We would like to provide you with an update on current developments impacting the logistics industry and international trade across both air and sea freight. The outlook, unfortunately, brings little cheer to traders or service providers engaged in international trade logistics and supply chain management.
Middle East — A Reality Check
There is considerable commentary across online platforms and industry media regarding alternative access routes to and from ports in Oman and Saudi Arabia, including land bridging freight into the UAE and elsewhere across the Gulf. While these options are achievable in principle, a measured reality check is warranted.
Practical considerations around trucking capacity, the carriage of perishables, dangerous or restricted goods, and human resource allocation to transport all require careful assessment. Customs and border clearance obligations — including cargo reporting and transit requirements — must also be addressed, as must the question of who carries the risk and absorbs the additional costs involved.
These are solvable problems, but they require a realistic timeframe for policy and process implementation across a range of public and private sector organisations.
Sea Freight
Sea freight across the Middle East remains significantly constrained. Shipping lines are now pivoting their assets to alternative ports in and around the region, focusing on vessel interconnectivity — either independently or in concert with other carriers.
Sea transport within Europe, Southeast Asia, and the Americas, while not as acutely affected, will not remain immune. Crew rotation demands and the ever-increasing cost of fuel will continue to find their way into bunker surcharges and elevated freight charges across these trades.
For Australian importers and exporters, access to shipping lines will remain available — however, within a materially changed market. Vessel sailings, rotations, and routings are altered, and cargo will move under different conditions than those previously experienced. Contracts of sale and carriage will need to reflect this new reality, with particular attention to monitoring and clarity around liability for time delays and additional costs arising from changed routings or transhipments — all of which carriers are entitled to implement under their contracts of carriage.
Nothing will be as it was for the foreseeable future.
Client relationships with overseas commodity suppliers and recipients will now be a key factor in problem-solving when transport issues arise, and in determining how liability and insurance obligations apply. Cost tracking and cash flow management are now business imperatives. Increased sea freight charges and changed shipping operating patterns should be anticipated accordingly.
Air Freight
Air freight capacity into the Middle East is highly constrained. Major carriers based within the region are taking steps to protect their assets — through out-of-country storage or significant dispersal within country. Most international carriers have also scaled back operations in the region for a range of sound commercial and reputational reasons.
Carriers operating outside the conflict zone continue to offer alternative routing structures to airports and destinations beyond the affected area. Air freight between Australia and Europe, for example, retains a variety of connectivity options via Southeast Asia, Africa, and the Americas. These extended routings naturally carry increased freight charges, driven by additional capacity requirements and elevated fuel costs — however, they offer a higher degree of predictability in terms of transit times and delivery.
As with sea freight, client relationships with overseas commodity suppliers and recipients will be central to effective problem-solving as transport challenges arise.
Australia
Road Freight
Notwithstanding recent Federal Government intervention on excise rates and other road charges, there is general consensus across the industry that any resulting change to domestic surcharges will be minimal at best. Fuel surcharge notifications from transport operators continue to be issued with a validity period of just seven (7) days, and currently range from 32% to 44% of carriers’ base cartage rates. These surcharges are not expected to decrease.
As previously noted, surcharges have been a feature of the international logistics industry for many years — most notably bunker surcharges applied by shipping lines and fuel surcharges applied by airlines. With volatile and fluctuating fuel prices now embedded in the domestic environment, it is no surprise that similar arrangements have become a fixture of domestic carriage.
Cable International continues to work across all transport options to provide timely information and commentary on international cargo handling operations. If you have any concerns about how current conditions may affect your shipments or costings, please do not hesitate to contact a member of the Cable International team.
