Press Room

Dear Valued Clients,

I hope this message finds you well and that the start of the 2024/25 financial year has been successful for everyone.

As always, before we delve into the update, I would like to extend a heartfelt thank you to all of our long-standing customers for their continued trust and support. The feedback we've received on the Neolink Team, Platform, and Services has been overwhelmingly positive, even as we navigate the various challenges affecting global supply chains. To our new customers who joined us this year, we deeply appreciate your confidence in Neolink. I hope you find this market update both informative and insightful, and that it sparks meaningful discussions with our team on how we can further collaborate to enhance the solutions we provide to best serve your business.

In this Global Freight Market Update for H2 2024 we will be covering off the below:

1. Overview of the Current Container Shipping Market
2. Overview of the Current Air Freight Shipping Market
3. Specific Challenges for Australian Importers and Exporters
4. Future Outlook & Recommendations for Australian Businesses
5. How Neolink Can Assist moving forwards
6. Key Dates for the remainder of 2024
7. Conclusion

1. Overview of the Current Container Shipping Market

The global container shipping market in 2024 is characterized by significant disruptions and volatility, much of which is driven by geopolitical conflicts, particularly in the Red Sea region. The rerouting of vessels around the Cape of Good Hope due to the Red Sea crisis has added substantial time and cost to shipping operations. This situation is further complicated by congestion at major transhipment hubs like Singapore, Port Klang, and Shanghai, exacerbating delays and increasing costs across the board.

Impact on Freight Rates:

• Freight Rate Increases: Freight rates have risen sharply, with spot rates on major trade lanes, such as those from the Far East to Europe and the US, approaching levels seen during the pandemic. This trend is also evident on the Asia to Oceania trade routes. For example, spot rates from the Far East to the US West Coast have surged by 366% since late 2023, driven by rerouting needs and congestion. On the Australia trade route from China, spot market rates have increased significantly, rising from $250 USD per TEU in January 2023 to $2,000 per TEU by mid-August. Several shipping lines are forecasting further increases of $300 to $500 per TEU for September

• Future Projections: While the current increase in freight rates is unlikely to reach the unprecedented levels experienced during the pandemic, the market remains unpredictable. Factors such as the ongoing conflict in the Red Sea, port congestion, and the introduction of new vessels will continue to impact rates throughout 2024 and into 2025. In the short term, particularly in the context of Australia, the withdrawal of some key transhipment MSC services, along with an increase in blank sailings and the rerouting of services to more profitable trade routes, could lead to rates rising to as much as $2,500 per TEU by the end of the year from China to Australia.

Port Congestion:

• Singapore and Southeast Asia: Singapore, the world’s largest transhipment hub, is experiencing severe congestion, with 90% of vessels arriving late. This bottleneck is compounded by increased volumes and rerouting, causing delays of up to a week in some cases. Neighbouring ports like Port Klang are also seeing record congestion levels which are up 20% year on year.

• Global Impact: The congestion in Southeast Asia is having a ripple effect on global supply chains, delaying shipments, and increasing costs for importers and exporters worldwide, including those in Australia. As carriers attempt to reduce the impact of longer sailing distances by minimizing port calls—most still stopping at Singapore—congestion has intensified. Hapag-Lloyd's reinstated China-Germany service (CGX), with a key stop in Singapore, exemplifies this strain, as the average TEU per ship arriving in Singapore has surged by 18.5%, nearing record levels of congestion.

2. Overview of the Current Air Freight Shipping Market

Current Air Freight Market Dynamics

The global air freight market has also been experiencing significant fluctuations and growth throughout 2024, driven by several key factors. As of July 2024 data, global air cargo spot rates have surged to an average of USD 2.66 per kg, reflecting a 20% year-on-year increase. This growth has been underpinned by strong global cargo demand, which rose by 13% year-on-year in July, fuelled largely by robust e-commerce demand from Asia. However, air cargo supply has grown at a much slower pace, with a modest 2% increase year-on-year, leading to an increase in the global dynamic load factor to 59% you will see listed below in Xeneta’s Air Freight data:

The air cargo market has remained resilient, especially in light of disruptions like the global IT CrowdStrike outage in July, which caused temporary but significant delays. Despite these challenges, the market has continued to see rising demand and rates, driven by several regional and global factors, including the ongoing Red Sea disruptions, which have compounded issues in the ocean freight market, pushing more cargo to air freight.

Impact on Australian Importers and Exporters

1. Increased Costs: The rising global air cargo rates will likely lead to higher transportation costs for Australian businesses, impacting profit margins. With spot rates from Asia-Pacific to the U.S. reaching USD 5.80 per kg, Australian companies importing goods from Asia or exporting to North America will face increased costs.

1. Supply Chain Disruptions: The disruptions in ocean freight, particularly due to the Red Sea crisis, have pushed more cargo to air freight, exacerbating capacity shortages. Australian exporters, especially those dealing with time-sensitive goods, may face delays and increased competition for air cargo space.

1. E-commerce Growth: The surge in e-commerce demand, particularly from Asia, presents opportunities for Australian businesses in this sector. However, they will need to navigate the higher costs and potential delays in shipping.

1. Peak Season Pressure: As the industry approaches the peak season in late 2024, air cargo rates are expected to rise further. This period will be critical for Australian importers and exporters, particularly those reliant on timely deliveries for seasonal products.

3. Specific Challenges for Australian Importers and Exporters

As global supply chain disruptions continue to impact international trade, Australian importers and exporters face a set of challenges that are exacerbating logistical difficulties and driving up costs. The withdrawal of major carriers from key Australian routes and the subsequent reduction in available shipping capacity have created a highly competitive environment, where securing space on vessels has become increasingly difficult. Additionally, rate increases, and the cancellation of planned vessels have added further pressure, forcing businesses to explore alternative and often more expensive solutions.

Please see specifics below:

Capacity Reduction in the Australian Market

• Carrier Withdrawals: Major carriers such as MSC and ZIM have exited the Australia West Coast (AUWC) market with some of its key transhipment services, leading to a significant reduction in available capacity. This has left Australian importers and exporters scrambling for space, with some routes experiencing capacity reductions of up to 50-55%.

• Impact of Vessel Cancellations: The cancellation of the ad hoc vessel XIN LAN ZHOU by COSCO, which was expected to alleviate some of the capacity issues, has further strained the market. This has led to a reversion to higher standard FAK (Freight All Kinds) rates, exacerbating the cost pressures on not only our customers but all Australian Importers and Exporters

Rate Increases and Space Allocation Issues

• General Rate Increases (GRI): Shipping lines have implemented GRIs across various trade lanes, with rates from China to Australia seeing hikes of USD 300-600 per container. This trend is expected to continue, particularly with the onset of the peak season.

• Space Allocation: The reduction in capacity has led to fierce competition for available space on vessels. Shippers are finding it increasingly difficult to secure bookings, and many are considering alternative routes, such as shipping to East Coast ports and then transporting goods inland by rail or truck to the west coast or South Australia.

4. Future Outlook and Recommendations for Australian Businesses

Future Outlook

As we move through the remainder of 2024, the global shipping industry is expected to remain volatile, with significant challenges driven by ongoing supply chain disruptions and geopolitical tensions. The rerouting of vessels due to the conflict in the Red Sea has added considerable transit time and costs, straining the global fleet's capacity. Although 2024 is set to witness record deliveries of new container ships, the anticipated relief from this additional capacity may be dampened by persistent port congestion and the need for ships to cover longer routes.

The potential for rate stabilization hinges on the resolution of key geopolitical conflicts, particularly in the Red Sea. Should the situation improve and normal shipping routes through the Suez Canal be restored, the market could experience a rapid increase in available capacity, leading to a possible reduction in freight rates. However, given the uncertainty surrounding these developments, the market is likely to remain unpredictable, with continued pressure on freight costs and capacity availability.

Recommendations for Australian Businesses

Given the challenging outlook, Australian importers and exporters must adopt proactive strategies to navigate the complexities of the current market environment. The following recommendations can help businesses mitigate risks and capitalize on potential opportunities:

1. Diversify Supply Routes: Alternative Ports and Inland Transport: To bypass congestion and capacity limitations at major ports, businesses should consider routing shipments through less congested ports and utilizing inland transport options such as rail or truck for final delivery direct to customers where feasible. For instance, shipping to East Coast ports and then transporting goods inland West can help reduce some delays and ensure timely deliveries.

1. Advance Bookings and Contract Negotiations: Secure Space in Advance: Early booking of shipping space is critical, particularly during peak seasons when demand is high. Businesses should also explore long-term contracts with shipping lines to secure favourable rates and guarantee space availability. Consider Alternative Transport Methods: For high-value or time-sensitive goods, air freight or sea/air combined transport from Europe may offer some viable alternatives to traditional sea freight, ensuring faster and more reliable delivery.

1. Monitor Market Developments Closely: Stay Informed: Regularly tracking updates from logistics providers and industry reports is essential for staying ahead of market trends and potential disruptions. By staying informed, businesses can make timely adjustments to their strategies and respond effectively to emerging challenges.

1. Build Supply Chain Resilience: Diversify Suppliers Where Feasible: Reducing reliance on a single market or trade route is crucial for mitigating risks. Businesses should diversify their supplier base across multiple regions to ensure a more resilient supply chain. Optimize Inventory Levels: Maintaining a balance between sufficient inventory to account for potential delays and avoiding excess stock is key. Implementing practices such as maintaining safety stock and utilizing just-in-time inventory management can help businesses navigate supply chain disruptions while minimizing costs.

Whilst not all of the above strategies or recommendations may be suitable for your business, adopting some of the above strategies has been done by several of our customers with success and positioned themselves better to manage the risks associated with managing the current volatile global shipping market.

5. How Neolink Can Assist Moving Forwards

As our customers and prospective customers are aware, Neolink is a modern, innovative freight forwarder that combines cutting-edge technology with deep industry expertise to help Australian businesses navigate the above complexities of today’s global supply chains. As a new-age forwarder, we leverage advanced digital platforms like Logixboard, strong carrier relationships, and proactive supply chain strategies to optimize routes, secure better freight rates, and ensure seamless communication and planning with factories.  Our tailored solutions are designed to help businesses maintain resilience and competitiveness in an increasingly volatile market.

So how can Neolink assist to best manage the current market dynamics with our customers?:

1. Optimizing Supply Chain Routes: Neolink leverages its expertise to identify and secure alternative shipping routes that may offer faster transit times or lower costs. By exploring all options such as air-sea freight combinations or utilizing less congested ports, Neolink can help mitigate the impact of delays and high freight rates on Australian businesses.

1. Negotiating Better Freight Rates: Given the current market volatility, Neolink’s strong relationships with carriers and deep understanding of market dynamics enable it to negotiate more favourable freight rates for its clients. By securing space allocations and locking in rates ahead of further increases, Neolink can provide cost savings for Australian importers and exporters.

1. Supply Chain Resilience: Neolink’s proactive approach to supply chain management, including diversifying suppliers and building buffer stocks, ensures that Australian businesses can maintain continuity despite global disruptions. This resilience is crucial in avoiding stockouts and meeting customer demands in a timely manner.

1. Utilizing Neolink's Logixboard: Neolink offers free access to its Logixboard platform, a powerful tool that enhances supply chain visibility and order management. By using Logixboard, clients can track shipments in real-time, manage orders more efficiently, and communicate directly with factories to ensure that production schedules align with logistics planning. This platform supports early supply chain planning, allowing businesses to anticipate challenges and optimize their operations from the start.

1. Early Supply Chain Planning and Order Management: Neolink emphasizes the importance of early supply chain planning and effective order management with factories. By engaging in early discussions and planning with suppliers, Neolink helps businesses to align their production schedules with shipping timelines, ensuring that goods are ready for shipment at the optimal time. This proactive approach reduces the risk of delays and helps maintain a steady flow of goods, even during peak seasons or periods of disruption.

6. Key Dates for the Remainder of 2024

As we approach the end of 2024, it's important to plan ahead for containers arriving into Australian ports during the Christmas period. We understand that many businesses have closure periods around this time, and we will work closely with you to ensure the right solutions are in place. If your business will be closed for any significant period, please coordinate with your Customer Operations contact at Neolink to ensure that orders and containers are scheduled appropriately.

Below are key dates that may impact your supply chains:

• BMSB Stink Bug Season to Commence 1^st of September 2024 - ***please note a separate announcement will be sent out around the specifics***
• China’s Golden Week: Tuesday, 1st October 2024 to Monday, 7th October 2024
• Australia Christmas and New Year Holidays: Wednesday, 25th to Thursday, 26th December 2024 | Wednesday, 1st January 2025
• Chinese New Year: 29th January 2025 – Based on previous years, factory workers typically begin their holidays during the week commencing 20th January, with some returning to work from 5th February.
• Chinese Lantern Festival: 12th February 2025 – Marks the end of the Chinese New Year season.

IMPORTANT – SHIPMENTS FROM EUROPE FOR CHRISTMAS

For customers importing from the EU, it’s crucial to consider current market conditions. Neolink’s customers typically have a 3-week order/production cycle. With the present shipping landscape, the average transit time for direct services is approximately 55 days, extending to around 65 days for door-to-door delivery. To ensure your goods arrive in your warehouses by the end of November, please have your orders in our system by close of business on September 6^th at the latest. This timeline assumes direct shipping services without transshipment. However, due to ongoing challenges at transshipment ports, we recommend adding an additional 2 to 3 weeks to your planning if a transshipment service is required. For trade routes relying on transshipment services, orders should already be in our system to ensure arrival before December.

IMPORTANT – CHINESE NEW YEAR SHIPMENTS

Regarding the upcoming Chinese New Year, we recommend that all orders needing shipment before the holiday should have EX-Factory dates no later than the second week of January. Typically, Neolink’s customers experience an order/production cycle of 2.5 weeks in China, so we need all such orders entered into our system before the Christmas holidays. This will ensure that your goods depart China before the Chinese New Year shutdown begins.

Please note that the above recommendations for Chinese New Year are based on current market dynamics. Should the situation change, we will promptly communicate any updates to our customers.

7. Conclusion

As we navigate the complexities of the global freight market in H2 2024, it is clear that the challenges faced by Australian businesses—ranging from increased freight costs to significant supply chain disruptions—are unprecedented in scale and impact, mainly driven by the red sea closure. The global container and air freight markets continue to be shaped by geopolitical tensions, port congestion, and shifting market dynamics. In this environment, agility and strategic planning are more critical than ever.

At Neolink, we are committed to supporting our clients through these turbulent times by offering tailored, proactive solutions that address the specific needs of Australian importers and exporters. Whether it's optimizing supply chain routes, negotiating competitive freight rates, or ensuring seamless communication through advanced digital platforms like Logixboard, our goal is to help you maintain resilience and competitiveness in a volatile market.

We encourage you to reach out to the Neolink team to discuss how we can further assist your business in overcoming the challenges of the current market environment. Together, we can develop strategies that not only mitigate risks but also capitalize on opportunities as they arise.

Thank you for your continued trust in Neolink. We look forward to working closely with you to ensure a successful and prosperous second half of 2024.

Appendix/Sources

Sea trade Maritime News - Hand, M. (2024, July 18). Spot container freight rates surge due to Red Sea crisis. Seatrade Maritime News | Xeneta Ocean Outlook 2024 Sand, P. (2024, July 4). What can stop ocean freight container spot rates reaching pandemic levels? Xeneta | Shipping Market Overview & Outlook | BIMCO. (2024, June). Container Shipping Market Overview & Outlook. BIMCO. | Freight Buyers’ Club Podcast Jensen, L. (2024, August 8). Suez Canal restart won’t solve container shipping turbulence. The Freight Buyers’ Club. Maersk's 2024 Outlook | Taylor, G. (2024, May 3). What Maersk’s 2024 Outlook Says About Container Shipping. Maersk.| DP World AI Innovation DP World. (2024, July 31). How AI can be the game changer for logistics? DP World | Port of Singapore Congestion Taylor, G. (2024, July 5). Singapore Endures More Port Delays as 90% of Container Ships Arrive Late. AFP via Getty Images. | Australian Supply Chain Issues Rabe, T., & Wiggins, J. (2024, July 10). Shipping crises ‘spanner in works for inflation fight. Financial Review.| ABC News on Shipping Costs Ziffer, D. (2024, April 29). Shipping costs on the rise with conflict, pirates, protectionism, and profits sharing the blame. ABC News.| Australian Supply Chain Impact of Red Sea Attacks SBS News. (2024, January 28). Australia’s trade is being threatened by Red Sea cargo ship attacks. SBS News. | Container Port Performance Index S&P Global Market Intelligence & World Bank. (2024, June 6). Container Port Performance Index 2024. World Bank.

Best regards,

Neolink Marketing Team