The global economic slowdown continues to put pressure on both air and sea freight carriers’ volumes and revenues. For importers, this is positive when it comes to rate levels and capacity availability. Hopefully, the Rand continues with its recent recovery, which will help drive down landed costs in the second half of 2023. This will give some positive relief to importers and consumers and will be most welcome, considering the current economic environment.
We will continue to work very closely with all our partners and service providers, to ensure that all your shipments are delivered as efficiently as possible.
The impact of the following key factors needs to be continually assessed and considered:
- Stabilisation of freight rates
- Lower fuel prices
- Improved schedule reliability
- Struggling rail service and port disruptions
- Stable airfreight market
Sea freight update
In general, the market remains relatively stable from a rate, capacity, and schedule reliability perspective. Disruptions across Transnet’s rail and port operations are arguably the biggest concern right now from a supply chain perspective. Performance has been below par and only time will tell if Transnet can effectively overcome its challenges. This all coincides with the peak citrus export season, which will add further pressure to port operations and backlogs.
The demand has started to pick up slightly on the Far East trade with some carriers reporting an increase in bookings over the next few weeks. Capacity availability on the rest of the trades remains stable with the odd disruption experienced because of port omissions. We expect demand to pick up from Europe in July as suppliers push to orders shipped before the summer holiday period. Carriers have had to reduce their capacity on vessels routed through the Panama Canal because of lower water levels. Low water surcharges have been implemented by some carriers because of the current situation.
With our expanded global network, we have access to additional capacity and alternative routings, which strengthens our service offering to our clients.
It is encouraging to see global schedule reliability continuing to improve. Berthing delays across South African ports have been experienced because of operational challenges caused by equipment failure and weather conditions. Some vessels on the Europe-South Africa trade have been delayed and carriers have decided to omit certain ports in some instances. There have been disruptions to port terminal operations at some of the USA West Coast ports due to the ongoing dockworker wage negotiations.
According to the latest Sea Intelligence schedule reliability report, global schedule reliability improved by 1.7% to 64.2% and average delays dropped to 4.34 days for late vessel arrivals. See the graphs below.
Figure 1: Global Schedule Reliability
Figure 2: Global Average Delays for Late Vessel Arrivals
Our rates have remained stable across most trades with a few reductions passed on the Far East and Middle East trades from May. The current capacity availability, subdued demand, and softening bunker prices have contributed to the market rates remaining range bound. Carriers are in favour of forty-foot (40ft) containers over twenty-foot (20ft) containers. Some carriers have implemented weight restrictions and/or over-weight surcharges (OWS) for 20ft containers on the Far East trade. Bookings for non-operating reefer (NOR) containers are receiving priority status from some carriers as they try to incentivize the repositioning of their equipment back to South Africa to support the current citrus export demand. This has helped drive down less-than-container-load (LCL) freight rates.
SCFI (Shanghai Container Freight Index):
The below graph demonstrates the freight rate movement per TEU ex-China to South Africa:
Due to our long-standing strategic relationships throughout our global network, we continue to secure very competitive pricing relative to market.
Air freight update
The airfreight market has normalised for the most part. There were some disruptions at London’s Heathrow Airport in May resulting in cargo movements being delayed and flights being cancelled.
There is sufficient capacity to accommodate demand. An increase in passenger travel has added belly capacity to the market. Except for cargo moving from London Heathrow in May, there have been no major backlogs and cargo has been moving smoothly from the various trade routes.
Our airfreight network enables us to continue offering flexible solutions that meet our clients’ import requirements.
Service levels are being maintained and shipments for the most part are moving timeously.
We encourage you to provide your required arrival dates in advance for us to offer you optimal routings and rates to meet your requirements.
Rate levels have remained stable or have come down slightly. Rates remain very competitive and the global economic slowdown and decrease in global jet fuel prices have also contributed to the softening of rates.
With our expanded network we are well-positioned to offer a variety of options to meet our clients' airfreight requirements.
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