Low Freight Rates in Turbulent Times

Yesterday's edition of SkyNews?Business Weekend?featured prominent importer / retailer (Anthony Scali, Managing Director -?Nick Scali)?outlining the significant cost savings able to be passed on to consumers with the lowering of international shipping freight rates.

While tempering this enthusiasm with a prediction of freight rate increases in the months ahead (refer to the below commentary), I had the opportunity in the same story to share concerns about other inflationary impacts in context of rapidly increasing?Terminal Access Charges and ancillary?fees paid to stevedores and empty container parks that exceed?$600 million per annum.

Data compiled by Freight & Trade Alliance (FTA) and the Australian Peak Shippers Association (APSA) will be presented to the Federal Government as evidence of this claim.

FTA and APSA are escalating advocacy for regulation, as also recommended in the Productivity Commission's inquiry of?Australia's Maritime Logistics System, to address this cost recovery model imposed on transport operators (both road and rail) who have no ability to influence service or price.

SkyNews story available?HERE?(starts 35min:25sec ends 41min:22sec)?

COMMENTARY ON FREIGHT RATES

After years of record high freight rates leading to multi-billion-dollar profits for foreign owned shipping lines, it is now a welcome relief for importers and exporters to see freight rates significantly reduce.?

But how long will it last before we see the pendulum swing again in favour of the carriers??

We imagine that shipping lines will look to again take control of the situation within alliances to increase blank (cancelled) sailings by agreement. In a period of adverse economic times and a corresponding reduction in demand, this appears to be how major shipping lines are remaining confident that rates will not fall below costs.?

If the contentious EU Consortia Block Exemption Regulation is renewed and at an Australian level, the Part X of the Competition and Consumer Act is retained for an extended period before its inevitable repeal, we can expect a bounce in spot rates in the months ahead.?

Recent developments would suggest that shipping lines will fiercely protect their exemptions from competition law. Rather than jeopardise the continuation of broader Block Exemption privileges, we witnessed the stunning announcement of a major split in a global shipping line consortium. Perhaps this was a pre-emptive, and arguably pragmatic decision, noting that this alliance was named by the EU Commission as breaching the 30% market share limit.?

Importantly, the ongoing turbulent operating environment places an increased dependence on freight forwarders to provide?contract cargo which shipping lines generally prioritise for loading over spot rate cargo.

Continuity of professional logistics services also includes the ability to seamlessly move between shipping lines to achieve competitive rates, ascertain equipment availability, forecast capacity restraints, manage domestic transport requirements?as well as meeting cross-border customs and biosecurity needs.