Taiwan-based freight company, Dimerco, has released a new freight market report on the Asia-Pacific region.
It outlined several economic and political changes which stand to impact the industry.
Temporary factory closure
Chief among the report’s covered topics was the news of then-expected factory closure across China due to the Lunar New Year, which created backlogs in Southeast Asian and South Korean markets. In anticipation of these closures, some shippers in these areas secured bookings weeks in advance.
Kathy Liu, Dimerco Vice President of Global Sales and Marketing, commented on these closures.
“The Lunar New Year has intensified the need for proactive logistics planning,” she said.
“Factories across Asia are gradually resuming production, but recovery will be staggered throughout February.”
Freight rate changes
Other news assessed freight rates which have been ostensibly rising post-Lunar New Year. According to the report, spot rates are rising by 40 per cent year-on-year as global idle tonnage reaches a record low of 0.7 per cent.
Additionally, freight rates on key Trans-Pacific routes in the US’ East and West coasts were stabilised following an averted strike between the ILA and USMX, who together reached a tentative six-year long agreement. The report speculates that the situations greatly contributed to an 8.56 per cent drop in the Shanghai Containerised Freight Index (SCFI).
Route stability increases
On top of the regional route stability, the recently developed ceasefire in the Middle East has reportedly reduced shipping risks near the Suez Canal, potentially cutting transit times by up to three weeks. However, insurers remain cautions and have delayed a full-scale recovery of premiums.
If the Suez Canal reopens, as a result of this ceasefire, it is expected that 2024’s oversupply in the industry will carry forward to this year – as vessels will not need to route via the Cape of Good Hope – and significantly impact rate dynamics.
Dimerco Express Group Vice President – Ocean Freight, Alvin Fuh, shared his thoughts and speculations on operations in the Suez Canal following news of the ceasefire.
“A key question is whether the Suez Canal will recover and if shipping rates will return to pre-war levels,” he said.
“Resuming routes through the Suez could cut transit times by two-to-three weeks and add significant capacity, but rates might not drop as quickly as expected.
“Carriers are likely to proceed cautiously, testing the route with smaller-sized vessels first to ensure safety. Until now, insurers are still hesitant to support full operations due to uncertainty about the cease-fire’s stability. As a result, Suez recovery may be gradual, with changes possibly extending into end of Q1 or even Q2 of 2025. If Cape diversions continue, long term fixed rates–especially for TPEB contracts due in April–could stay higher than in 2024.”
Capacity pressures in high-tech exports
The Asia-Pacific region is feeling capacity pressures in high tech-exports, largely due to Taiwan and South Korea’s roles as critical hubs for the production and distribution of artificial intelligence chips and semiconductors. Their respective positions drive strong demand for air and ocean freight in the region.
Alliances disrupt the status-quo
Finally, having come into effect on 1 February, a number of maritime trade alliances are expected to redefine capacity allocation, impacting Asia-Europe and trans-Pacific rates.
Fuh also shared comments on this matter, noting the Asia-Pacific region’s trade strength in spite of these changes.
“Shippers should monitor rate adjustments closely as alliances stabilise capacity across major trade lanes,” he said.
“The Asia-Pacific region remains resilient despite these challenges.”
In other news, Australia’a STG Global announced a merger.
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