Market Update – 3rd February 2023

A recent report highlighted how Australia’s rail routes pale in comparison to their roads. It’s significant because flooding this year and last has exposed how fragile and unsustainable some of Australia’s supply chains are. 

The nation’s truck fleet is known for producing more emissions than their overseas counterparts. At least 14% were produced pre-1996 which means they emit 60 times the pollutants of new HGVs, and according to a new study, kill 400 Australians every year. 

Despite this, road has increased its share of domestic non-bulk trade. In the 1970s, road accounted for 65.5% and now that figure is 79.8%. Rail on the other hand transported 22.8% of domestic non-bulk in 1977, and now only accounts for 16.7%. 

But why? The amount of freight moving across Australia has grown considerably since then. And rail has been used consistently to transport coal, iron ore and grain during that time. 

The answer seems to be a lack of investment. Trucks can now move freight between Sydney and Melbourne within 10 hours, while the alternative rail route takes at least 13 hours, plus the time taken to unload and deliver. 

Rail freight in Australia is largely fuelled by diesel, and still lags behind countries like the US that transports around 27% of domestic trade by rail. Environmental groups believe this to be a lost opportunity. 

They argue that electrifying the tracks would not only decarbonise the country’s transportation but also create more jobs. 

Whether this argument will lead to any action remains to be seen.

In other news:  

Transportation trends     

Land:    

• Technology and climate mitigation are driving a transformation in road freight. This shift will span value chains and impact business models, social conditions, and regulatory frameworks. Three developments are driving this: automation of vehicle control, digitalisation of logistics planning, and coordination and electrification of drivetrain.

• £81 million in combined UK government and industry funding is being made available for commercial self-driving passenger and freight service.

• According to experts, without action to make the driver profession more accessible and attractive, Europe could lack over two million drivers by 2026, impacting half of all freight movements and millions of passenger journeys. 

Air: 

• Even though air cargo capacity is still up to 10% below pre-pandemic levels, industry executives predict that soon there will be an oversupply of freighters. 

• Despite the general grim outlook for air freight, it seems intra-regional demand for shipments passing through the key hubs in East Africa – Kenya, Ethiopia and Rwanda – are set to pick up again.    

Sea:  

• Ocean carriers are shifting their ship capacity from Chinese export routes to stronger tradelanes with room for expansion. 

• The Chinese market’s weakness is causing competing alliances to explore carrier slot exchange agreements more often.

• After the pandemic, more banks and investors have gotten into shipping thanks to strong profitability across all industries and a flow of cheap money from quantitative easing initiatives.  

• For new fuel blends entering the maritime industry to take off, cost transparency is necessary. Today marks the introduction of the first ever independently determined price for ship fuel with a biofuel component by Argus, a commodities price reporting service.  

Industry news    

• Age limits for ships arriving at the second-most populous country in the world are being prepared by New Delhi. The age limitations imposed by India would affect thousands of ships.  

• Ever-increasing numbers of huge box ships are docking in India, the main economy with the highest rate of growth in the world, necessitating the development of ever larger ports.   

• According to a worldwide estimate from the World Bank, any more significant financial shocks might cause a global economic downturn. 

Looking forward 

Sustainability initiatives and workforce woes continue to be a problem for leaders in logistics, but the real concern still seems to be uncertainty in the markets. 

Please note that the information provided in our market reports is taken from a variety of news sources and partners. These insights are for informational purposes only.