News

From the MD’s Desk
From the MD’s desk – Glenn Allison

Welcome to the June edition of the Orbit Logistics Newsletter

Welcome to winter, and to the June 17 edition of our newsletter, in which we have a number of relevant articles for your information on some hot topics:

• FTA updates
• Ultra large container ships entering the market & other shipping line developments
• Port of Melbourne’s advice re the increase in port fees, which will be passed onto the shipping lines, and will end up with the importers/exporters
• CFMEU union’s stance on asbestos imports
• Market trends
• US destination airfreight security measures that impact here at origin

Also, please don’t forget that Packing Declarations that are on old templates will be rejected (and delay import customs clearance) from June 16^th. We are still seeing quite a few of the old version templates and we are working with customers to ensure they get the message back to their suppliers as a priority.

The new templates are:

Packing Declaration new template July 2016.docx

Annual Packing Dec new template July 2016.docx

Best Regards

Glenn Allison
Managing Director

HONG KONG-AUSTRALIA FTA NEGOTIATIONS BEGIN

NEGOTIATIONS on a Hong Kong-Australia free trade agreement (A-HKFTA) were officially launched today (May 16).

Australian trade minister Steven Ciobo said an FTA with Hong Kong would help Australian exporters in the market and also help support Australia’s continuing transition to a broader-based economy.

“As a separate customs entity, Hong Kong is in an unparalleled position to act as gateway to China and the rest of the world,” Mr Ciobo said.

“Hong Kong is a trendsetter in the region, demanding high-quality products for its sophisticated and wealthy market – for Australian food, beverages and fashion exporters, Hong Kong has long been a showcase market not only to engage domestic consumers, but buyers from the Chinese mainland and across the region.”

Mr Ciobo went on to say Australia was seeking a “modern” FTA with Hong Kong, with a focus on access for Aussie services.

“Australia’s services export industries, including legal and financial services, as well as education and transport services, will benefit from the openness for services we expect an FTA to bring,” he said.

“During negotiations, I continue to invite stakeholders to provide their views on the specific impediments to trade and investment that the A-HKFTA could address.”

Hong Kong is also an important base for Australian businesses overseas, with more than 600 Aussie businesses in the region, according to Mr Ciobo.

According information provided by the Department of Foreign Affairs and Trade, the Hong Kong Special Administrative Region of the People’s Republic of China was Australia’s 14 largest trading partner for merchandise in the 2015-16 financial year.

By far the largest merchandise export to Hong Kong by value was gold, with $5.6bn worth of the precious metal exported to the region over the past financial year.

Other major Australian exports over the period included edible products and preparations, worth $367m; telecom equipment and parts, worth $328m; and fruit and nuts, worth $198m.

At the top of the list for merchandise imports from Hong Kong was telecom equipment and parts, worth $97m for the period.

Other notable imports included printed matter ($65m), jewellery ($50m) and monitors, projectors and TVs ($50m).

Continuing to glean information from DFAT sources, we find that Hong Kong’s GDP was US$316.1bn in 2016, with a per capita GDP of US$42,963.

OOCL RECEIVES FIRST ULTRA LARGE CONTAINERSHIP

ORIENT Overseas Container Line named its first ultra large containership recently in South Korea, as vessels over 20,000 teu continue to gradually enter the market.

With a carrying capacity of 21,413 teu, OOCL Hong Kong marks “an important milestone for us”, said CC Tung, chairman of Orient Overseas (International) Limited, the shipping line’s Hong Kong-listed parent company.

The 400 m long, 58.8 m wide ship, built at Samsung Heavy Industries, will be the third ULC exceeding 20,000 teu to come into operation this year. The 20,600 teu Madrid Maersk and 20,170 teu MOL Triumph were delivered in April and March respectively.

Apart from the OOCL Hong Kong, the Hong Kong-based carrier has another five ships of a similar size on order — all set to be delivered by SHI in 2017.

Speaking to Lloyd’s List during the recent Singapore Maritime Week, OOCL chief executive Andy Tung said that the company would stick to the delivery schedules for those five vessels, despite the delay of six 20,000 teu-class ships from 2018 to 2019 recently announced by its Ocean Alliance partner Cosco Shipping Lines.

CC Tung said at the ship christening ceremony last week: “While our industry seems to have the knack to outdo one another in building larger containerships relatively quickly these days, faced with increasing competition and unending pressure on costs, we need to take the bold step in operating larger size ships of quality and high efficiency in order to stay relevant and compete effectively as a major container shipping company.”

According to Clarskons, the industry’s total ULC orderbook currently stands at 56 units — 40 boxships of or above 20,000 teu, six of 19,150 teu and 10 of 18,000 teu — with expected delivery between 2017 and 2020.

The OOCL Hong Kong will be serving the Asia-Europe trade lane on the LL1 service in a 77-day round trip.

The port rotation will be Shanghai, Ningbo, Xiamen, Yantian, Singapore, via Suez Canal, Felixstowe, Rotterdam, Gdansk, Wilhelmshaven, Felixstowe, via Suez Canal, Singapore, Yantian, Shanghai.

PORT OF MELBOURNE REFERENCE TARIFF SCHEDULE

Port of Melbourne (PoM) has released its Reference Tariff Schedule (RTS) which lists the Prescribed Services Tariffs to apply for the 2017-18 financial year commencing on 1 July 2017.

The RTS details all of the Prescribed Services which are defined by the Pricing Order under section 49 of the Port Management Act (Vic) 1995.

Port charges and fees will increase by 2.1% in 2017-18 (except for international full outward containers) and this increase is based on the annual change in the Consumer Price Index (CPI) for the 12 months to March 2017. The CPI used is the All Groups Index Number (weighted average of eight capital cities) published by the Australian Bureau of Statistics.

International full outward container wharfage rates have been reduced by 2.5%. This represents the second of four years of planned reductions.

CFMEU CRITICISES LACK OF ASBESTOS PROSECUTIONS

THERE are calls for authorities to take a harder line on those found to have imported asbestos.

The formidable Construction, Forestry, Mining and Energy Union has latched onto figures showing the Australian Border Force has made 40 detections of products laced with the substance this year.

Construction firm Yuanda last year imported asbestos-tainted products from China but has not faced charges.

The information was revealed at a recent Senate Estimates hearing.

“Border Force can’t inspect every shipment which comes into the country and that’s why offenders should have the book thrown at them in order to send a message and change behaviour,” said Dave Noonan, CFMEU construction and general national secretary.

“If this soft touch approach to prosecutions continues we’ll have no choice but to consider banning certain building products from certain countries on health and safety grounds until Minister Dutton is willing to take decisive action.”

The CFMEU recommended in its submission to the economics committee’s non-conforming building products inquiry earlier this year that offences in the Customs Act 1901 be reformed to allow for more successful prosecutions.

Comment has been sought from the Australian Border Force.

APAC FORWARDING MARKETS TRENDING UPWARDS

FORWARDERS and carriers expect air and ocean volumes on the major East-West trades to continue to grow in the coming months, according to the latest survey results for the APAC Forwarding Index, with APAC forwarding markets seeing their best run of demand growth for at least two years.

The survey results, compiled by consultants Mike King and Cathy Roberson, will be used to help create a new APAC Forwarding Index that will be published later this year.

Ocean freight

The second of a series of monthly survey results confirm that after a solid start to 2017, which has seen ocean freight markets buoyed by healthy demand growth, survey respondents for the May Index broadly expect stable volumes or further traffic expansion in the coming months. Over 40% of respondents expect volumes to be higher in August than in May on ocean lanes to and from the APAC region, while a similar amount predict volumes will remain the same.

In keeping with the traditional ocean freight peak season surge in the third quarter (Q3), two thirds of survey respondents forecast that APAC-Europe westbound volumes will be higher in August than they were in May. On the head-haul APAC-North America trade, 44% also predict higher volumes over the same period, with only 11% expecting box numbers to fall.

“We’ve had a solid start to 2017,” said one ocean liner respondent. “Exports from Asia have been strong and, after the normal May lull and on completion of Transpac contracting, we’d be surprised if we didn’t see a good peak season.”

Strong optimism for the summer months followed a solid May. More than 47% of respondents reported higher month-on-month (m/m) volumes in May compared to April, while just 5% reported lower m/m volumes. Month-on-month volume growth was also reported on all major ocean trades.

“The demand side of the picture has been strong thus far in 2017 as our latest survey has illustrated,” said Roberson. “Respondents are rightly optimistic that volumes of exports to North America and Europe will build in the coming months as the peak season gets underway.

“Exports out of the US continue to underperform, but Asian demand for European exports is ticking along and we expect this will continue at least through Q3. We expect lines will be able to consolidate most of their General Rate Increases if they keep their supply discipline as they smooth out network disruptions due to the start of the new alliance services in April. We’d expect forwarders to seek higher margins on higher rates, where possible.”

Air freight

In terms of expectations for air freight markets, over half of survey respondents predicted APAC volumes across all lanes would be higher in August than in May, with 40% also expecting them to remain the same. Only 9% of respondents expect lower volumes in August compared to May across all APAC lanes.

Sentiment was most bullish on the APAC-Europe, APAC-North America and APAC-Emerging Market lanes, where the majority of respondents expect air freight volumes to be higher in August than in May.

“The three-month outlook for air freight remains positive,” said Roberson. “Across all lanes, over half of respondents expect volumes to be higher in August than now – with optimism most obvious on the APAC-North America lane, where 71.43% of respondents predict higher volumes in August than in May. The lane is expected to benefit from key electronic product launches in the coming months.”

Growth in air freight volumes was also apparent in May compared to April. 52.3% of survey respondents indicated air freight volumes were higher in May compared to a month earlier, while only 4.5% of all respondents reported a m/m drop in APAC volumes.

Growth was most evident on the APAC-Europe, Europe-APAC, APAC-North America and APAC-Emerging Markets lanes, where 78%, 67%, 57% and 67%, respectively, of respondents reported higher m/m volumes.

One respondent said major product launches later in the year, such as the new iPhone – which multinational Logistics Service Providers were already shipping – would help bolster demand out of APAC. He also said Asian demand growth had outstripped Europe and the US in percentage terms over the last year. “Asia and particularly India are the rising stars of the future,” he added.

Roberson said APAC forwarding markets were on their best run of positive demand growth seen for at least two years. “Forwarders and other logistics stakeholders have struggled with low rates by air and ocean for an extended period,” she said. “But there are signs that supply-demand equilibrium is returning to both markets and this should create new margin opportunities for those with a strong footprint in Asia.

“To what extent digital forwarders will win chunks of this expanding pie will be interesting to follow over the rest of 2017.”

The APAC Forwarding Index is being developed by freight journalist and consultant Mike King, and industry veteran and logistics consultant Cathy Roberson, with the full Index set to be published in the coming months.

They claim that the survey data, combined with economic and manufacturing data along with proprietary market sizing of the forwarding market, will create an index that will provide insight into the APAC forwarding market – international and intra-regional – that is not available elsewhere.

The survey is open to anyone with insight or business linked to key trade lanes to and from Asia used by forwarders and other third parties. The third monthly APAC Forwarding Index survey is now open. To take the survey, click here.

THREE JAPANESE LINES BECOME ONE

IT was the best-kept secret in shipping, but now the name of the new Japanese container shipping giant is finally out.

Kawasaki Kisen Kaisha, Mitsui O.S.K. Lines, and Nippon Yusen Kabushiki Kaisha have announced that their new joint venture will operate under the name Ocean Network Express.

The much-anticipated announcement puts to rest myriad industry guesses and rumours over the name, which included San-Line, 3Js, and J3.

The establishment of the new joint venture, which will integrate the three companies’ container shipping businesses — including worldwide terminal operation businesses, excluding those in Japan — was first announced in October 2016.

NYK said on Wednesday that current plans were to establish a holding company in Japan, with an operating company to be incorporated in Singapore.

In addition, regional headquarters of the operating company will be set up in Singapore, Hong Kong, the UK, US and Brazil.

“The move will allow Ocean Network Express to better meet customers’ needs by providing high-quality, competitive services through the consolidation and enhancement of the three companies’ global network and service structures,” NYK said in a statement.

The establishment of the new joint venture will be officially announced once all anti-trust reviews are completed, said NYK. The service commencement date for Ocean Network Express is April 1, 2018. A new website informs stakeholders about the joint venture.

The momentous move that saw the three companies agree to merge their container shipping businesses last year was in keeping with an unprecedented round of consolidation and the formation of global alliances among ocean carrier heavyweights. The three Japanese lines are already members of The Alliance, along with Germany’s Hapag-Lloyd and Taiwan’s Yang Ming.

NYK, MOL and K Line will hold 38%, 31% and 31% stakes respectively in the new joint venture.

The new entity will control a fleet of 1.4m teu, or about 7% of the world’s total capacity, ranking it sixth among the global liner shipping operators. Individually, each only has a market share of around 2% to 3%, too small to survive as global carriers in today’s container markets.

Analysts in general hold positive views about the move, saying the merger will make it easier for The Alliance to reduce costs, reach common ground and bring over-ordering of tonnage under control.

That said, they also pointed out that the combined operation between NYK, MOL and K Line was expected to encounter some challenges, including culture clashes, conflicts in terminal arrangements and resistance from risk-adverse shippers who want to have their cargoes divided over a few shipping lines.

Alphaliner executive consultant Tan Hua Joo even noted that the three should shorten the period between the formation of the joint venture and the start date of joint operations, following the US Federal Maritime Commission’s decision to reject the three liner companies’ tripartite agreement on information sharing ahead of their merger.

PROPOSED FOOD IMPORT RULE CHANGES WILL REQUIRE MORE OF IMPORTERS

PROPOSED legislation to food importation rules are aimed at better protecting Australians from food safety and health risks, but they would put more responsibility on importers to ensure the safety of food imports.

The imported food reforms are expected to be introduced to Parliament today.

Agriculture minister Barnaby Joyce said 16,000 companies import food into Australia every year.

“The changes put greater onus on importers to ensure the food they bring into our country is safe, and that they have internationally recognised food safety controls in place throughout the supply chain.”

“The strengthened laws also take into consideration the food safety and regulatory systems in exporting countries and introduce stronger traceability requirements.”

The proposed legislation would change several rules around food importation.

They would require importers have documentary evidence that effective, internationally recognised food safety controls are in place through the supply chain for foods where at-border testing can’t provide assurance of food safety.

Also, all food importers would be required to have a system in place to be able to trace food “one step forwards, and one step backwards”, according to the Department of Agriculture and Water Resources (DAWR) website.

Additionally, the changes would broaden emergency powers for Australian authorities to hold food at the border when there is uncertainty of the safety of a particular food.

The changes are also to provide authorities additional powers to monitor and manage risks through a temporary variable rate of inspection and/or analysis.

Mr Joyce said these changes would give DAWR additional powers to respond more quickly to potential risks to food safety.

“The changes strengthen our imported food inspection, giving the government greater power to hold food at the border if there are reasonable grounds to suspect it possesses a serious risk to human health,” he said.

“This will also boost the government’s response and management arrangements for imported food safety risks.”

Mr Joyce said Australia exports food that meets high standards set by trading partners, and it follows that Aussie consumers must have the same level of assurance.

“We need to provide this assurance without burdening local importers with unnecessary red tape or consumers with price increases or reduced choice,” he said.

FREIGHT FORWARDERS BEWARE, US AIR CARGO SCREENING REQUIREMENTS TO TIGHTEN SOON

FREIGHT forwarders are urged to get ready to comply with tough new cargo screening procedures for US-bound air cargo, due to come into force on July 1.

Transport minister Darren Chester said the US requirements were non-negotiable and Australian exporters should take steps to secure their US-bound air cargo ahead of the implementation date.

“These changes mean that all air cargo being transported to the US must either be examined at piece level (for example each box, carton, or pallet is screened) or originate from a Known Consignor,” Mr Chester said.

“The Australian Government is working with businesses, freight forwarders, and cargo terminal operators to help them comply with the US requirements, and ensure readiness for the transition.”

Mr Chester said Known Consignors could secure air cargo originating from their business, minimising potential delays and costs.

“While it may be too late to become a Known Consignor by 1 July, exporters are encouraged to start the process so they can do so in the future,” he said.

“Freight forwarders are also encouraged to talk to their customers now about how they can help secure their US export business.”