SEA FREIGHT
In 2021 and 2022, the container industry achieved its two most profitable years. On cue, owners ordered a record number of new container ships. Even as freight rates decline, they continue to place more orders. Despite the worsening supply-demand situation, Maersk and MSC confirmed further orders for new tonnage last week, pushing the containership order book to a new record high of 7,44 million teu.
But now, with stagnating demand, many brand-new, massive container ships will enter service. It may be difficult for the market to absorb these new ships.
The container-ship order book currently consists of 7,1 million twenty-foot equivalent units. 2008 marked the previous peak of 6,6 million TEUs. At that time, the tonnage on order represented sixty percent of the fleet’s capacity. Since then, the worldwide fleet has more than doubled. Hence the current order book represents “just” 30% of existing tonnage.
Carriers are still unwilling to reduce capacity, while the reduction in port congestion has neutralized a significant portion of the initial capacity cutbacks. From a record of 15% in March, global port congestion has decreased to 10.5%, the lowest level in ten months.
Blank sailings have been ineffective thus far in arresting the rate decline. Permanent capacity withdrawals are needed in this situation. Unlike in 2016 or 2020, when charter prices were low and order book pressure was little, the opportunity cost of pulling capacity is currently too high for the carriers.
AIR FREIGHT
As rates and volumes continue dropping, the air freight industry can anticipate an absent or, best, a subdued peak season. According to the TAC Index, in September, rates from Hong Kong to North America dropped 19% year-over-year, while rates from Shanghai decreased by 42%.
On flights from Asia to Europe, fares were reduced by 25% from Shanghai and remained unchanged from Hong Kong, but all lanes remain substantially over pre-Covid levels – between 92% and 175%. Chargeable weight went down by 12% year on year in weeks 38 and 39, with volumes ex-Asia Pacific 20% below and tonnages from North America down 12%.
We do not anticipate there will be much of a peak since there is more inventory in the system, better fluidity in the supply chain, less gain from fiscal and stimulus policy, and tension over the global economy. In addition, economic uncertainty, residual volatility, and uneven supply chains as contributing reasons.
Nevertheless, there are geographical variations. Transatlantic demand and supply have returned to pre-Covid levels. U.S. air commerce has reached a plateau following the most significant increase in a decade. It accounts for forty percent of worldwide aviation trade and is highly influential. Inventories in the United States surpass sales and limit the anticipated increase of air imports in the near future. Nevertheless, despite the recent dip year-over-year, U.S. air imports are still on track to equal 2021.
Russia’s airspace restrictions, typhoons, and lockdowns are just a few examples of the “disruption” that experts say is here to stay. Long-term indicators indicate ongoing expansion. In the near term, exercise caution, as there are substantial headwinds.
ROAD FREIGHT
The post-pandemic reduction in truck utilization has been attributed to a decline in driver numbers and an increase in “deadhead” miles, or empty backhaul miles. In the aftermath of the Russia-Ukraine war, a shortage of drivers and soaring fuel prices drove up rates. However, numerous indicators suggest a weak demand for European road freight, with declining activity in all major economies and inflation rates weighing on consumer and business confidence.
Now, a circumstance unique to the epidemic is beginning to normalize. In 2020 and 2021, the pandemic and Brexit disrupted the supply chain, but growth in ad hoc work naturally lowered the number of empty miles.
However, declining demand and high fuel costs threaten to place smaller trucking companies in an untenable position. For example in Britain over 70% of licensed haulage companies are owner-operated and operate fewer than 12 vehicle fleets. These fleets have difficulty filling their vehicles for both trips due to the time and effort required to obtain suitable freight. They must also account for additional delays and travel, as return cargoes rarely follow the same path as the outbound shipment.
RAIL FREIGHT
On 16 September, a new postal train freight service was established, transporting parcels from Xi’an, the capital of Shaanxi province, to Malaszewice, Poland. The service is offered by Xi’an Free Trade Port Construction and Operation and is geared toward the expanding e-commerce industry.
The anticipated transit duration is twelve days, and the trains will be laden with e-commerce products and foreign mail. The items will be dispersed around Europe by Polish Post, the state postal agency of Poland, which also provides logistics services, after the train reaches Poland.
In a separate development, the capacity of the Khorgos port was doubled to alleviate congestion. The Khorgos gateway terminal is the largest dry port in Central Asia. It was inaugurated in 2015 and spanned 102.8 hectares as part of the Altynkol railway station complex on the Kazakh-Chinese frontier. It is a crucial center for transshipment and railroad processing that has recently witnessed rapid expansion. Specifically, KTZ explained that the average yearly increase in cargo handling over the past three years was 25 percent.
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.
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