Freight rates have continued to fall as global trade volumes slow as a result of shrinking demand for goods.
Trends in global supply chains continue to flip as container prices fall and container depots fill up, logistics data show.
Following Syed Mohammad Arif, president of Shipping Agents’ Association, told The Business Standard that consumers in Europe and the US have cut back on their spending on clothing and other luxury items under record-high inflationary pressure. That is why booking goods on shipping lines has now dropped by 30-40%.
G20 merchandise trade growth slowed markedly in value terms in the second quarter of 2022, as measured in current US dollars.
Almost 60% of British shoppers say they will cut back on non-food spending in the so-called “golden quarter” – the last three months of the year when most retailers make the majority of their profits, according to research by Retail Economics with the retail technology firm Metapack.
While freight rates have also fallen due to the easing in supply chain disruptions that were built up over the pandemic, a lot of the slowdown in container and vessel demand was due to weaker cargo movement, according to the research group.
Shipping lines continue to reduce vessel capacity and suspend services by considerable blank sailings. In a recent advisory, Maersk indicates that it will continue to make capacity adjustments on services from Asia to North America, Europe and the Mediterranean to better align with demand fluctuations.
Recently, there was news about China United Lines, an emerging carrier on transpacific and Asia-Europe services, being at risk of defaulting on a charter party involving more than 10 containerships.
Aerial photo taken on Aug 2022 shows the loading and unloading of import and export goods at the container terminal of Lianyungang Port in East China’s Jiangsu Province. China’s exports grew 7.1% in August year-on-year, while imports rose only 0.3%, both missing expectations, customs data showed on Wednesday.
A 90% year over year drop in ocean freight rates for cargo from China bound to the U.S. West Coast exceeded the expectation among logistics firms for just how fast trade demand would fall.
Prices in the ocean freight contract market posted a record monthly drop in November. Logistics firms are warning of an all-out price war in 2023 with too many ocean vessels and too much container capacity.
“Into the year 2023, freight forwarders will be able to go window shopping quite a lot, and there’s going to be a lot of room for negotiation, especially in the early parts of the year. Contract rates will follow suit as spot rates fall significantly.” commented Christian Roeloffs, Cofounder and CEO, of Container xChange, an online platform for container logistics.
Speaking at TOC Asia Alan Murphy, CEO and Founder of Sea-Intelligence “The carriers have much large war chests than before.”
One key difference to the past is carriers now have huge amounts of cash and it was noted lines had earned the same amount in the first six months of 2022 as they did in 10 years prior to the pandemic.
Then he added “The only thing scares me more than shipping lines with no money and is shipping lines with money.”
Murphy sees two scenarios playing out – a managed decline with lay-ups starting now or a rate war. “What I personally think is much more likely is headed into we’re in for a rate war,” he said, putting an 80% chance on a rate war.
The result could be a prolonged rate war which is dragged out by carriers with more money to fight.
Reported by Alex 2022-12-20
