As the drinks Industry prepares for its busiest time of year, it is important to stay on top of the latest shipping trends in the lead-up to the peak season to ensure the impact to your supply chain is as minimal as possible.
For the European to Oceania routes, strong demand for cargo is likely to increase in the coming months, but several factors below will be at play in shaping the peak season this year:
- Last year, Italy, Spain, and France experienced complete closures during the European Summer Holidays. This year, only a "partial" closure was experienced, which has influenced demand. Demand has only started to ease in the last two weeks of August.
- Extensive delays have been experienced due to the Red Sea Crisis, leading many importers to redirect their bookings to the direct services of CMA and MSC.
- MSC's withdrawal of the Kiwi and Capricorn services, which offered a transshipment route via Singapore from Europe and USA, has led to an 11% reduction in capacity from Europe to Oceania.
Apart from the main factors mentioned above, dedicated Asian carriers who offer transshipment services from Europe via Singapore or Malaysia have begun capping the European volumes to make room for SEASIAN volumes, as freight rates have soared. In recent months we have learned that some carriers had over 2000 TEUs lying idle in Singapore, resulting in high costs for the carrier. This backlog is gradually decreasing due to this carrier's decision to halt bookings for this relay/transshipment service, but it has also impacted their market share. It is expected for the backlog to be cleared by the end of November or earlier if additional extra - loaders can be deployed to facilitate.
The unexpected surge of additional bookings being diverted to other transhipment carriers has had a negative impact. This has increased pressure on those carriers still offering a service, affecting equipment availability in some origins. Delays are inevitable, and urgent orders are now being handled by direct carriers, who are having to accommodate the unprecedented surge in bookings.
What can we expect in Q4 based on our observations?
Currently, all indications suggest that there will continue to be high demand throughout the quarter, which could lead to further rate increases across all services soon. The only exception may be on the direct services of the USA East Coast where demand may slip, due to the planned International Longshoremen’s Association (ILA) strike on October 1st resulting in shippers diverting their cargo to the West Coast instead.
- The Red Sea Crisis is showing no signs of easing, and congestion and longer transit times are expected to persist.
- It is expected that approximately 15% of East Coast USA volume will be diverted to West Coast USA this will impact on port terminals and rail capacity therefore delays may be experienced.
- On the major East-West trade routes, despite spot rates declining weekly due to softening demand, some routes are still showing very high rates:
- CHINA-SOUTH AMERICA (Santos) - USD 15,046 PER 40HC
- CHINA-NORTH AMERICA EAST COAST: USD 7,511 PER 40HC
- CHINA-AFRICA - USD 9,700 PER 40HC
This indicates that MSC's decision to suspend their transshipment service and deploy vessels into higher revenue trades will likely continue in Quarters 1 & 2 of 2025.
Other transhipment carriers will be under pressure to take additional cargo which may lessen the demand on the direct services. As a result, it is expected that in Quarter 4 direct carriers will not implement significant increases as those implemented last quarter, owing to pricing on these direct services is always at a premium in comparison to the current transhipment offerings.
As a result, pricing fluctuations may not be as rapid as those being experienced in the Asian markets.
Nonetheless, we can expect fluctuations in fuel, bunker adjustments, and emissions where some carriers may see a decrease in Quarter 4 however be pushed to increase their ocean freight rates as delays and demand continue to outpace available supply.
Given that we are approaching the busy period, it is advisable to consider planning earlier than usual, with lead times of 3 to 4 weeks, to minimise delays. Direct services should be considered for any urgent cargo.
For more information on how Henning Harders can support your business in the lead up to this year's peak season, please contact Nathan Arneil on narneil@harders.com.au or visit harders.com.au
Henning Harders is a Silver Partner of the Drinks Association