Locally, we will be watching the South African Budget Speech with great interest, especially on what financial support is provided to Transnet. Pending permanent group executive appointments at Transnet are also on our radar with hopes that a new CEO and CFO can drive the turn-around of the rail and port operator's financial and operational performance, boosting the economy and investment confidence.
The impact of the following key factors needs to be continually assessed and considered:
- Blank sailings on Far East trade
- Cargo rollings
- Strikes in Germany and France
- Transnet
- Fuel increases
Sea freight update
The start of 2024 has not been smooth sailing for the sea freight market, but we are starting to see pockets of improvements. The number of vessels at anchorage, most notably outside Durban port, has come down. Equipment challenges and strong winds continue to hinder the port's operations and Transnet still has an enormous amount of work to do to bring about stability.
Time spent for vessels at anchor and berthing are still too long, but efforts to improve the situation have been made and we can only hope that we will continue to see progress.
Capacity:
Far East trade faced expected capacity constraints and disrupted sailing schedules due to pre-Chinese New Year period. Carriers had to deal with a high number of shipment roll-overs and backlogs both at loading and transshipment ports.
Capacity availability for February has been reduced by the carriers with all carriers scheduling at least one blank sailing post the Chinese New Year and numerous vessels are fully booked until the end of February.
India and the Middle East have also experienced some capacity constraints, but the situation is not as severe compared to the Far East. We have experienced constant capacity availability on the European and USA trade to South Africa.
Sailing schedules:
The disruptions to sailing schedules continued throughout January and the same is expected for February and into March. Vessels returning from South Africa to the various trades have all been delayed because of the delays across our ports.
Carriers did omit some of our ports in January and re-routed shipments via feeder services which extended lead times. Carriers were also forced to blank out some inbound sailings at the last minute due to delays experienced on their services. This also resulted in cargo awaiting transshipment to be delayed by two to three weeks.
Strikes across French ports will commence from 16 February and will result in delays to cargo movements and backlogs. Cargo can be moved via alternative ports in neighbouring countries. Cargo transshipping via Port Louis has also been delayed because of missed connections into South Africa and disruptions caused by the cyclones in January.
We still encourage clients to factor in additional lead times of two to three weeks. Vessels waiting on anchor outside our ports are still experiencing delays of up to 10 days with Durban’s Pier 2 at times exceeding 15 days.
Global schedule reliability declined at 56.8% according to the latest Sea-Intelligence report. The average delays for late vessel arrivals increased to 5.35 days. We expect schedule reliability to decline further in the coming weeks.
See graphs below.
Figure 1: Global Schedule Reliability
Figure 2: Global Average Delays for Late Vessel Arrivals
Freight rates:
Rate levels have softened on the Far East trade from January, but not by any significant quantum ($50-$100/TEU). Carriers will assess their booking pipeline post the Chinese New Year period before deciding on further rate reductions, but we do expect rate levels to soften into March.
Some carriers will start to be more aggressive with non-operating reefer (NOR’s) freight rates as they push to re-position their equipment back into South Africa for the start of the citrus reefer season. India and Middle East rates have remained elevated and the USA trade has remained relatively constant.
Rate levels on the European trade were reduced in January and will remain relatively stable for the rest of quarter one. Carriers have maintained their port congestion surcharges for the time being.
SCFI (Shanghai Container Freight Index):
The below graph demonstrates the freight rate movement per TEU ex-China to South Africa:
Air freight update
The air freight market experienced some turbulence in January and certainly more than we had become accustomed to over the past year. The reason for the disruption across various trades can be attributed to weather conditions, increase in demand leading up to the Chinese New Year, effects of the Red Sea situation and strike action in Germany. We expect the market to stabilise again post Chinese New Year.
Transit times:
Disruptions and flight cancellations in Germany impacted shipments resulting in departure delays and backlogs. An increase in demand for capacity ex-China and Far East also resulted in some carriers experiencing backlogs.
We are encouraging clients to provide their required arrival dates in advance for us to offer optimal routings and rates to meet their requirements.
Freight rates:
Rate levels did increase on the Far East trade, but we anticipate rate levels to soften again for the remainder of quarter one. Our rate levels ex-Europe and the USA remain very competitive, and we have numerous carrier options at our disposable.
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