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Freight market report – June 2022

Our June freight market report provides multi-modal situation updates and insights, together with carrier updates, that will provide you with critical insights for the weeks ahead.

Despite criticism and published legislation the UK government will rip up its 2020 Brexit deal with the EU, claiming a “genuinely exceptional situation” and that the Northern Ireland protocol was causing “peril” to social and political conditions in the region.

Brussels has restarted previously stalled legal action for failing to implement full border checks in Northern Ireland. The ECJ could impose fines for non-compliance and if the UK refuses to pay and comply with its judgment, the EU could end parts of its post-Brexit free trade deal, applying tariffs to British goods.

Our customs expertise, means we are well positioned to react swiftly and protect PSP customers from any changes in the UK’s trading relationship with the EU.

There have been fears that freight spot rates from Asia to North Europe could spike when Shanghai opened up and North European hub ports continue to struggle with chronic yard congestion, exacerbated by threats of strikes by dockers.

Recent readings of freight indexes from Asia to Europe have reflected stable supply and demand, which is particularly promising given the fears of a Shanghai backlog of 260K teu.

Despite the apparent good news in China, North European hub ports have become overwhelmed with import boxes and are suffering yard density numbers of 80% to 90%, with some lines scheduling extra calls in order to ease the pressure on saturated Antwerp and Rotterdam terminals.

And “warning strikes” by dockers at north German container ports at the start of June together with the threat of increased industrial action at other North European hubs, does not bode well for the upcoming peak season.

Carriers are still expecting rates to increase further, particularly as congestion is forecast to continue long after volumes return to the market. And with manufacturing hubs getting ready to produce high volumes of goods again, demand will certainly outweigh supply.

Longer term, however, many are eyeing the increasing cost of living and the higher fuel costs as a potential reason for a fall in demand from key importing regions as many consumers around the world begin to ease back on spending.

Air freight capacity to and from Asia remains strained, while long-haul connectivity from Asia to North America and Europe has increased to about 1/3 of pre-pandemic levels.

Overall connectivity in the Americas and Europe has reached 80% of pre-COVID-19 levels, according to a May report from the International Air Transport Association (IATA).

Transatlantic capacity is returning to the air cargo market as airlines ramp up their summer schedules to meet rebounding passenger demand, which hopefully could be a preview of what’s to come for other air cargo trade lanes and particularly East/West as passengers begin to travel again

The growth in flight numbers have helped cool transatlantic rates and business travel across the Atlantic has largely returned to normal

Capacity to and from Asia remains strained, but people are increasing looking to fly, because there’s pent-up demand, despite the ‘cost of living crisis’, though how long this will last is questionable.

Cargo volumes at European airports rebounded in 2021, growing 33% during the year compared to 2020 and were slightly above the pre-pandemic levels of 2019.

Volumes at London Heathrow have increased by 9%, but volumes at Frankfurt and Amsterdam Schiphol have fallen by 8% and 10%and that trend may continue as the seasonal rebound usually seen following the Chinese New Year, is at its weakest level since 2011, rising just 12% compared to a 10-year average of 16.7%.

European road freight rates hit an all-time high in Q1 2022 as rising cost pressures, supply and capacity disruptions, regulatory change and war in Ukraine created a potent mix of rate drivers.

The highest ever fuel prices, tough market conditions and high rates mean the sector’s projected growth of 4.9% in 2022 is something of a surprise.

The majority of the supply side issues come from driver shortages, with numbers in some countries such as the UK and Poland, still reaching around 100,000, driving costs up for hauliers and therefore rates are rising too.

The road freight sector has been hit particularly hard by increasing fuel prices, pushed higher by the Ukraine crisis, with the cost of running a truck £20K more than a year ago.
Ultimately, with diesel prices increasing by 50% in a year, it is a further cost to the customer and ultimately the end-user, as it filters into inflation.

Two years on from Brexit and the road freight sector is still feeling the effect, with rules changing and inconsistent from country to country and the shortage of international drivers, contributing to the drop in the number of people working in the industry.

Thankfully, recent figures suggest that the driver shortage is lessening, with 27,144 HGV vocational tests undertaken in Q4 2021, a 53.5% increase compared with Q4 2019.

However bleak our market reports may seem on occasion, we have the solutions, processes and capability to protect your supply chain, however demanding your needs are.

To discuss any of the issues highlighted here, or to discover the value that PSP Worldwide would bring to your supply chain please EMAIL our managing director, Colin Redman.

We continuously monitor the evolving logistics environment, to share breaking news and developments, so that you can make the informed decisions that will protect your supply chain.