Neolink Announcement – Carriers Planning To Take Action on China to Australia Trade Lane Shipping – 8.5.23
Monday 8th of May 2023
Dear Valued Clients,
We hope this message finds you well.
As a Freight Forwarder and your Global Supply Chain Partner, we understand the importance of timely and reliable shipping services, and we are committed to keeping you informed about the current developments in the China to Australia trade lane
As you are aware, the first quarter of this year brought some relief from high freight rates and low schedule reliability. The Shanghai Container Freight Index (USD/TEU), which tracks all export sea freight rates from the world's busiest container port, demonstrates how far rates have fallen since the beginning of 2022 to now, with overall rates at less than 20% of what they were during the height of COVID.
See below (source: SCFI):
However, this has led to the lowest freight rates from China to Australia in a very long time, and now rates are well below 2019 freight rates. This is due to an increase in supply of new capacity entering the market, such as new vessels, services, and empty containers, followed by a drop in demand "post-COVID" due to inflationary pressures that most economies are now facing.
See below (source: Sea Intelligence):
Currently, it costs more money to pay the ports in Australia to remove the cargo from the vessel and make it available for collection from the wharf (Destination Port Charges on your invoices) than it costs to ship a container from China to Australia. While we understand that many in the industry may be pleased with the low freight rates, the shipping lines are doing everything they can to increase the price of the freight rates, especially on the CN to AU Trade Lane, which is well below break-even for any shipping line carrying cargo to Australia from China.
Due to all of the above factors, the shipping lines are doing everything within their control to increase their prices by utilising the supply side of the equation. As a result, they are planning to take some real action on upcoming sailings as we head into May. Our China Branch Office informed us late last week via their Procurement Department, which deals with the shipping lines in China on all of our contracts to Australia, that the carriers are planning to cancel or "blank" sailings coming to Australia earlier over the coming weeks.
Please find below sailings that are being planned to be cancelled by all carriers. Since all vessels are calling into Shanghai, they might come from Qingdao and then go to Shenzhen. This impacts most vessels/services coming to Australia:
This is the biggest scale of action we have seen for many years with regards to blank/cancelled sailings on the CN to AU Trade Lane. This is on top of the fact that A3X and CA3 services were totally removed from the market earlier in the year.
The belief from the shipping lines is that if the market isn't pushed up after these actions, carriers will do more blank sailings like they have in CN-EU and CN-US, and CN to other trade lanes. Further to the information we have received on the blank sailings, we are also being informed by most of the shipping lines that they are planning to introduce a “Rate Restoration surcharge” USD250.00/USD500.00 PER 20GP/40HQ from China to Australia with effective date 21 May 2023.
If you have any orders with us currently waiting to be shipped in May your Customer Operations Coordinator or Business Development Manager will be in contact if it has been impacted by the above cancelled sailings.
Just like we did during the COVID period our team will work with you proactively to look at other options and seek our alternatives where feasible to keep you cargo moving – all of which will be updated in our Digital Logixboard Platform.
However, we cannot do that if we do not have your orders in our system – if you have anything in production in China that is ready in May and we are not aware, please let us know.
We can be proactive in providing different options and solutions to help best navigate the above cancelled sailings if we have advanced notice of more than a week on goods readiness.
If you have any questions at all about any of the above, please feel free to also call any member of the Operations and Business Development Team.
Neolink Marketing Team