Author: NZ Freight

Introduction: The global shipping industry is facing a severe challenge as Maersk, one of the world’s largest shipping companies, issues a warning about potential months-long disruptions in the vital Red Sea trade routes. Vincent Clerc, Maersk’s chief executive, has highlighted the gravity of the situation, emphasizing its serious and dramatic impact on containerized traffic due to ongoing attacks by Yemen’s Houthis.

The Severity of the Situation: Vincent Clerc expressed deep concern over the escalating attacks, labeling the disruption to Red Sea shipping as “extremely serious and dramatic.” The consequences of this disruption extend far beyond the immediate challenges faced by the shipping industry, with potential economic and inflationary repercussions on a global scale.

Economic and Inflationary Impact: As Maersk handles approximately one-fifth of all seaborne cargo, the prolonged closure of Red Sea trade routes poses a significant threat to the global economy. The rerouting of ships around South Africa not only results in longer voyages but also significantly raises operational costs. Vincent Clerc warned that the uncertainty surrounding the reopening of safe access to the Red Sea could have a lasting impact, potentially lasting for months.

Call for International Action: In response to the crisis, Vincent Clerc urged the international community, led by the United States, to take decisive action. The plea is not only for the sake of the shipping industry but also to mitigate the broader economic implications. The need for collective efforts to ensure the safe passage of ships through the Red Sea has become a pressing priority.

Inflationary Pressures and Short-Term Disruptions: Vincent Clerc pointed out the immediate consequences of the disruption, emphasizing the inflationary pressures it creates. With inflation already a significant concern globally, the shipping giant’s CEO highlighted how these disruptions could lead to increased costs for businesses, customers, and ultimately impact European and U.S. consumers. The short-term disruptions, anticipated in late January, February, and early March, could further exacerbate the existing challenges in the market.

Conclusion: Maersk’s warning sheds light on the vulnerability of global trade and the interconnectedness of economies. The call for international cooperation to address the security issues in the Red Sea is not only a plea for the shipping industry but a crucial step to safeguarding the stability of the global economy. As stakeholders brace themselves for potential months of disruption, the urgency for concerted efforts and swift resolutions becomes more apparent than ever.

The maritime industry is undergoing significant transformations, with key players and regions making noteworthy strides in infrastructure development, sustainability, and market dynamics. In this blog post, we will delve into various aspects of the global maritime landscape, ranging from new vessel launches to environmental initiatives and market trends.

New Vessel Launch: COSCO’s Mega Vessel Maiden Voyage to Australia

COSCO’s latest addition, the 24,000 TEU mega vessel, OOCL VALENCIA 001W, embarked on its maiden voyage from Shanghai to Australia West via Singapore. This development signifies the industry’s commitment to expanding capacity and enhancing efficiency.

India’s Maritime Aspirations: A P&I Club and Infrastructure Investments

India is gearing up to establish its Protection and Indemnity (P&I) club, named India Club, focusing initially on domestic shipping. The country’s ambitious plans include becoming one of the top five shipbuilding nations within the next decade, with substantial investments in new ports and maritime infrastructure.

Nhava Sheva Port’s Growth and Sustainable Initiatives

Nhava Sheva Port reported a remarkable 7% year-over-year increase in containerized traffic, defying market challenges. The port is set to double its capacity with the development of a new green-field, deep-water port at Vadhavan. PSA Mumbai, powered by 100% renewable energy, is leading the way in sustainable operations, reducing CO2 emissions significantly.

Bangladesh’s Response to Economic Challenges: VAT Withdrawal on Port Services

In response to the global economic crisis, Bangladesh has withdrawn value-added tax (VAT) on port services for export-oriented industries, aiming to support businesses facing downturns. However, the country faced a decline in container and ship handling, reflecting broader economic challenges.

Global Market Trends and Challenges: Inflation, Supply Constraints, and Geopolitical Issues

The global maritime market faces challenges at the outset of 2024, including inflation concerns due to supply constraints from conflicts in the Middle East and Eastern Europe. The Red Sea blockade by Yemen has led to shipping diversions, impacting costs and raising inflationary pressures. Geopolitical issues, particularly in the Red Sea, pose threats to shipping routes, requiring operators to reroute and impacting capacity.

Market Predictions and Carrier Strategies: Addressing Challenges and Seizing Opportunities

Looking ahead, carriers like Maersk are adapting to challenges by rerouting ships and addressing delays in specific regions. Major carriers have implemented rate increases to counter rising costs, with a focus on key trade routes. As the industry navigates uncertainties, attention remains on geopolitical developments, energy prices, and their potential impacts on future interest rates.

The global maritime landscape is evolving rapidly, with key players making strategic moves to enhance infrastructure, embrace sustainability, and tackle emerging challenges. As we move further into 2024, the industry’s ability to adapt and innovate will play a crucial role in shaping its future. Stay tuned for more updates on the dynamic world of maritime trade.

 

Several changes to the Ports of Auckland tariff costs effective January 1, 2024. Here’s a breakdown of the key points you mentioned:

General Rate Increase (GRI):

  • A general tariff GRI of 7.7% will apply. This means that across-the-board, there will be a 7.7% increase in the tariff costs.

Peak Season Cost for VBS Container Booking:

  • The cost per VBS (Vehicle Booking System) container booking during peak seasons will increase substantially. This increase is likely intended to encourage more after-hours and weekend VBS bookings.

Additional Base Cost for DG Containers:

  • There will be a new base cost of $60 added for every DG (Dangerous Goods) container that moves via the Port of Auckland. This suggests an additional charge specifically for containers carrying dangerous goods.

Charge for Containers Moved via Rail:

  • There will be a charge for every container moved via rail through the Port of Auckland. This implies that using rail services for transportation will incur an additional cost.

It’s important for businesses and stakeholders involved in shipping and logistics through the Ports of Auckland to be aware of these changes and plan accordingly. These adjustments may have implications on overall transportation costs and logistics strategies. It would be advisable to review the detailed tariff schedule and communicate with relevant authorities or shipping agents for further clarification and to understand the specific impact on individual shipments or operations.

The escalating attacks on shipping in the Red Sea, particularly the recent incidents involving Houthi rebels from Yemen targeting vessels, have significant implications for the global shipping industry and supply chains.

Suspension of Shipping Services: Major shipping companies, including Maersk, MSC, CMA-CGM, and Hapag-Lloyd, have suspended all journeys through the Red Sea and Suez Canal in response to the attacks by Houthi rebels.

Reasons for Attacks: The attacks by the Houthi rebels are seen as a response to the conflict in Gaza. The Red Sea and Suez Canal serve as crucial routes for East-West trade, especially for oil shipments. The attacks aim to disrupt this trade route, causing delays and economic impact.

Impact on Shipping Prices: A supply chain expert suggests that if these shipping attacks escalate, it is likely to lead to an increase in shipping prices. The disruption to major trade routes can result in higher costs for shipping companies, which may be passed on to consumers.

Global Delays: The suspension of shipping services through the Red Sea and Suez Canal can cause major delays worldwide. The Suez Canal is a key artery for international trade, and any disruption can have cascading effects on global supply chains.

War Risk Insurance Premiums: The attacks have led to a rise in war risk insurance premiums. Shipping companies are likely to face increased insurance costs due to the heightened risks associated with navigating through conflict-prone areas.

Vessel Attacks: Specific incidents mentioned include the attack on the Liberian-flagged MSC Palatium III with a drone and the attack on Hapag Lloyd’s Al Jasrah with a missile. While there were no reported injuries in the MSC Palatium III incident, the vessel suffered fire damage and was taken out of service.

Response of Shipping Companies: Companies like Maersk have responded by instructing their vessels in the area to pause their journeys until further notice. The safety of crews and vessels is a top priority in light of the increased security risks.

Historical Reference to Suez Canal Blockage: The mention of the Ever Given container ship getting stuck in the Suez Canal in 2021 serves as a historical reference to the significant disruptions caused by such incidents. The blockage of the canal had far-reaching consequences on global logistics and supply chains.

Potential Ripple Effects: The expert mentions potential disruptions in ports like Singapore and Hamburg, which have significant Red Sea traffic. The pause in shipping trips through the Suez Canal can have ripple effects, causing delays and challenges in various parts of the world.

In summary, the attacks on shipping in the Red Sea are a cause for concern, with potential ramifications for global trade, shipping costs, and supply chain disruptions. The situation underscores the vulnerability of key maritime routes to geopolitical tensions and conflicts.

The oversupply of vessels in the container shipping industry in 2024 is expected to lead to various strategies by container lines to minimize losses. Philip Damas, managing director of Drewry Shipping Consultants, outlined several methods that container lines may employ:

Blank Sailings: Container lines are likely to implement more blank sailings, where scheduled voyages are canceled to match supply with demand.

Industrial Use of Cancelled Sailings: There might be an industrial use of cancelled sailings, reducing the predictability of container ship departures.

Reductions in Ship Speed: Container lines may further reduce the speed of ships to optimize fuel consumption and operational costs.

Scrapping of Older Ships: The scrapping of the slowest and oldest ships is a possibility, resulting in longer transit times for shippers.

Suspensions or Cancellations of Services: Container lines may consider suspending or canceling entire services or loops to address oversupply.

Despite these measures, Damas predicts that the oversupply will lead to a collective loss of around US$15 billion for container lines in 2024, following an estimated collective profit of US$20 billion in the current year.

The approach that individual container lines take in managing the supply will depend on their priorities, whether it is protecting market share or the bottom line. Damas suggests that some container lines may sacrifice cargo volumes and market share to maintain profitability.

For shippers, Damas advises that the next year will be an ocean freight buyer’s market. While significant rate cuts may be possible, he warns that there will be a trade-off, with service reliability and levels likely to worsen.

Shippers renegotiating ocean freight contracts are urged to seek efficiencies and savings beyond freight rate reductions. This includes examining surcharges, reducing detention and demurrage costs, and carefully considering contract terms, especially related to “free time.”

Additionally, Damas highlights the introduction of new EU Emission Trading System (ETS) surcharges in 2024. The lack of transparency on how these surcharges will be passed on and negotiated is a concern, and shippers are advised to seek clarity and evidence about the justification of these charges.

In conclusion, shippers are encouraged to negotiate not only freight rates but also to scrutinize and understand all associated costs and surcharges, as well as prepare for potential challenges related to ETS surcharges in the coming years.

New Zealand Customs’ 2023 Time Release Study. It’s evident that the customs service is dedicated to optimizing its processes to facilitate fast and effective international trade.

Time Release Study (TRS): The TRS methodology, as established by the World Customs Organization, serves as a valuable tool for assessing customs performance in clearing cargo. By measuring various events and procedures from arrival to release, customs can identify areas for improvement and enhance overall efficiency.

Supply Chain Dynamics: Recognizing that customs is just one component of the broader supply chain, New Zealand Customs acknowledges the interconnected nature of international trade. Efforts to streamline customs clearance contribute to ensuring that trade flows smoothly across borders.

Baseline Indicators: The TRS allows customs authorities to establish baseline indicators, assess their effectiveness, and track improvements over time. This data-driven approach is crucial for identifying successful practices and implementing changes that support economic growth.

Comprehensive Studies: The 2023 TRS is the fourth comprehensive study conducted by the New Zealand Customs Service. The previous studies in 2009 and 2022 provided benchmarks for assessing the effectiveness of customs clearance processes over the years.

Scope of the Study: The study focused on international cargo vessels and flights during a specific week in 2023. Data from a substantial number of import and export entries, involving both sea and air cargo, were analyzed. Collaboration with industry partners, including port and air freight companies, ensured a holistic assessment.

Efficient Clearance: Notably, the key results highlight the efficiency of customs clearance when entries are correctly reported. Import entries that are accurately reported are cleared quickly and, on average, before the arrival of the cargo vessel. Similarly, export entries that are correctly reported are cleared in advance of loading for export.

High Clearance Rates: An impressive statistic is that 98.82% of import and export entries for air and sea cargo were cleared within five minutes of lodgement. This rapid clearance rate underscores the effectiveness of customs processes, particularly when accurate reporting is ensured.

Accuracy is Key: The study emphasizes the importance of accurate reporting. When items are reported accurately, customs clearance can occur within a matter of seconds, further expediting the movement of goods across borders.

In summary, New Zealand Customs’ commitment to continuous improvement and data-driven decision-making is evident in the positive outcomes of the 2023 Time Release Study. The emphasis on accuracy, collaboration with industry partners, and high clearance rates contribute to a more efficient and responsive customs clearance process, ultimately supporting the facilitation of international trade.

 

Air Cargo

The additional information provides a more detailed picture of the efficiency of New Zealand Customs in handling air cargo.

Export Entry Efficiency: An impressive statistic is that 100% of export entries for air cargo were cleared before the departure time of the aircraft. This indicates a high level of efficiency in processing export documentation, ensuring that goods are ready for departure without delays.

Import Entry Efficiency: For import entries for air cargo, 78.3% were lodged and released by Customs before the arrival of the cargo into New Zealand. This indicates a proactive approach by Customs in processing import documentation ahead of the physical arrival of the goods.

Lead Time for Import Entries: On average, import entries for air cargo were lodged and released by Customs 16 hours and 47 minutes before the arrival of the aircraft. This reflects the relatively short flight times from overseas departure points to the landing of the aircraft in New Zealand. The advanced processing of import entries contributes to a smoother and faster clearance process upon arrival.

Efficiency Considerations: The shorter flight times play a significant role in the overall efficiency of air cargo clearance. With a shorter window between departure and arrival, customs processes need to be well-optimized to ensure that cargo is cleared promptly upon landing.

Proactive Customs Practices: The high percentage of import entries lodged and released before arrival indicates a proactive approach by New Zealand Customs. This approach helps in minimizing potential bottlenecks at the point of arrival, contributing to a faster and more streamlined customs clearance process.

Overall, these statistics underscore New Zealand Customs’ commitment to efficiency and timeliness, particularly in the context of air cargo. The advanced processing of import and export entries reflects a well-organized and responsive customs system, aligning with the goal of making international trade fast and effective.

 

Sea Cargo

The additional information provides further insights into the efficiency and performance of New Zealand Customs in clearing cargo, particularly in the context of sea cargo and the overall processing timeframe.

Efficiency in Sea Cargo Import Entries for FCLs:

  • A significant 93.9% of sea cargo import entries for Full Container Loads (FCLs) were lodged and cleared by Customs before the arrival of the cargo into New Zealand. This indicates a high level of efficiency in processing sea cargo documentation in advance.

Advance Lodgement for Sea Cargo Export Entries:

  • For sea cargo export entries involving FCLs, 87.7% were lodged at least 48 hours before loading on the vessel for export. This advance lodging contributes to the smooth movement of goods and ensures that export entries are processed well ahead of the vessel’s departure.

Performance Measures and Targets:

  • In the 2022/23 reporting period, New Zealand Customs aimed to process 98% of trade transactions within 30 minutes. Due to improved timeliness, this target was exceeded, and the specified timeframe for the 2023/24 period has been further reduced to 5 minutes. This highlights the commitment to continuous improvement and efficiency in customs processing.

High Clearance Rates:

  • During the study, an impressive 98.82% of all import and export entries lodged were cleared within 5 minutes. This high clearance rate demonstrates the effectiveness of Customs’ processes and their ability to facilitate the clearance of cargo promptly.

Processes in Place:

  • The success in cargo clearance is attributed to various processes in place, including electronic reporting, business rules, risk management, alert systems, deferred payment schemes, post-entry auditing capability, and ongoing engagement with the importing and exporting industry at all levels in Customs.

Future Time Release Studies:

  • Customs plans to conduct Time Release Studies every two years, with the next one scheduled for 2025. This commitment to regular assessments ensures a continuous focus on improvement and collaboration with port and cargo operators.

Overall, the information indicates that New Zealand Customs has implemented effective processes, embraced technology, and engaged with industry stakeholders to create an efficient and responsive customs clearance system. The commitment to regular assessments through Time Release Studies reflects a proactive approach to maintaining and enhancing the efficiency of cargo clearance processes.

Biosecurity New Zealand is taking proactive measures to enhance arrivals processing and ensure the effective management of biosecurity risks. The introduction of hosts wearing ‘Biosecurity New Zealand host’ t-shirts to guide travellers is a positive step toward improving the overall experience for visitors while maintaining biosecurity standards.

The implementation of new systems, such as biosecurity express lanes for low-risk passengers, not only streamlines processing but also recognizes the importance of differentiating between passenger risk levels. This approach can contribute to a more efficient use of resources while maintaining the necessary scrutiny on potential threats.

The emphasis on protecting New Zealand from biosecurity threats, including pests and diseases that could impact the economy and environment, is crucial. It’s good to see that the focus extends beyond security to educating and guiding travelers on how to navigate the biosecurity system effectively.

The success of the biosecurity system is evident in the significant number of risk items seized and appropriately dealt with by officers in the past three months. The combination of fines, destruction of risk items, and the overall number of interventions reflects the effectiveness of the measures in place.

Encouraging travelers to be patient, travel light, and follow guidelines for declaration and disposal of risk items is essential for fostering cooperation. The call for accurate digital declarations, the declaration of risk items, and proper disposal procedures underscores the shared responsibility of both Biosecurity New Zealand and travelers in safeguarding the country’s primary sector exports.

Overall, this proactive and comprehensive approach to biosecurity measures during the surge in summer travelers is commendable and serves as a model for other regions facing similar challenges. It highlights the importance of balancing security with a positive and informative traveler experience.

The OECD’s latest economic outlook paints a mixed picture for the global and New Zealand economies.

 

Global Economic Outlook:

Slow Global Economy: The OECD forecasts a slow global economy in 2024. Despite a projected slowdown, there is an expectation that it will avoid a “hard landing.”

Global Growth Projection: The global growth is expected to be 2.9 percent in 2023, slowing to 2.7 percent in 2024, with a slight improvement to 3.0 percent in 2025.

 

New Zealand Economic Outlook:

Below Potential Growth: In contrast to the global outlook, the forecast for New Zealand is less optimistic. The OECD projects the New Zealand economy to grow by just 1.3 percent in 2024 and 1.9 percent in 2025.

Comparison with Potential Growth: The projected growth for New Zealand is substantially less than its potential economic growth rate, which was assessed to be 2.9 percent during the same period according to Treasury’s Pre-election Economic and Fiscal Update 2023.

 

Monetary Policy in New Zealand:

Cash Rate Decision: The Reserve Bank’s Monetary Policy Committee held the cash rate steady at 5.5 percent.

Factors Impacting Decision: The committee highlighted that demand growth had not eased as much as anticipated in the first half of 2023, partly due to stronger-than-expected population growth. While this eased supply constraints, there is a concern that it might increase the risk of inflation remaining above the target.

Potential for Rate Increase: If inflationary pressures were to be stronger than anticipated, the committee noted that there might be a need for an increase in the cash rate.

 

Overall Implications:

The global economic slowdown and New Zealand’s economic performance below its potential growth rate pose challenges. The monetary policy decisions, including the potential need for an interest rate increase in response to inflationary pressures, reflect efforts to balance economic stability.

These forecasts and policy decisions indicate the importance of monitoring global economic trends, managing inflationary risks, and adapting monetary policies to ensure economic resilience in the face of evolving conditions.

The challenges facing the container shipping sector, with decreasing volumes, oversupply, and falling rates. Key indicators like the Drewry World Container Index and Xeneta Shipping Index point to a concerning trend for carriers, with long-term contracted rates continuing to decline.

The 40% drop in the Drewry World Container Index compared to the same week last year and the Xeneta Shipping Index falling an additional 4.7% in October raise alarms about the financial health of carriers in the ocean freight shipping market.

Xeneta’s warning about 2024 being even more challenging for carriers than anticipated is notable. The observation that older contracts, signed when rates were higher in 2022, are masking the true severity of the situation is a crucial insight. As these older contracts are replaced in early 2024, carriers may face the full impact of the current weak market conditions.

The anticipation of new contracts being signed at significantly lower rates in 2024 raises concerns about substantial financial losses for carriers. This is particularly troubling, considering that four major carriers have already reported significant financial losses in the third quarter of 2023, attributing the decline to rates rather than volumes.

The industry’s acknowledgment of the difficult period ahead aligns with the broader economic challenges and uncertainties that affect global trade. It will be essential for carriers to navigate these challenges strategically, possibly through cost-cutting measures, operational efficiencies, or exploring new business models to ensure sustainability in the long run. Additionally, regulatory and industry initiatives aimed at addressing environmental concerns, as mentioned in the previous context about COP28, could play a role in shaping the future landscape of the shipping industry.

Major CEOs of global shipping companies taking a proactive stance on addressing the maritime industry’s greenhouse gas emissions during COP28. The joint statement and the push for an end date for fossil-only powered newbuild ships reflect a growing recognition of the need for sustainability in the shipping sector.

Soren Toft’s emphasis on the importance of a tangible supply of alternative fuels and globally recognized pricing for greenhouse gas emissions highlights the practical challenges that need to be addressed for a successful transition to greener practices. The proposal for a “pricing mechanism” to support the competitiveness of green fuels during the transitional period is a notable suggestion, as economic incentives often play a crucial role in driving industry-wide changes.

The commitment of major carriers, such as Maersk and CMA CGM, to invest in and adopt greener technologies is encouraging. Maersk’s goal of achieving net-zero greenhouse gas emissions by 2040 and its investment in vessels running on green methanol showcase a dedication to environmental responsibility. Similarly, CMA CGM’s substantial investment in decarbonizing its fleet, including the shift from methanol to LNG, demonstrates a commitment to exploring various sustainable options.

The industry’s acknowledgment of the challenges ahead, particularly with the downturn in container rates and the anticipated difficulties in 2024, underscores the complex nature of transitioning to more sustainable practices. However, the collective efforts and commitments from industry leaders, coupled with regulatory support from organizations like the International Maritime Organization (IMO), are crucial for driving positive change and reducing the carbon footprint of the shipping industry.