AIR FREIGHT
As we transition into the summer months, the air freight sector continues to navigate intriguing market dynamics. From a period of high demand and soaring prices, the landscape is shifting towards softening demand and swelling capacity, decreasing air freight rates.
TAC Index, a key price reporting agency, paints a compelling picture of these dynamics. Their data shows that the Baltic Air Freight Index (BAI00) has gradually declined, further dipping by 0.8% in the week leading up to 1 May. This brings us to a considerable decrease of 42.5% over the past year.
Yet, this trend isn’t uniform across all regions, indicating the complexities within the sector. For example, while Hong Kong (BAI30) showcased a 1.1% week-on-week rise, it’s down 42.2% year-on-year. Meanwhile, Shanghai (BAI80) experienced a 2.3% decrease from the previous week and a significant 48.5% decrease from last year. Frankfurt (BAI20) and London (BAI40) saw a substantial decline in their week-on-week performance, with a 3% and 5.1% drop, respectively. This decline translates to a year-on-year decrease of -38.8% and -43.0% in the European markets. Interestingly, Chicago (BAI50) bucked the trend, with a week-on-week gain of 5.6%, trimming the year-on-year figure to -28.2%.
Amidst falling freight rates, there’s a glimmer of optimism with a decrease in jet fuel prices. Jet fuel prices fell by 11.5% in the month leading up to 28 April, bringing them to 45.1% lower over 12 months. This decline aligns closely with the fall in freight rates, potentially serving as a buffer for air freight operators.
As we gaze into the summer of 2023, the air freight industry is carving a unique path with various challenges and opportunities. Shippers are likely to benefit from softer freight rates. Specific sectors demonstrate resilience, and lower jet fuel prices might mitigate the impacts of decreased rates for operators. The air freight market is in for an exciting ride this year.
Suggestions:
- Take note of softening demand and swelling capacity in the air freight sector, leading to decreasing rates.
- Monitor regional variations in air freight rates and adjust strategies accordingly.
- Consider the potential impact of lower jet fuel prices on mitigating the effects of decreased rates for operators.
- Take advantage of softer freight rates as a shipper to optimize costs.
- Stay informed about market dynamics and adapt to the evolving challenges and opportunities in the air freight industry.
- All-around steady outlook for the summer and beginning of fall
SEA FREIGHT
In an unexpected turn, the liner industry faced a dampening of the usual peak season enthusiasm as freight rates started to slip further in May. This shift, highlighted by the recent trends, underscores the fluid and dynamic nature of the sea freight market.
According to the Shanghai Containerized Freight Index (SCFI), major east-west trade rates saw noticeable decreases. The SCFI comprehensive index fell by 3.4% in the first week of May, signifying the fourth consecutive week of decline. This weakening trend was not limited to Europe, with the Asia-US West Coast and the Asia-US East Coast also experiencing significant rate reductions. For instance, the Asia-Europe trade lane decreased 4.8% week-on-week, while the Asia-Mediterranean trade lane witnessed a 5% week-on-week decline.
However, This rate drop must be interpreted in the context of their record-breaking levels over the past year. Even with the recent downturn, rates remain historically high compared to the same period in previous years. That said, the rate reductions combined with the uncertainty around demand growth may dampen hopes for a strong peak season for carriers.
In another development, carrier alliances have started to rationalize their schedules and services, with several blank sailings announced for June and July. This move aims to align capacity with demand and limit further rate erosion.
In the bigger picture, the implications of these trends on the liner industry’s profitability remain to be seen. As we sail into the summer of 2023, the sea freight sector is poised to experience complex market dynamics that could reshape the industry’s trajectory. Although the outlook for a strong peak season may be uncertain, the industry’s ability to adapt and persevere through these fluctuations will likely determine its future trajectory.
Suggestions:
- Recognize the decline in freight rates in the liner industry, particularly in major east-west trade lanes.
- Understand that despite the rate drop, rates remain historically high compared to previous years.
- Anticipate potential challenges in achieving a strong peak season for carriers due to rate reductions and uncertainty around demand growth.
- Monitor carrier alliances’ rationalization of schedules and services, including blank sailings, and assess their impact on capacity and rates.
- Prepare for complex market dynamics in the sea freight sector and adapt strategies accordingly.
- Blank sailings will reduce the reliability of schedules. Remember to discuss with your Wiima contact thoroughly about your needs.
ROAD FREIGHT
The onset of summer in 2023 brings a complex terrain for the road freight industry. According to the International Road Transport Union (IRU), contract and spot rates begin a downward trend this year, a development that could significantly impact the sector’s outlook.
Specifically, the IRU’s Road Freight Transport Price Index, a crucial indicator of pricing trends, reported a decrease in contract rates for the first time in two years. While the contract rate reduction was relatively modest at 0.7% compared to Q4 2022, it nonetheless signals a notable shift in the industry’s landscape.
On the other hand, spot rates, which often reflect immediate market conditions, have continued their downward trajectory. They declined by 1.6% in Q1 2023 compared to the last quarter of 2022. This trend aligns with expectations, given the ongoing excess capacity in the market and recent moderation in demand.
Although these trends can provide valuable insights, they do not offer a comprehensive view of the situation. Despite the recent downturn, contract, and spot rates remain elevated compared to historical standards. Moreover, regional variations persist, reflecting the complexity of the road freight industry and its susceptibility to local and global factors.
The question is how these trends will shape the rest of 2023. Some carriers may renegotiate contracts to ensure sustainability in light of the falling rates. Meanwhile, shippers could leverage the lower spot rates to optimize their supply chain costs. As we continue on this journey, these evolving dynamics are set to steer the road freight industry on an exciting path through the remainder of the year.
Suggestions:
- Note the downward trend in contract and spot rates in the road freight industry.
- Assess the potential impact of rate reductions on the industry’s outlook and profitability.
- Recognize the ongoing excess capacity in the market and its influence on spot rates.
- Consider renegotiating contracts to ensure sustainability in light of falling rates.
- Leverage lower spot rates to optimize supply chain costs as a shipper.
- For more specific lane information contact your local Wiima personnel to support and plan your project.
RAIL FREIGHT
In a significant development, RailNetEurope (RNE) and Europe’s Rail Joint Undertaking have partnered through a Memorandum of Understanding (MoU). This partnership is geared towards boosting the efficiency and competitiveness of the European rail sector.
Key elements of the MoU include supporting the Single European Railway Area for seamless cross-border transport and driving digital transformation through improved data exchange and shared digital platforms. Moreover, the agreement emphasizes the need for customer-centric solutions and enhanced international contingency management.
This partnership will significantly improve Europe’s Rail Logistics in the second half of 2023.
Suggestions:
- Take note of the partnership between RailNetEurope and Europe’s Rail Joint Undertaking to boost the efficiency and competitiveness of the European rail sector.
- Stay updated on developments regarding the Single European Railway Area and digital transformation initiatives.
- Explore the potential benefits of improved data exchange, shared digital platforms, and customer-centric solutions in rail logistics.
- Monitor the implementation of the partnership and its impact on the European rail sector throughout the second half of 2023.
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!
