Deloitte Ports and Freight Yearbook 2024: DAESCHI mid-year update | Infrastructure | Deloitte New Zealand

The rapid increase in the SCFI comes as the result of multiple global shipping lines increasing their spot rates across major trade routes since mid-April. These spot-rate increases reflect a mix of demand and supply side pressures on freight rates. These pressures come from shippers frontloading ahead of the international peak season, ongoing congestion in ports in Asia, such as Singapore and China, and the Mediterranean and tensions in the Middle East.¹ Maersk recently estimated that, due to longer routes avoiding the Red Sea, there has been a 15-20% reduction in available industry-wide capacity in the second quarter of 2024. Additionally, avoiding the Red Sea has resulted in a 40% increase in average fuel costs on affected routes.² While container line schedule reliability has been improving, it is still significantly worse than last year, with the May month-on-month figures being 11% points lower than its 2023 counterpart at 55.8%.³ The outcome of all these factors is an increase in prices.

Volatile and elevated shipping costs could create heightened supply chain uncertainty in New Zealand, which is a risk that importers and exporters should be monitoring closely.

The DAESCHI is composed of other inputs, which have remained relatively stable since our previous update in March. These inputs include Purchasing Managers’ Index (PMI) data from New Zealand and our major trading partners, as well as other transport cost inputs. Domestic transport costs have remained stable for all modes of domestic shipping. International and domestic PMIs have showed relatively little variation, with some exceptions. Since January, the manufacturing PMIs in New Zealand and Australia have been consistently reflecting poor growth in the manufacturing sector, with the Australian PMI showing more variation but not enough to have a material impact on the overall index. China has held PMIs close to the 50 baseline since January, reflecting average manufacturing growth. The US has held PMI values consistently at or above the 50 baseline, reflecting strong growth. The stability of the other inputs of the DAESCHI underline that movement in the SCFI is the key driver to the current spike.

The DAESCHI is also a leading indicator of tradeable inflation, where a one point increase in the DAESCHI translates to a 276 basis point increase in tradeable inflation in six months. Given this, the uptick in the DAESCHI creates a downside risk to the Reserve Bank of New Zealand’s goal of bringing inflation within its 1-3% target band.⁴