The Ongoing Disruptions to International & Domestic Logistics Networks

One of Australia’s leading Defence logistics specialists, Customs Agency Services (CAS), recently spoke to the DTC regarding the ongoing disruptions to international and domestic logistics networks. Mark Callus, one of CAS Director’s, revealed that while the logistics challenges that began due to COVID in early 2020 have already further deteriorated recently, the next 4 months until Christmas 2021 are expected to see even more freight cost increases and transport delays.

With Australia’s borders having been effectively closed to passenger travel since 20th March 2020, import and export air freight rates and transit times increased almost overnight. Additionally, COVID outbreaks globally in 2020 slowed down the rate of manufacturing output, which further exasperated supply deficiencies.

The sudden lack of passenger flights created a sudden loss of cargo capacity in their belly holds, which was subsequently only partly restored by additional freighter aircraft and ‘preighter’ aircraft (passenger aircraft carrying only freight) being added to the network.

So, in some ways, international importers and exporters that have been utilising airfreight over the past 18 months, have now reluctantly already factored in ongoing higher airfreight pricing and longer transit times.

However, Australia’s passenger intake was again halved in September 2021 from 6070 arrivals per week to just 3035 arrivals per week. This resulted in even less air freight capacity in and out of Australia, and this is particularly true of the USA where American Airlines have now suspended all flights between the two countries. It’s also now thought that the postal services from the USA to Australia may also be suspended, due to sudden high costs and delays.

New COVID outbreaks, particularly in Asia, industrial strikes across both Australian wharves and domestic transport operators, and many ocean freight rates quadrupling over the past 6 months means that air cargo capacity is under further pressure and airfreight rates are rising yet again. Particularly as the industry ramps up towards the Christmas peak shipping period. Fortunately, Australia is hopefully on track to have 80% of its eligible population double-vaccinated sometime during December 2021 and many other countries will hit that target in November 2021. Singapore, for example, is already at 80% double vaccinated.

It is anticipated that from January 2022, Australia and many other countries will once again open borders for both business and holiday travel.  More flights will result in more cargo capacity and reduced freight rates and transit times.

Even though a possible return to the low air freight rates of pre-COVID could take several years to achieve, a mid-point between current and pre-COVID rates seems more likely and would be a welcome relief.

Fingers crossed that the world does indeed hit the 80%-plus targeted vaccination rate and that there are no new COVID variants. The world also needs to both morally and economically consider how it can fast-track vaccination in third world countries, many of which are struggling and need assistance, and then deliver a fast-tracked solution.

Unlike air freight, ocean freight pricing and space on vessels throughout 2020 remained relatively unaffected. However, that all changed in 2021 and sea freight bookings are now also experiencing similar rate increases and transit time delays that air freight bookings suffered since March 2020.

The logistics industry is now experiencing major cost increases and delays for inland truck and rail movements along with a global shortage of containers and shipping vessels. Ocean freight prices for 40ft containers from China to the USA and Europe have increased by 500% over the last 12 months, with the cost of shipping a 40ft container now exceeding USD 25,000.

When the price of shipping that same 40ft container from China to Australia is comparatively cheap at USD 10,000, many shipping lines do not see the value and financial return in positioning such high demand vessels and containers into the Australian market. This further stretches Australian capacity and pricing pressures.

The recent Delta strain resurgence across the globe has further delayed the movement of ocean freight globally and any hiccup or delay at the port unleashes a domino effect across all other ports. For example, there are 2.4 million containers sitting on ships at anchor globally, waiting to berth due to congestion.

Additionally, the world’s largest shipping port, Shanghai, was virtually locked down from the 12th to 14th of September, due to a major typhoon, which will further disrupt global shipping delays leading into Christmas.

Unfortunately, the current global shipping backlogs and bottlenecks are not expected to return to near normal until mid-2022. New container production is under way, as is new vessel capacity – however the impact will not be felt until the second half of 2022. At this stage, it is expected that ocean freight rates and transit times will only begin to settle somewhere between current levels and pre-COVID levels, sometime mid-2022.

The soaring shipping costs, surcharges and delays, has now resulted in the Australian Competition and Consumer Commission (ACCC) announcing on 13 September 2021, that they have launched an investigation into the shipping lines ‘’Anti-competitive behaviour”.

From a National Australian Defence, Aerospace and Space Industry perspective, we all need to factor in longer transit times and higher logistics costs for all components sourced from overseas, or that need to be returned overseas for repair.

Australia is rightly pivoting to reduce our reliance on overseas supply chains and encourage and support a Sovereign Australian Defence capability. However, the reality is that the global Defence industry is highly interconnected and the global movements of componentry, is unavoidable.

Ongoing COVID lockdowns in Australia’s two most populous states, NSW and Victoria, has also resulted in domestic Australian Logistics delays.

Full visibility of your global and domestic logistics chain and a close proactive engagement and support from your logistics providers, is now more important than ever. So too is closely monitoring your current and projected inventory levels and considering having buffer inventory on hand – it seems for the time being, Just In Time (JIT), is just too risky.

Logistics risk and opportunity is now a board room conversation with most businesses globally. The right freight provider can be a key driver in delivering complex programmes on time, on cost and with full compliance.

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Customs Agency Services

Website: caspl.com.au
Phone: +61 08 8354 2221
Email: [email protected]

Customs Agency Services has a proven reputation as a leading provider of world-class customs and logistics services. Since 1976, CAS has worked diligently to secure its position as one of Australia’s most progressive international and domestic customs and logistics service providers. We are a proud locally owned company that provides cost-effective, reliable services to companies of every size. At CAS, we are capable of competing with multinational organizations and meet variations in market demands head-on. We offer innovative, trustworthy tailored solutions to move all standard and time-sensitive, defence, project, food and e-commerce cargo to destinations worldwide at competitive rates.