It is now more than seven months since the Galaxy Leader was hijacked by Houthi rebels operating from Yemen and despite numerous strikes by US and coalition forces, attacks on merchant vessels have increased.
While we all hoped for a quick resolution, conflicts in the Middle East often last years, not months and the container shipping lines will be factoring this into their long-term planning, which may include ordering even more new vessels, despite the risk of future overcapacity when the Red Sea situation does eventually resolve.
OCEAN
In May, global demand for ocean freight container shipping hit an all-time high, marking a 7.5% increase from the first five months of 2023 and comes despite capacity challenges from diversions around Africa and severe port congestion in Asia and Europe.
Average spot rates from the Far East to the US, Europe and the Mediterranean have surged since the end of April and the key question is whether these record volumes will see demand taper away during the traditional peak season.
It does look likely that consumer demand, shippers front-loading imports, and potential further tariffs on China imports could sustain high demand in the coming months, but the sustainability of these record levels is uncertain.
The Drewry World Container Index indicates rising rates from Asia to Europe and the US West and East Coasts, with their analysts anticipating high freight rates to persist through the peak season.
In the first half of 2024, carriers introduced 257 new container ships totaling 1.65 million TEUs, with a significant portion allocated to Asia-Europe services. The Asia-US trade lane has seen 42 ships deployed, totalling 390,000 TEUs, reflecting the higher number of super-post-Panamax ships on the Asia-Europe lane.
The Federal Maritime Commission (FMC) has delayed the Gemini Cooperation Agreement, requesting more information to assess its competitive impacts. The FMC will reconsider the agreement once a fully compliant response is received.
AIR
In June, airfreight rates on key trade routes out of Asia remained robust despite entering the quieter summer season, with spot rates from Hong Kong to Europe and North America increasing over 20% and 15% respectively, compared to last year and slightly above May levels.
Typically, June rates plateau or decline as demand stabilizes and additional belly-hold capacity becomes available due to the summer tourist season. However, the market is being fuelled by robust eCommerce activity from major China-based exporters like Temu and Shein.
Outbound spots rates from Shanghai remained 40% higher than last year, while other Asian markets, including India and Vietnam, have also experienced substantial year-on-year rate increases, particularly on routes to Europe.
Demand, measured in cargo tonne-kilometres (CTKs), showed double-digit growth for the fifth consecutive month, while capacity, measured in available cargo tonne-kilometres (ACTKs), grew by 7.1% compared to April 2023.
The overall market remains firm, with block space agreements for Thanksgiving and Christmas hinting at a potential spike in spot rates later in the year.
This is the first time in two years that new export orders have been rising, suggesting a robust outlook for air cargo for the rest of the year and likely beyond.
ROAD
In 2023, the European road freight market contracted by 2%, due to challenging conditions, and is projected to grow by 1.5% in 2024, with a compound annual growth rate (CAGR) of 2% from 2023 to 2028.
The TEG Road Transport Index rose by 1.8 points to 125.6 in June, a 1.45% monthly increase, but lower than the 2.69% annual rise. Haulier prices increased by almost 3% in June, though this was also lower than the annual 3.98% rise. Courier prices remained stable with a slight 0.23% increase in June.
The European road freight market outlook for early 2024 remains dependent on strengthening household demand from rising real incomes. Key risks include potential increases in energy prices, tighter lending criteria, rising interest rates, and volatile inflation.
Despite the difficult market, freight rates remain high due to rising driver costs, road toll adjustments, and investments in decarbonisation. Transporeon’s data shows a -7.5% year-on-year decrease in European road freight capacity in June 2024, marking the sixth consecutive fall this year.
Whatever challenges your supply chain may face, our commercial vehicle fleet and the price and capacity agreements we have in place with our long-term partner air and ocean carriers mean that we continue to deliver resilient and reliable supply chain solutions.
Our purchase order management and supply chain tracking technology support the most demanding global trading regimes, providing transparency and control.
EMAIL Andy Costara to learn more and see how our technology can support your supply chain.
