SILA Global Industry News 05/07/21

05/07/21

MUA Action at Patrick Terminals
Notice has been received by Patrick terminal that MUA plan to ramp up industrial action over the coming weeks which include certain overtime and shift performance bans as well as rolling work stoppages;

• Stoppages of work of 1-hour duration at 0500, 1300 and 2100 each day commencing on Thursday, 24 June 2021 for a 21-day period until Thursday 15 July 2021.

As of Tuesday 29th June the current status of Patrick Port Botany was as follows;

• Average Sydney Terminal delays are now:8 days
• Average delay on-window vessels: 3 days 
• Average delay off-window vessels: 9 days
• The MUA currently has a ban on working subcontracted vessels from other operators.

Patrick Terminals have made adjustments to rail windows including reducing capacity allocated from 4300 lifts per week to 3200 lifts per week due to ongoing industrial action (with the cancellation of 12 of 56 windows). As a result, rail capacity will be reduced by approx. 25%. Patrick will seek to re-instate the rail windows as soon as possible.

Needless to say, these interruptions provide a lot of issues with some carriers reporting they are expecting a large amount of containers to be subject to storage due to ongoing delays. Patrick have put a notice to industry stating:

“Given that the protected industrial action is outside our ability to control, Patrick will not be issuing storage waivers or reductions resulting from the MUA imposed stoppages”.

Freight & Trade Alliance has issued a media release calling for “urgent intervention to prevent supply-chain crisis” the media release can be read here and our team will keep you up to date on any developments.

Shipping Update  
Vessel arrivals from Asia are being delayed by up to 20 days or more, with little improvement in sight. China ports are facing widespread congestion, equipment shortages and a lack of shipping space which will continues to delay any return of some form of ’normal’ well back to the second half of next year.

With space availability continually to shrinking from China, we are receiving reports that some carriers are not accepting any bookings for at least 2 weeks and are reporting fully booked vessels until at least 15th July. Other reports are coming to us that there is the potential for 5 week or possibly longer delays from Ningbo.

Reports from India also suggest that the wait time for equipment is between 10-20 days, which is also compounded by wait time in order to secure bookings which can also be a few weeks in itself (the LoadStar provides a good commentary in this area). Additionally we are seeing transhipment waiting times increase on certain carrier services as the international trade hub continues to grow. Recent figures released show that Year On Year container Growth is up 14.6% for May 2021 equating to 3.22million TEU.

Ocean Freight Pricing – Commentary by Simon Pepper, Director of Customs & Logistics.
It is a topic of much speculation and conjecture, but what I think most can agree on is that the level of pricing increase that has been seen was not predicted or foreseen by many. According to Global Container Freight Index provided by Freightos Baltic index  https://fbx.freightos.com/freight-index/FBX (while it will vary on each trade lane), the cost of Ocean Freight has increased six times compared to this time 2019 (pre-covid).

Toward the end of 2019 Ocean Freight pricing was not at its lowest levels, however it was at a level which was predictable and most proposed rate increases were rejected by the market at the time. Any increases which did go through were marginal with little effect to the bottom line.

There are many factors which have a bearing on this situation and there are also factors which are region or country specific (each with its own issues), but in most cases it can be attributed to the following factors: equipment shortages, port congestion, space supply and demand.

According to data provided by Statista 6 out of 10 of the world’s busiest ports in 2020 (based on throughput) are in China. Given that China is a majority export country there is a substantial need for empty containers there to support this throughput. However, in most ports there is a constant shortage of empty equipment and there are many factors which impact the repositioning of empty containers to these much-needed areas, such as the much-publicised Suez Canal blockage. Also recently reported by Taricc Booker on news.com.au indicators suggest we may be facing another bottleneck in China which will continue to make matters difficult. If ports are closed and vessels are skipping their port calls then this will only put further strain on an already tense situation. There are plans by lines and equipment manufacturers to assist with equipment shortage relief, as reported by FreightWaves but there is still a way to go in this area with little relief expected until sometime in 2022.

When also looking at the economics of the global trade situation, certain tradelines are paying nearly double others. For example, the China/East Asia to North Europe is 40-50% higher than the current base global trade index and given a choice to allocate container equipment to a tradeline with a base price nearly half of another, it only makes sense to prioritize the allocation of equipment to a lane with the potential for higher yield limiting what is left over for other lanes.

The effect of this then floats down to the smaller, lower yield markets and to make these lanes still attractive for the carriers to support then Freight Prices must increase. Needless to say, it certainly is a difficult situation and as reported by Greg Miller of FreightWaves indicators suggest that pricing may continue to rise.

If you have any questions, please contact your local SILA representative.

Thanks – SILA Customer Service