Our final freight market report of the year highlights key developments in air, sea and road freight, to keep you informed and to provide valuable supply chain insights, that will aid your decision making. Situation summary The spiking freight...
Our final freight market report of the year highlights key developments in air, sea and road freight, to keep you informed and to provide valuable supply chain insights, that will aid your decision making.
Situation summary
The spiking freight rates on all modes are falling away as falling volumes and demand slumps that have been so prevalent in recent months feed through and as transport prices return to relative stability in 2023, the market is expected to rebalance and recover with slow growth. But with so many uncertainties the market’s longer term growth prospects remain opaque.
Ocean
Freight rates have continued their decline with the market struggling to keep up and the carriers resorting to ever more drastic blanking programmes, to slow the slide.
Even with residual disruption and congestion, container freight spot rates have reached new lows, amid falling demand. The reversal toward normality is happening faster than most anticipated and the shipping lines are taking drastic action.
Improving bottlenecks also are having a downward effect on rates, because shorter transit times and improving congestion levels are increasing available capacity in the markets, which further widens the gap between supply and demand.
The Asia-Europe trade remains under pressure with falling spot rates, a generally soft trading environment and indications that the market bottoming out.
Our offices in China are seeing an increase in bookings over November and even though demand is still at a far a lower level than last year, the shipping lines blanking of multiple sailings means that space is tight on some routes.
Carriers are expected to announce more blank sailings as they seek to balance the supply equation in their favour and while residual congestion is still impacting parts of Europe, hopes are rising in China as the government finally begin to relax zero-COVID restrictions.
With transpacific volumes declining, rates have been declining, with west coast spot rates reaching pre-pandemic levels and while east coast rates have fallen, some capacity has been tied up in the continuing Savannah congestion.
In better news for U.S. shippers, one week before it was due to start, President Joe Biden signed legislation to block a national railroad strike that could have frozen almost 30% of U.S. cargo shipments and devastated the American economy.
Transatlantic rates are starting to soften, particularly to Europe and while there is no change to capacity expected through the end of 2022, the fall in volumes is reducing port congestion and vessel waiting times on both coasts.
Air
November's PMI data pointed to a slowing of global economic growth, which signalled the strongest recession risks since 2008, with the US, UK and eurozone all in contraction territory and airfreight volumes expected to witness flat growth in the first two quarters of 2023.
Shippers that switched from ocean to air, due to record-low service levels, are switching back to sea freight, as ocean congestion ends and rates fall, but they are also securing some air capacity for 2023.
The stabilisation of rates and improvements in schedule reliability is encouraging some shippers to move cargo between airplanes and ocean containers, and despite rates on many routes continuing to soften, shippers are unlikely to delay booking and securing airfreight capacity, because this would mean enormous risk, if there were any market improvements.
From a financial point of view, the airfreight market seems to be ‘normalising’, which will be beneficial for all budget-driven shippers, as ad-hoc rates are replaced by long(er)-term stability.
The latest statistics from IATA show that air cargo tonne kilometres (CTK) declined by 13.6% year on year in the last recorded month, while capacity was down 0.6% and load factors slipped 7.4% on last year to 48.7%.
New export orders, a leading indicator of cargo demand, are “shrinking in all markets, with the exception of China and South Korea, while on a more positive note, inflation in producer (input) prices, reduced by 0.5% points to 13.3%.
Road
The economic recovery that began in 2021 continued in the first half of 2022, leading to a positive development in volumes for road freight transport.
But growth then began to slow, depressed by rising transport prices that were driven by soaring fuel prices, increasing operating costs and a sharp slowdown in demand, as high inflation sapped consumer confidence.
The European road freight market grew 9.4% in real terms in 2021 and will expand by 4.9% in 2022. Recovery through to 2026 is expected to remain positive, with the market growing 3%.
The report from Transport Intelligence, which underpins this section, suggests that the European road transport market will come under more pressure in 2023. The analyst expects this market to expand by just 1.1% in real terms (holding prices and exchange rates constant) next year.
Ti expects both the domestic and international European road freight market growth to slow down in 2023, but the slowdown will be more pronounced for domestic deliveries.
Shortages of raw materials and intermediate products, together with weakening demand and energy shortages are clouding the outlook for the manufacturing sector in Europe, with the Munich-based Ifo Institute, suggesting around 90% of German electronics, mechanical and automotive companies are not receiving all the materials and intermediate products they need to run their production lines.
Our teams in the UK and across Asia continuously scan the evolving global multimodal operating environment, to identify potential issues and adapt operations, to avoid pitfalls that may challenge our customers’ supply chains.
We share the most important news and developments, so that you can make informed decisions that protect your supply chain.
To discuss any questions or concerns you might have, about the issues highlighted here, please EMAIL for our immediate attention.The post December freight market report appeared first on Norman Global Logistics.
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