The COVID-19 pandemic caused major disruptions to the international freight supply chain which anyone who has been exporting for the last 3 years would be familiar with. Although 2022 has seen some improvements, conditions are still a long way off those prior to the pandemic.

S&P Global Market Intelligence reports that year-on-year growth of exports value is slowing down in most of the top 10 economies, except for Brazil, which marked 17.6% year-on-year (y/y) growth and the United States, reaching over 20% y/y growth for the sixth month in a row. On the other hand, the largest year-on-year drop in September was noted by EU (external trade at -6.5% y/y) and Japan, marking exactly the same negative year-on-year growth as in August (-0.9%).

Looking at the most recent results in the imports value, the highest growth in September 2022 was noted by Brazil, with imports increasing by 24.9% y/y. India, marking over 40% growth in July and August, has slowed down to 13.9% y/y in September.

As clearly demonstrated by the Ukraine war, we live in a dynamic and unpredictable world where market conditions are ever-changing. It’s fair to say that anyone in international freight and logistics would love to have a crystal ball, but although there is still uncertainty most agree that conditions will stabilise in 2023 and that prices should normalise to comparable pre-pandemic levels.

Air freight

Air freight is an essential freight method for highly perishable product.

Since the pandemic commenced the air freight industry has seen enormous changes with reduced operators, reduced services and capacity, and significant increases in rates. The war in Ukraine affecting energy prices, subdued economic outlooks around the globe softening consumer demand, and a surge in passenger demand as international travel recommences have further complicated the recovery of airfreight services and pricing structures.

As at mid-December 2022 outbound flights from Australia had increased to 1541[1]. This is approximately 70% of the flight capacity in the same period to December 2019 but nearly 3 times more than December 2020 when flights hit a 3-year annual low of 526.

Importantly in recent months there has been an increase in wide bodied aircraft particularly from some of our key trading partners in Asia.

However due to high passenger utilisation on international flights there is not the cargo capacity as previously experienced pre-pandemic. This is expected to ease as the demand for overseas travel starts to level out which means cargo capacity in passenger planes is likely to increase.

Furthermore, as the airline industry becomes more confident with the post-pandemic recovery it is expected that more flights and additional routes will be added. Changes to trading relationships and geo-political relations will no doubt be reflected in new routes or a slower return to capacity on some pre-pandemic routes.

The effect of recent changes with China’s borders reopening is also unknown although airlines services are expected to increase incrementally as confidence increases. Increasing COVID-19 infections in China are also expected to cause disruptions to supply chains.

Prices will stabilise as supply and demand balance out. Increased reliability in international manufacturing, a reduction in supply chain disruptions (such as port congestion) and a decline in the cost of sea freight will continue to see a shift of some products from air to sea freight, noting that some non-traditional air-freight products, such as pharmaceuticals, have been utilising air freight rather than sea freight.

According to World ACD, from 28 November to 4 December 2022 pricing for the Asia-Pacific region fell by 1% and is 33% lower than the same period in 2021.

• Global airfreight rates are 26% lower than what is normally expected over this ‘peak season’ period. However, current average rates of $USD3.29/kg are still significantly above pre-COVID levels, due largely to the cost of jet fuel pricing.

Bookings on spot rate pricing and short-term (3 months or less) rate agreements are increasing. Xenata reports 44% of airfreight shipments are now based on spot rates, a 10% growth year on year.

Importantly, the innovation and collaboration, that exporters forged through necessity during the pandemic should, hopefully, continue. The hastened adoption of technology and on-line processes during the pandemic has also improved processes in some parts of the supply chain, particularly in areas where paperwork was still being utilised rather than on-line forms.

What is yet unknown is the pressure on air freight cargo to reduce their carbon footprints. It is expected that some cargo will swap from air to sea, where feasible, especially with newer ships being more energy efficient. Changes to reduce carbon footprints along the supply chain are likely in the future but whether the appetite is there to address this in the short term is unknown but given current global economic challenges businesses may have some leeway.

Switching to sea freight is a somewhat of a moot point for highly-perishable cargo however innovations in packaging to decrease packaging weight and increase unit weight to volume ratios are already being implemented. However, the use of post-harvest treatments and tools such as modified atmosphere packaging may enable some perishable products to make the switch from air to sea, especially on shorter voyages.

IFAM (International Freight Assistance Mechanism)

IFAM was a Federal Government targeted support initiative to assist exporters access international markets during the COVID-19 pandemic. IFAM connected high value perishable produce and goods of national importance with over 60 international destinations around the globe.

IFAM ceased on 30 June 2022 with a new Export Supply Chain Service (ESCS) delivered by Austrade starting on 1 August 2022.

ESCS coordinates insights to help stakeholders navigate supply chain issues while connectivity to international markets remains volatile and capacity diminished and expensive. This includes sharing insights with agribusinesses and exporters, assisting exporters to access Austrade’s Global Engagement Managers and the Tradestart network and assisting exporters on supply chain issues within Federal Government agencies, and state and territory governments.

Further information on the ESCS visit: The Export Supply Chain Service   – Austrade

Sea Freight

Sea freight continues to see disruptions to the supply chain although major congestion at some global ports is easing, however Christmas and Chinese New Year consumer demand had caused some seasonal issues. Like air freight, sea freight will be impacted by rising fuel costs, subdued consumer demand for goods, and inflation. S&P Global Market Intelligence projects global real GDP growth to slow from 5.9% in 2021 to 2.9% in 2022 and 1.5% in 2023.

China is experiencing a wave of COVID-19 infections, and this is expected to cause disruptions in manufacturing and delays in supply chains which will have flow on effects around the globe.

Commodity volumes are likely to decline due to both the economic softening and consumers transferring their post-pandemic spending from consumer goods to experiences such as travel, dining out and entertainment.

Reduced demand however is likely to see greater competition for sea freight cargo. Some global routes are already reporting charge rates similar to pre-pandemic levels, whilst others have only dropped minimally and are still well over 2019 levels.

Between 28 November and 1 January 2023, 105 reported sailings will be cancelled across major shipping lanes which represents a 14% cancellation rate on scheduled sailings. With the softening of global markets carriers continue to actively manage capacity in line with demand in a bid to reduce downward pressure on rates.

According to the Export Supply Chain December Snapshot, Asia-Oceania routes are lagging behind other parts of the world in both reliability of schedule sailing and days behind schedule. Average global delays for late vessels fell in October 2022 to 5.56 days whereas Oceania region delays increased in October 2022 from 7.5 days to 7.9. Asia-Oceania schedule reliability is nearly half that compared to global reliability: 26.1% compared to 52%.

What is evident as we embark on a new year is that there is still a large degree of uncertainty in the global supply chains however there is optimism that the volatility evident over the last few years will reduce.

Productivity Commission report in to Australia’s Maritime Logistics System

The Australian Government Productivity Commission released their report in to Lifting productivity at Australia’s container ports: between water, wharf and warehouse on 9 January 2023.

The report examined the performance of Australia’s maritime logistics system, long-term trends in system performance, competition, industrial relations, infrastructure constraints and technology uptake

The key points of the inquiry were:

• Higher productivity at Australia’s container ports is achievable and would deliver significant benefits.
• Infrastructure needs in the maritime logistics system are being addressed.
• The adoption of technology at Australia’s container ports is broadly in line with international practice.
• Workplace arrangements lower productivity — incremental changes to the Fair Work Act are needed.
• Lack of competition in some parts of the maritime logistics system means consumers pay too much
• Concerns about domestic shipping capacity and training can be met through modest measures.

The full report can be found at:

Inquiry Report – Australia’s Maritime Logistics System – Productivity Commission (pc.gov.au)

[1] Sourced from Export Supply Chain Services Snapshot #10