam “plunged” by 14% – that’s a fall of just under USD$1k – to stand at USD$6,219 per forty foot. Rates from Shanghai to Genoa (Italy) fell 12% to USD$5,842 and spot rates from Shanghai to Los Angeles slid by 3 per cent to just over USD$6,000 for a forty foot box. Drewry expects a further decline in Asia-Europe rates in the coming weeks.
Global freight forwarder DHL has reported in its September 2024 Outlook that rates have stabilised, reaching a plateau, and that Asia-Europe has experienced the slightest decreases due to limited capacity, schedule changes, port strikes, port congestion, and adverse weather.
DHL notes that nearly all routes in August out of Asia to the Rest of the World remained in a situation where demand was greater than capacity; this is forecast to change slightly in the next couple of months with Asia to North America moving into a situation in which capacity is temporarily greater than demand. That said, high demand out of Asia is otherwise generally expected through Q3. Backhaul routes from Europe to North America and Europe to Asia will move to a situation in which demand is less than capacity; meanwhile the North America to Asia route is forecast to move into demand / capacity balance.
Software provider Flexport notes that cargo demand on the Asia-North America may soften in the coming weeks owing to blank sailings announced in preparation for Golden Week, port congestion in Asia, and “healthy inventory levels”. Inventory is thought to be high in the US owing to shippers front-loading imports and inventory stocking. On the Asia-Europe, Flexport argues that the demand is slowing with more capacity available in September than August. Flexport adds that carriers are adjusting rates to optimise vessel utilisation, noting that the Shanghai Containerized Freight Index dropped by 12% in Week 36 (i.e. this week – from 2 September to 08 September).
Although there has been a massive expansion in global container shipping capacity – there was 27.8 million TEU of global capacity in 2023 and a forecast 30.9m TEU in 2024 (an 11% increase), disruptions are limiting the benefit of capacity. Disruptions will include such matters as the ongoing Red Sea Disruption, and industrial relations.
DHL also comments that Oceania freight rates are “rapidly increasing” owing to limited shipping capacity and it forecasts that Oceania will face equipment shortages.
Disruption underway
Australia’s break bulk and vehicular trade sectors will like experience disruption as domestic trade unions escalate their campaign against stevedoring major Qube. As of last Friday (30 August), a seven day industrial action (which should therefore be concluding today), saw eight hour stoppages when vessels tied-up at berth; only shifts of eight hours being worked; work only beginning at set times; no shift extensions; no work during meal or other breaks; once a start time being order no variation to that start time; no call-ins outside of allocated shifts; only driving up to 15 km / h for car carrier and ro-ro operations; no upgrades to Grade 7 supervisor levels; no vessels from specified companies being worked for a certain number of days; a one day strike (which should have concluded this morning. The industrial relations are being pursued in respect of enterprise bargaining. The general industry consensus is that this dispute will run for some time.
Meanwhile, severe bad weather off the coast of India, especially around Mundra Port, is causing disruption and that, in turn is causing a cascading set of disruption throughout the region.
Up north, a major storm system, super typhoon Yagi, is causing disruptions to shipping operations in the sea space between Hainan Island and the Pearl River Estuary region in south east China. Bear in mind that some of the world’s busiest international container ports – Ningbo-Zhoushan, Shenzhen, Guangzhou, and Hong Kong, While the system is to the south west of Hong Kong, it is massive and is clearly causing delay and deviation to vessels. The system is tracking westward and is forecast to run over northern Vietnam within a few days which will likely cause the suspension of operations at Hai Phong, a 5m TEU plus global container port
Disruption averted
Major strike-related disruption around the globe has been averted after a group of six Indian unions, representing about 20,000 dockworkers across 12 major Indian ports, agreed to a new five year deal in late August, according to international news outlets. Meanwhile, closer to home, a brewing industrial relations problem at Fremantle came to an end after the port authority and unions came to a new pay deal for small craft vessel masters and vessel traffic control staff.
Disruption in North America looked highly likely after employers locked out Canadian rail workers; this potentially could have led to ongoing problems in the maritime sector too as cargo imports / exports via Canadian ports would have come to a standstill and ocean-going ships would have had to divert to U.S. ports. However, the Canadian government issued orders that resulted in the work continuing under the current collective employment agreement until mandatory arbitration concluded. However, the Canadian unions filed lawsuits at the end of August challenging the government’s orders alleging that the arbitration order was unconstitutional and “beyond the powers” of the Minister of Labour to issue. So, while disruption from the Canadian dispute is averted – for now – the issue is still very much live.
Disruption… upcoming?
German trade unionists have rejected a collective employment agreement, turning down the two sets of offers as being “completely inadequate” and which did not “represent the necessary wage increases”. The German trade union is therefore calling for the German employer’s association to return to the negotiating table, arguing that “employees have a right to noticeable wage increases and significant relief”. The prospect of further industrial action therefore remains live in Germany.
A union representing dockworkers in the United States have supported a call for a nationwide strike at ports from “Maine to Texas”, i.e. the whole U.S. eastern coast, on 1 October 2024 if a new agreement with industry association, the United States Maritime Alliance, which represents employers on the US East and Gulf Coasts.
Declaring that the US union and the employers’ association are very far apart on matters such as wage increases, health benefits and rejecting automated and semi-automated container terminals.
Meanwhile, the US employers’ association has claimed that it has been unable to secure a meeting with the trade union to resume negotiations on a new master contract.
International container trade analyst Lars Jensen noted that the Union has referred to a three month strike in 1977, which saw pickets sent from across the US to the West Coast to stop vessels that had been diverted from the the US East coast. “The last times we saw issues on the West Coast this did not result in shutdowns on the East Coast, hence this threat is clearly a ramp-up compared to the conflicts in the past decades,” Jensen comments.
Trade analysts have indicated that US companies have been re-routing freight from East Coast to West Coast Ports. US East Coast ports market share has apparently decreased from 34.4% to 32.6% between Q4 last year and Q2 this year whereas U.S. West Coast ports have increased by just over two per cent to about 60% in Q2 2024.
In an interesting automation-related development, the US labour union has gone so far as to declare that it will need to go “global” and form some kind of world alliance of trade unions to fight terminal automation. The union has asserted that if global ocean shipping companies build fully-automated terminals then the global alliance will activate and the company will be shut down around the world. “Doesn’t matter who they are, if they wanna put in an automated terminal we are gonna shut them down throughout the world and put them out of business,” union spokespeople have been quoted as saying.
“This is not a new position,” Mr Jensen comments, adding that it seems to him that “the union wants to keep port infrastructure in the US locked in the past century whilst the rest of the world long since are already decades into the 21st century”.
