SEA FREIGHT
Several carriers have canceled or postponed their sailings from Shanghai to the US in the last week of June. But the backlog of containerships created during the lockdown period is under control and is being cleared methodically. There was less congestion in Chinese ports “across the board,” not just in Shanghai. Berthing delays have decreased across the board in all three major port areas, and vessel lineups are getting shorter. While Shanghai’s reopening has boosted labor availability, better weather in eastern and northern China has helped to lessen berthing delays.
Peak season will start mid-to late-July and run through Q3 in this unpredictable year. Carriers plan to closely watch volume over the following three months to decide which course to take in Q4 and beyond 2023.
Demand levels are influenced by macro-level uncertainties, including the crisis in Ukraine, rising inflation in Europe, and poor consumer confidence. The west’s inventory levels could also be calming the market’s “bullwhip” impact. For instance, recently, Samsung had requested many suppliers to postpone or restrict shipments of both components and finished goods owing to “surging” stocks and inflationary worries.
AIR FREIGHT
Due to the return of passenger aircraft and their belly capacity to the market, the world’s air cargo capacity is back to its 2019 levels. Compared to the similar pre-Covid time in 2019, the worldwide aviation cargo capacity between June 13 and June 26 decreased by only 4%. However, the increase in capacity had not been consistent, and trade lanes varied “quite significantly.” For instance, the direct air cargo capacity between Asia and Europe in the timeframe was 50% lower than in 2019 due to the conflict in Ukraine and the shutdown of Russian airspace.
In Q3 2022, several variables will influence the air freight business. These will primarily be affected by the health of the world economy, the state of the ocean freight industry, geopolitical variables like the conflict in Ukraine, and potential future Covid-19 lockdowns.
However, based on the supply-demand imbalance brought on by fewer passenger flights, the termination of freighter flights, and interruptions in the ocean transport industry, market demand will generally stay high until 2022. Unless the market experiences persistent macroeconomic headwinds, such as inflation, interest rate rises, and a decline in consumer confidence, air freight prices are likely to stay high.
The air freight market is facing difficulties due to limited capacity, a labor shortage, and inadequate infrastructure. The lack of passenger flights and the freighter flight prohibitions in China and the EU continue to constrain capacity. Flight disruptions are generally still a global problem due to pilot shortages and a lack of ground staff due to Covid-19 layoffs. Airfreight business will continue to be hampered by lack of labor, keeping the air freight high.
ROAD FREIGHT
Spot pricing in the US truckload market has decreased recently and seems to deteriorate further following a brief period of stabilization in Q2 2022. However, there is minimal chance of reduced costs for shippers that rely on the less-than-truckload (LTL) market. If anything, rates are most likely to increase.
The combined revenues of US LTL carriers increased by 20.4 percent to $50.7 billion last year. In addition to the manufacturing industry, increased retail demand over the past few years has been fueled by capacity constraints and price hikes in the parcel industry.
Shippers have started shifting some business to the ad hoc market in the truckload (FTL) industry to take advantage of cheaper rates, but this is unlikely to occur in the LTL market.
Retailers are cautious. They won’t risk losing access to the capacity they have access to through a contract. Carriers have firmly concentrated on contract business. Thus, limited capacity is available on the LTL spot market, and they have maintained prices.
Price restraint will continue because carriers’ expenses have increased roughly 8% annually. It is predicted that rate inflation will continue throughout the year. Carriers continue to face difficulties in hiring drivers and paying wages. Walmart made headlines in April when it decided to pay truck drivers between $95,000 and $110,000.
But the sector has improved its performance. On-time services were still below historical, pre-Covid norms but close to 15-month record levels and exhibiting further progress. The increased emphasis on technology to run terminals more effectively and automate customer-facing activities has contributed to this, among other things.
However, there is no indication of any significant capacity improvements due to the lack of trucks and drivers. For clients, collaborating with their carriers to reduce inefficiencies and optimize flows appears to be the greatest path to minimizing costs.
ABOUT US
Wiima Logistics is a provider of fourth-party logistics (4PL) services. The 4PL service provides the customer with a complete solution for supply chain management, administration and outsourcing.
4PL operations can be described as outsourcing the management and coordination of the entire supply chain – this allows the customer to focus on their core business.
Wiima staff will be more than happy to advise you in supply chain and logistics related matters. Our logistics experts and digital tools will provide you with a winning combination if you are looking for an effective and efficient logistics management setup.
We are looking forward to hearing from you!
