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December 2021 Oceania Market Update

As the end of 2021 approaches, Ligentia’s Managing Director for Australia Dean Neville shares his thoughts on the current Oceania market and what to expect as we move into 2022.

South China feeder services set for decline due to COVID

China’s quarantine rules for seafarers are set to cause a big drop in Pearl River Delta feeder capacity in the run-up to Chinese New Year in February. Carriers have issued advisory warnings of disruption from mid-December to mid-February, after feeder operators announced service suspensions due to a lack of crew. Services which connect the Pearl River Delta origins between South China and Hong Kong will be impacted, including Fuzhou. The main ports of Hong Kong, Yantian and Shekou will be used as the base ports for cargo acceptance on mainline services, with potential to see earlier surges than usual. Once feeder capacity declines, this will put further pressure on land transport capacities (which are already stretched).

Indian shippers reroute more transhipment cargo to Nhava Sheva and Mundra

Cargo owners and forwarders from India’s hinterland points of Chennai and Kolkata are rerouting more shipments to JNPT (Nhava Sheva) or Mundra instead of feedering to hub or intermediate ports in South Asia for mainline connectivity (Colombo, Singapore and Port Kelang). This is due to ongoing heavy congestion and delay disruptions at these mainline hub ports. This trend is expected to continue for at least another 3-4 months based on industry press information.

New law in China coincides with significant cut in vessel location data

Vessel location data from China has been greatly reduced, impacting maritime supply chain visibility. The tracking signal known as Automated Identification System (AIS) is used globally by the shipping industry to transmit data on vessel location and identity. New personal information protection laws which came into effect in China this month have reportedly prompted domestic providers to stop sharing AIS data with foreign companies. The drop-off in vessel location data transmission (by nearly 90%) appears to coincide with these new laws, presenting further challenges to shipping lines who are already scrambling to restore integrity and confidence in vessel activity, scheduling, route planning and vessel status.

Ocean container freight rates heading into 2022

Shipping lines continue to maintain status quo, extending October 2021 validity FAK and Spot rates through until (mid-) January 2022 at this stage. Carriers are presently assessing BCO and NVO allocations for 2022 against historical lifting performance during 2021; we are expecting this to be very much in line with space allocations preserved for 2022. Contract rates in 2022 will likely be more than double those of 2021, and with strict forecasting maintenance and dead freight rules enforced in 2022 for VIP contract rates offered. Market FAK rates will likely mirror Q4 2021 in H1 2022, before a heightened risk of increasing again in H2 2022.

Space and equipment availability heading into 2022

There are no signs that services into Oceania destinations from North Asia, South Asia or Indian Subcontinent (ISC origins) will improve significantly in 2022. There are no headline announcements from the shipping lines that larger capacity cellular vessels will be returned to Oceania destination services during 2022. Combined with buoyancy of the larger TransPacific and UK / European trades, ongoing sustained blank sailing programs have been announced by the shipping lines for 2022 into Oceania destinations and imbalanced equipment is pooling at destination locations rather than at base origin locations where it is needed. The market will continue to be pressured for space and transit integrity owing to ongoing congestion spanning the theatre, lack of equipment availability and high container freight rates through until 2023 at the earliest.

Airfreight space and rates heading into 2022

With the latest variation of COVID taking hold of the world and many countries considering further extensions on keeping their international borders closed indefinitely, the glimmer of hope of seeing more PAX capacity return to the skies and airfreight rates soften as a result during Q1 2022 is unfortunately waning. It is most likely we will now see per KG airfreight rates from Asia and ISC origins into SYD and MEL base destinations at +US$9-10/KG for some months to come – for BNE, ADL and PER destinations at +US$11-12/KG for some months to come unfortunately.

Power rationing impacting most of China’s manufacturing zones

While this is not getting a lot of mainstream press, everyone working in sourcing, supply chain and shipping sectors are aware how serious this is for our key manufacturing partners based in China. It will most likely mean production lead times will extend significantly beyond normal parameters, potentially risking open PO cargo ready dates this side of the Chinese New Year holiday in early February. It is not clear how long this power rationing imposed on China’s manufacturing zones will last, but it could be ongoing for some months to come (well into the 2022 calendar year). Forecasting and regular communication with vendor partners will be crucial; as will the sharing of that information with Ligentia teams, in order to overlay with shipping line allocation and schedule management.

Domestic disruptors

Medium to heavy levels of port congestion continue to impact ANZ destinations (for imports, containers, breakbulk and airfreight modes of transport). This is combined with:

  • COVID-related labour disruptions and shortages
  • Fuel cost escalation
  • Skilled driver shortages
  • Stevedore and CTO labour and workflow challenges
  • High levels of cargoes within available warehousing space
  • Seriously low availability of hire pallets nationally
  • Raw material shortages in-country, impacting replenishment supply chains
  • Ensuing cost driver pressures.

With this in mind, 2022 is shaping up to be “more of the same as 2021”!

Thank you – genuinely – for another wonderful year of your support and trust. As the season draws closer, we’d like to wish you many happy returns, great food and joyous celebrations with your family and loved ones over Christmas and the New Year. We look forward to tackling 2022 with you all!

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