Singapore Port Congestion Reaches 2 Million TEU
According to Hong Kong analysts, significant new port congestion has added to the already over-stretched container market that is struggling to cope with shortages of container equipment and vessel space, mainly as a consequence of the Red Sea diversions.
The global port congestion indicator hit the 2m teu mark, accounting for 6.8% of the global fleet with Singapore becoming the new congestion hotspot. The SCFI [Shanghai Containerized Freight Index] has jumped by 42% in the past month, with further gains to follow in June as carriers are adding new surcharges and rate hikes.
The latest report from Bank of America indicates that more than 2% of container vessel supply has been affected by worsening port congestion since March. Singapore, Dubai, and the Mediterranean are identified as congestion hot spots, while Asian container equipment availability remains limited.
A new report from an Asian container consultancy warns that port congestion, particularly in Singapore, is causing berthing delays of up to seven days at the world’s second-largest container port.
The total capacity waiting to berth has risen to 450,000 TEU in recent days. Some carriers have had to omit their planned Singapore port calls, which will worsen the problem at downstream ports. The delays have led to vessel bunching, with Shanghai and Qingdao also experiencing a significant build-up of vessels at anchor. Dwell times at Shanghai, the world’s largest boxport, are now at three-year highs. These inefficiencies in cargo movement have prompted carriers to omit regional calls and cancel sailings in longer haul routes to restore schedule reliability, further reducing the already tight capacity. Sky-high spot freight rates are currently the highest on record outside the Covid era, attributing this to the impact of congestion and delays.
“The port congestion in Asia and the sudden surge in demand now soaks up even more capacity – capacity which the market does not have,” analysts at Sea-Intelligence suggested in their latest weekly report, adding: “Carriers are blanking sailings, not in attempt to restrict capacity, but simply because they do not have free vessels to maintain weekly services, when vessels get stuck in congestion.”
Ensuring that your supply chain is preparing for delays will be important as last-minute changes are occurring with vessel rotation changes, ports being omitted and terminal changes which can add additional costs at origin and destination. Carriers will do their utmost to minimise the impact to their schedules however planning ahead and ensuring ample lead times of 3 to 4 weeks prior to ETD for bookings are being adopted.
Sea Freight Market Update
Global supply chains are facing significant challenges due to extraordinary market conditions on major trade routes.
Freight rates in the spot market continue to rise, with carriers implementing blank sailings to manage capacity in the “traditional slack season”, resulting in 10 cancelled voyages from April to mid-May.
There has been an unprecedented increase in demand in Quarter 1 2024 compared to Quarter 1 2023. This surge is particularly evident in Far East trade lanes, where five consecutive rate increases since January 2024 have been successfully implemented and another Rate Restoration is set to take effect from June 1st, 2024, from Northeast Asia to Oceania trades at a quantum of USD 300 per TEU.
Southeast Asia to Oceania has also been impacted however to a lesser degree but nonetheless carriers are also enforcing rate increases on this trade however on a lower scale. A Rate Restoration announcement has been initiated by a few shipping lines to take effect from June 1st, 2024, on the Southeast Asia to Oceania trade lane at USD 100 per TEU.
The sudden surge in shipments and rising freight rates can be attributed to several factors and assumptions. Once again, we find ourselves in an unpredictable year where the market conditions could not have been forecasted based on available data.
Why is there a surge in freight rates and shipments?
The following key factors are attributing to these unique market conditions:
- In Quarter 1 2024, there was a 9.2% increase in demand, causing market nervousness.
- The Red Sea crisis is causing pressure on shipping capacity, leading to longer lead times, earlier ordering patterns, and increased imports.
- Equipment displacement and congestion in major hubs due to vessels omitting ports adding to the fear of increased delays.
- The past pandemic has taught shippers to anticipate capacity squeezes during peak season, leading to increased imports.
- Customers used 2023 to reduce inventory levels and create space for frontload imports.
- Long-term rates on major trades remained relatively flat in Quarter 2, but the gap between short and long-term contracts increases the risk of cargo being rolled. Therefore, most clients opted to move freight early to minimise delays fearing they will not be loaded in the peak.
- The industry is looming with black swan events like the Red Sea crisis, Panama Canal restrictions, Middle East Unrest, Signs of US-China trade war, and China-Taiwan tensions.
- Customers are therefore building up inventories to prepare for potential threats.
- This therefore has increased demand amidst low supply (due to the various blank sailings) and carriers are therefore increasing freight rates via Rate Restoration announcements.
You can be assured that we will communicate any changes in the market conditions at the earliest via our experienced team of professionals who are ready to take your calls.
It is recommended that you plan your shipments 3 weeks in advance and consider all modes of transport including airfreight, LCL to mitigate your risk and disruption to your supply chain.
We thank you for your continued trust and patience while we navigate through these challenging times.
Air Freight Update
Global air cargo demand keeps climbing, now at +6% YoY vs same period last year. Boom in e-commerce drives increase in air cargo volume, led by fashion and consumer sectors.
Global air cargo capacity now at +10% YoY, Capacity growth varies significantly across trade lanes, influenced by airspace closures, e-commerce expansion, and production shifts. Asia Pacific region projected to increase widebody belly capacity in anticipation of the summer 2024 traffic season.
Airfreight rates continued to increase in specific regions this month, due to global surge in cargo demand and regional capacity challenges.
Red Sea challenges drive sea-air conversion and capacity disruption, high demand for perishables boosts air traffic, prompting shippers to secure costlier space.
Disruption to container shipping operations out of Asia has unexpectedly worsened over recent weeks but the development is expected to have limited impact on air cargo.
The last few weeks have seen the return of port congestion and container shipping capacity shortages out of Asia push up ocean freight rates.
That is a secondary push that is moving to air because they can’t wait for containers to come back into the distribution cycle.
We have weekly consoles from USA, Europe, China, and South Africa into AU. Please contact our team of supply chain professionals who will continue to provide you with the most competitive options to support your supply chain needs.
HARDERS 3PL Warehouse – Continuous Improvement
Continuous improvement is pivotal to our 3PL warehouse operation, driving efficiency, cost savings, and customer satisfaction. By implementing methodologies such as Kaizen, we can achieve substantial operational enhancements. Kaizen, which means “change for better” in Japanese, emphasizes small, incremental changes that collectively result in significant improvements.
Such initiatives encourage employees at all levels to actively participate in identifying problems, suggesting solutions, and implementing improvements. By involving staff in decision-making and problem-solving, a sense of ownership and empowerment is fostered. When employees feel their opinions matter, they become more engaged and committed to the organization’s success. They often require cross-functional collaboration.
Teams work together to analyze processes, eliminate waste, and enhance efficiency with regular communication channels established to share progress, challenges, and successes. This promotes transparency and builds trust among team members. Employees engaged in these projects gain valuable skills related to problem-solving, data analysis, and project management. Training sessions, workshops, and mentorship opportunities enhance their capabilities, making them more valuable contributors to the organization over time – acknowledging and celebrating small wins along the way.
An example of continuous improvement progress is the adoption of the 5S methodology: Sort, Set in order, Shine, Standardize, and Sustain. This approach is used to effectively streamline operations. Implementation of 5S methodology typically leads to a 20% increase in picking efficiency and a 15% reduction in errors, resulting in better inventory accuracy and faster order fulfilment.
Another impactful Kaizen project involved optimizing warehouse layout. By reconfiguring the storage and picking paths based on a detailed analysis of order patterns, we can reduce travel time for pickers by up to 30%. This not only boosts productivity but also shortened delivery times, again enhancing customer satisfaction.
Continuous improvement also extends to technology adoption. For instance, integrating a warehouse management system (WMS) with automated guided vehicles (AGVs) allowed for automation of repetitive tasks. This integration would reduce labour costs by up to 25% and increased throughput by up to 40%, depending on application which demonstrating the transformative potential of continuous improvement initiatives.
Continuous improvement practices like Kaizen and 5S, alongside technological advancements, are crucial for warehouse operations. These initiatives not only streamline processes and reduce costs but also enhance service quality, meeting the evolving demands of clients and customers.
UK Customs Roll Out New System
UK Customs have installed a new customs platform to cover all import and export declarations to and from the UK. The system is called the Customs Declaration Service (CDS) and will be implemented for all export declarations made from the 1st June 2024.
In terms of exports from the UK, one major change is that all clearing agents must now show on the customs declaration how they are representing the exporter of the goods from the UK. This requires that they receive authority to act as the direct customs agent. This is called a Direct Representation (DR) letter (similar to a Letter of Authority for Australia). This DR letter must be completed on the exporters letter head, signed by a company director, and returned before agents can progress with any export declaration and booking processes. Once the letter is signed, it will remain valid for 2 years. If you import from the UK, its important to ensure that your suppliers provide this letter to Harders agent to avoid any delays and ensure the export clearance can be completed on their behalf as early as possible as the export will not be able to proceed without a completed DR letter on file.
Our agent will send the Direct Representation letter to your supplier on confirmation of any new bookings if one is not in place already. If you have any questions, please feel free to reach out to your Key Account Manager to discuss further.