As the leading freight forwarder in Australia for transporting machinery, equipment, components and parts domestically and internationally, NMT is here this month to provide a supply chain update – particularly on shipping delays as we head into the New Year.
Australian Port Congestion
Australian break bulk ports across the country have been regularly congested since 2020, starting with the costs of container shipments increasing to over 6000 USD per 20ft – resulting in many shipments being de-consolidated and shipped via break bulk.
This was not limited to small machines and cars but also general cargo. Container freight rates were reduced by 2021; however, congestion did not dissipate due to the high demand for imported cars between 2021 and 2023.
Coupling this demand with disrupted supply chains led to many car manufacturers dumping complete and partially complete vehicles in temporary overseas laydown areas, where the vehicles were contaminated with exotic seeds and other plant materials – leading to a record number of new cars failing quarantine inspection that had never been seen before.
Australian ports quickly had congestion exceeding three weeks in Brisbane, Port Kembla and Melbourne terminals. Hoists had to be urgently installed, and 24-hour cleaning crews were employed to tackle the number of HELD vehicles in the ports to clear the congestion.
As lengthy delays to berth increased in frequency, carriers reduced their number of port calls in Australia from four to just one or two. This meant a voyage that would typically discharge 1500 cars now discharged more than 4000 in a single terminal. The sheer quantity of vehicles discharged exceeded the transport capacity for local delivery, meaning that cars were discharged from the vessel quicker than they could leave the terminal.
Ultimately, supply and demand caught up – there was no significant terminal congestion for most of 2024.
Global RoRo Space Shortage
Most RoRo vessels operate in trades determined by the distribution needs of major car manufacturers. Despite their high and heavy decks, these carriers simply must load cargo as instructed by the car manufacturers. The result of high and heavy cargo was less capacity for cranes, trucks, and other mobile machinery from Asia.
Other trade lanes were also affected due to the high orders being delivered from major factories across Europe and North America. Therefore, cargo from smaller manufacturers – or dealers handling used machinery – were pushed down the priority list and shipped via alternative shipping modes such as lift on, lift off (or, if practical, via container or flat rack).
Although the trend has reduced recently, some machines remain containerised due to the cost benefits. Has anyone ever tried to pack a 20-tonne wheel loader—like a CAT 950—into a 40-foot-high cube container? It’s not a particularly fun (nor easy) job.
Reduction in Coastal Shipping Services
Due to carrier demand, the cost of vessel charters increased by up to 200% in some circumstances. Owners and operators were keen to profit from the global situation and often secured favourable terms on their vessels on risky long-term contracts.
Carriers using these chartered vessels were forced to shorten voyage times and focus on the most profitable cargoes to utilise the vessels better. Vessels calling Fremantle refused to accept coastal cargo because it would slow down the vessel operations by just a few hours.
Due to service omission, fewer port calls on voyages, and terminal congestion, some coastal services were reduced weekly to monthly. Transit time from Brisbane to Fremantle peaked at nearly 40 days in early 2023. Naturally, transit times like this gave new meaning to the term “slow boat,” for many customers, this service no longer made commercial sense.
Panama Canal Drought
The Panama Canal is an important structure built by the USA in 1904. Its engineering allows vessels to pass an 82km waterway across Panama – between the Atlantic and Pacific Oceans – where there is a massive 26m height difference in water levels. This canal allows for faster transit from the USA to Oceania compared to transiting around Cape Horn, the southernmost tip of Chile.
The locks require up to 190 million litres of water (fed by two nearby lake systems) for each vessel to pass. Typically, the passage will allow 36-38 vessels to pass through the lock system daily, but due to droughts, the number of vessels allowed through was reduced to 22 in December 2023 to reduce water consumption in the depleted lake systems. This created delays, vessel deviations around the Cape of Good Hope in South Africa, and a reduction in voyages from the USA to Australia.
For those carriers that chose to wait, the bottleneck on either side of the canal was massive, with hundreds of boats waiting for passage at the peak of the congestion. A Dutch-style bidding system was used to ensure passage priority was won by the highest-paying vessel. One such vessel topped its bid at a monstrous 3.98 million USD – ten to twelve times the typical cost! As usual, it’s the customer who pays – with passage costs and voyage delay costs worked into the following period’s ocean freight rates.
Currently, the Panama Canal’s delays have returned to normal but may be restricted if abnormal drought conditions prevail in the region. The canal’s revenue in 23/24 increased by 650 million USD to 5 billion USD, an increase of 15% despite a drop in tonnage through the canal.
Red Sea Closure
15% of the global seaborne trade passed through the Red Sea until October 2023. The Iranian-backed Houthi Rebels reportedly launched dozens of attacks against commercial vessels using drones, missiles and even a Mil Mi-17 helicopter. These attacks not only damaged vessels but resulted in the hijacking of Galaxy Leader – a prominent RoRo vessel operated by NYK Lines that is (along with its crew) still held off the port city of Hodeidah in Yemen 12 months later (October 2024).
The ongoing result of these attacks is the diversion of most commercial vessels around the Cape of Good Hope in South Africa. The adjusted route adds an additional two weeks to voyage times and disrupts trade lanes passing through the Red Sea to ports such as Aqaba and Jeddah. As a result, the port of Dammam is heavily congested with cargo originating from Asia, with destinations in Jordan, Lebanon, Turkey, etc.
Trans-Shipment Congestion
The flow-on effects of the Red Sea closure have created a pent-up demand for cargo space, and we are seeing shipping lines – just like they did during the early stages of the Pandemic in 2020 – increase their freight pricing structure rapidly.
For Australian cargo, we have seen increases of up to 300% in freight rates in the past 6 months alone for containerised cargo from China.
The demand for slots has created transhipment congestion in Singapore, Port Klang, Colombo and Dammam. Simply put, there aren’t enough vessels and trucks to handle the current freight volumes. With vessels sitting idle at anchorage waiting for a berth, we can understand why freight prices increase to compensate for the lack of asset productivity.
RoRo Space
Like most trends, when there is a peak, a trough typically follows.
RoRo shipping is no different, with space now available from Europe and the USA to Australia since early 2024. Capacity is also being added to the Australian coastal trade, with transit times from Brisbane to Fremantle returning to 11 days for some services.
While space on some services, such as Japan to Australia, is difficult to obtain, the market is expected to return to normal conditions in early 2025. At this point, we should see additional competition in the RoRo market that puts downward pressure on freight rates, too. Watch this space!
How NMT Can Help
NMT can provide consultancy, quotations, documentation, freight forwarding, transit insurance, customs clearance, landed costings and more – such as machinery washing, transportation, dismantling, repairs, and quarantine treatments can also be arranged if required.
Connect with NMT to explore how we can assist with your cargo requirements.
Call 13 SHIP (13 7447) or email au.sales@nmtshipping.com to learn more about our services and explore shipping options for your business.
