Asia market update; August

By Paul Kelly in News Posted: 7th, September, 2022

The recent strike at the port of Felixstowe saw vessel calls drop from 29 to 5, as lines called at alternative ports or delayed cargo to avoid disruption. With  Liverpool dock workers walking out on the 19th September and Felixstowe workers striking from Tuesday the 27th September we are taking action to protect our customers’ supply chains.

As global economies take a battering, with new buyers orders dropping and consumer sentiment plunging, the inevitable slowing in demand is leading carriers to blank sailings, with 8.8% of capacity due to be pulled from Asia to Europe over the next 12 weeks.

Last week, the US government suspended 26 China-bound September flights from Chinese carriers in a tit-for-tat response to the Chinese government’s decision to cancel flights by US carriers over Covid cases, in a move that reduces capacity and could hit cargo markets hard after the summer slack season.

OCEAN

September’s outlook from Asia is expected to be flat, with concern remaining on the port congestion in Europe which delays schedules, increases blank sailings and adds port omissions, but there are indications that the situation may improve, though the continuing typhoon season could further disrupt the schedules.

Container ports on the US east and west coasts remain highly congested, with inland capacity and labor reductions impacting operations, which lead to pick-up and delivery delays, with extended container dwell times, with the ripple effects often meaning vessels experiencing extended berth-waiting time.

Transatlantic demand remains strong, with rates stable, albeit at a high level, though these may be threatened by energy price increases and lower demand. 

As of the 1st September the Port Authority of New York and New Jersey introduced a container imbalance fee for ocean carriers, to try and reduce the number of excess empty containers dwelling at the port, so there is more capacity to process import containers and while no carrier has so far commented, it has to be expected that carriers will pass the associated costs to the market.

Wage settlement last week at German ports also expected to relieve the high yard density at Hamburg’s box terminals in the coming weeks and according to new weekly data congestion at Rotterdam and neighbouring Antwerp has declined significantly in the past few weeks.

It is becoming increasingly evident that power is being shifted from carriers to shippers, with carriers on many routes reportedly cutting rates to compete with the limited demand in the market, while also showing some flexibility in negotiating long-term rates. 

Carriers are often aggressively looking for more bookings, with some offering attractive rates on spot basis while others are trying to hold on to higher levels. The simple reality is with a downturn in cargo and more open space, due to weak demand, carriers will chase cargo – until that capacity is booked or blanked.

To support rates on primary trade lanes, shipping lines are beginning to blank scheduled sailings to constrain space and drive up prices.

Almost 9% of capacity on Asia-Europe rotations will be blanked by carriers across the three shipping alliances: 2M, Ocean Alliance and THE Alliance, with the capacity constraints expected to be sustained over 12 weeks.

AIR

Overall, the market has been pretty flat recently for outbound cargo to both the EU and US, though rates ex-PVG [Shanghai] to Europe started to increase, but not from other origins, so it’s not certain yet if this is an ad-hoc increase or if it could last longer.

With heat waves in China subsiding, and new tech products, such as an iPhone, launching in September/October, it may suggest a peak season starting at around the third week of September.

Despite the “soft” summer for airfreight, the market may simply be returning to pre-Covid norms, as demand this year is broadly similar to pre-Covid, but the difference is that we are actually experiencing a normal seasonal summer slack period, as opposed to the relentless demand and capacity shortfalls we have had to work through in the previous two years.

On many routes space on aircraft is freely available, but we expect this will change in the coming months, even though Peak season is unlikely to trigger any volume surge, with inventories at high levels.

Rates show sign of softening on a few trade-lanes, but globally were still 121% higher than the same pre-pandemic period in 2019.

Service disruptions, fuel costs and multiple external factors further complicate pricing and we are consequently likely to see an aggressive spot market on certain trade-lanes.

Overall global capacity was down 11% in August, compared to 2019, with belly capacity 19% below pre-COVID levels and while this has improved since last year, capacity recovery has slowed due to service disruptions and backlogs.

Tensions between the US and China could affect westbound trade, with the US potentially using EU aircraft to ship their product via Europe.

 

European bottlenecks still ongoing, but there is some hope that delays may lessen now that Lufthansa has agreed a pay deal with its pilots.

Last week, the US government suspended 26 China-bound September flights from Chinese carriers in a tit-for-tat response to the Chinese government’s move to cancel flights by US carriers over Covid cases.

The impacted airlines include Xiamen, Air China, China Southern and China Eastern, while the US airlines are American, Delta and United and the reduction in capacity could hit cargo markets even harder after the summer slack season, if China responds by cancelling US-bound flights.

Whatever challenges your supply chain may face, 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.

Andy Costara (andyc@globalf.com) will be pleased to explain further and demonstrate how our technology can support your supply chain.

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