The capacity between Asia and the United States West Coast decreased but remained the most important commercial route. In the three months leading up to July 24, the average capacity between Asia and the United States East Coast increased by 18.9% year-over-year to 210,000 teu. During the same period, Asia-West Coast capacity averaged 310,000 teu, a decrease of 1.7%. Significant delays and lines at U.S. West Coast ports drove the change between coasts, but the problem was not solved; it was only relocated. On the East Coast of the United States, just 18.7 per cent of services ran on time in June, with average delays of nine days for those that arrived late, whereas, on the West Coast, reliability increased to 24.8 per cent in June, with average delays of 9.8 days.
On the transpacific, there is optimism that the U.S. consumer’s voracious hunger for goods will maintain healthy load factors. In Europe, European consumer confidence was “at an all-time low,” which would affect reservations. This sent container spot pricing back above $10,000 to $10,494 per 40ft. But the increase is temporary, as other indexes and market fundamentals are moving in the opposite direction.
Nonetheless, spot rates from Asia to the west coast of the United States continue to plummet; for example, it recorded an 8% decline this week to $6,353 per 40ft, which is a 60 per cent decline from the short-term market rates of a year ago.
Asian freight forwarders report a significant decline in airfreight rates, but they do not believe this to be the end of it. The market for airfreight to Europe and the United States appears relatively undisturbed.
While the decline in interest rates and high inflation appears to be related to a reduction in demand, last year was not particularly robust either. Coupled with the fact that there is significantly greater capacity this year, it is hard to argue that demand has decreased considerably. In addition, the summer holiday season is often a sluggish time of year. With the beginning of August, the back-to-school season has just gotten over. Back-to-school shopping also marks the beginning of the peak shipping season, which usually lasts nearly half the year and is vital for freight and logistics.
Year-over-year, capacity out of Asia Pacific in the preceding two weeks decreased by 10%. Whereas in Europe and the United States it increased by 18%. Passenger flights had not restarted in their entirety, and the market is still running at approximately 80% of the usual capacity. Once the summer flying schedules are over, capacities can improve.
Global rates fell from $3.90 on July 3 to $3.84 but still command a 15 percent increase over the previous year. Rates from China to Europe reduced by 5.5% on July 18 to $6.98. In contrast, prices from China to the United States decreased by 3.1% to $7.78.
The industry is still in the phase of recovery. The airlines still bear $650 billion in debt accumulated during the COVID crisis. However, there are concerns that the industry’s rebound could be impacted. A strong U.S. dollar is increasing the price of U.S.-dollar-denominated debt for those conducting business in a local currency and adding to the cost of paying for fuel imports.
According to the IRU Road Freight Rate Benchmark for Q2 2022, inflation, falling demand, social unrest, and the conflict in Ukraine are causing chaotic developments in road freight costs. In the second quarter of 2022, the European contract road freight index sets a record high of 121 points, up 6.1 points from the previous quarter and 13.1 points from the prior year.
Inflation, along with the driver shortages, is also adding to the stress on the sector. In June, the inflation rate in the Eurozone reached an all-time high of 8.6 percent, putting pressure on prices and demand. While fuel prices have varied by the nation, since January, they have stayed elevated in July and are now 69 percent higher than in January.
The driver shortage continues to affect the entire continent of Europe. A shortfall of 50,000 and 80,000 truck drivers puts Germany in a particularly precarious position. Twenty-four percent of German drivers are migrant workers, and the loss of Ukrainian citizens returning to defend their country has further reduced the availability of drivers in Germany.
Europe trucking is also facing headwinds after Brexit, even now. Since the Brexit, transport activities between France and the United Kingdom have grown more expensive and time-consuming. Researchers at the London School of Economics (LSE) discovered that while exports have rebounded substantially, imports from the E.U. have decreased by 25% relative to other destinations. Additionally, the variety of commodities traded has been reduced by 30%. The increase in administrative costs has the most significant effect on low-value items.
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