July 1 fast approaching
Over recent weeks, we have been hearing from shipping lines and contacts that the current trend of full capacity vessels is expected to drop off come the new financial year.
We understand that current volumes have been driven by many retail businesses looking to attract EOFY sales by luring customers in with "sale" prices. Commentators suggest that a V-shaped recovery that was initially hoped for (where economies bounce-back to pre-Crisis levels quite quickly) is now unlikely to happen because the return of consumer demand will be slower than initially thought.
In Australia, should the financial assistance schemes be stopped or wound back this may further prolong the recovery period. We are witnessing businesses now looking to restructure to cope with lower work volumes.
China - Update
Our sources from China have provided us with the following updates
- As at June 1 there were 14 confirmed local COVID-19 cases in 7 cities. There are 63 quarantined traveller cases in Mainland China. 43 cases in Hong Kong and 12 in Taiwan.
- According to the WTO trade statistics and outlook report for April 2020 the predictions are that global merchandise trading could reduce anywhere between 13% - 32% in 2020, with suggestions that under the right circumstances could bounce back 24% in 2021
- Based on a China Daily report of June 1, manufacturing activity in China sustained a steady recovery in May with the rally in domestic demand gathering pace. Analysts expected the manufacturing sector to continue to pick up over the coming months, but cautioned about the uncertainty over external demand and the pressure on employment. China's purchasing managers index for the manufacturing sector came in at 50.6 in May. It is third consecutive month for the index to stand above 50, the dividing line between expansion and contraction, after the plunge in February due to the COVID-19 outbreak.
- Xinhua press reported on May 30, that as of May 23, 98.4 percent of transport enterprises had resumed operation, according to Sun Wenjian, spokesperson at the Ministry of Transport. Freight volume had begun to increase year on year. Official data showed that logistics demand in China improved in April as economic activities recovered following easing epidemic containment measures. According to the Ministry, in the middle 10 days of May, the country's cargo throughput at ports and export cargo throughput both increased from one year ago, with that of container throughput close to last year's level, according to the ministry.
- According to Chinese Customs Announcement No. 69, effective June 1, if the importer or agent do not request Iron Ore Quality Certificates, Customs will release the imports once physical inspection has been done without further Lab testing. This new procedure will reduce the Customs clearance processing and time for importers.
- Yang Ming and Evergreen get support from Taiwan's Ministry of Transport through a T$30 bullion aid package. Support had previously been supplied to China Airlines and EVA Airways.
- According to Ministry of Transport of the PRC, effective June 1, China will tight restriction with overweight shipments and shippers will be the liable party for this restrictions.
Shipping lines continue to advise that current capacity is solid, albeit with managed capacity, and is expected to remain so for the rest of June. As for what July will bring time will tell - some lines we have spoken with suggest volumes will remain steady with some small troughs. Much will depend on consumer confidence in a future where so much is still unknown.
Freight Forwarders have also been reporting issues with cargo being rolled and delayed, whilst reduced capacity may have some impact here, most of the lines we addressed this with suggested that vessels missing connections due to weather was a contributing factor. The recent bad weather on both the east and west coasts of Australia may see some further disruption when these vessels return to their load / transship ports for their next south bound voyages. In cases of rolled cargoes these were usually picked up on the next sailing.
Being aware of what to expect will assist shipping lines in supplying the capacity needed to maintain efficient service levels. It is crucial that lines of communication between exporters / importers / forwarders and shipping lines need to flow freely. The lines advise there is vessel capacity available but knowing when to bring that on line is based solely on the knowledge of expected bookings.
We will keep you informed of any further developments as COVID-19 evolves
For any enquiries, please contact us on +61 2 9771 6611