Freight market report – June 2023
While Europe’s GDP growth is projected to slow to 0.7% in 2023, record volumes of new ships are joining a global fleet, which is sailing at ever slower speeds, as the shipping lines attempt to absorb additional capacity, by diminishing supply.
IATA has lowered its expectations for air cargo revenues and yields for the year due to growing capacity and a weak demand outlook, with the airline association predicting that cargo revenues will be down 31.3% on last year, as global demand for airfreight has fallen by 6.6%.
The most popular road freight lanes have not been protected from the decline in market volume and while prices are expected to continue softening, they are likely to remain elevated compared with historic norms, due to the shortage of drivers and vehicle supply pressures.
SEA
Persistently subdued demand and the injection of new-build capacity is exerting downward pressure on spot rates and led some participants to doubt the possibility of a traditional peak season.
The average sailing speed of the global container shipping fleet has fallen 4% year-on-year. Lower sailing speeds will decrease efficiency by 5% in 2023 and another 5% in 2024. Therefore, our forecast is for supply to grow by 8.3% in 2023 and 3.0% in 2024, as the lines seek to absorb all their new capacity.
– Asia-Europe spot rates stable, further dips expected
– Global schedule reliability continues to improve
– Blank sailing to continue due declining volumes
– BAF stabilised and we are not expecting increases
AIR
Summer transatlantic and transpacific passenger services are returning, and the combination of extra capacity alongside weak cargo demand is pushing air freight into the doldrums with volumes expected to bottom out within the next couple of months.
While cyclical downturns in air freight tend to last between six months and a year, this cycle looks as if it might be longer, with very few bright spots for carriers, though yields are still higher than pre-Covid.
– Given the uncertain global macro- outlook there has been no sign of a peak season
– Global demand for airfreight has fallen by 6.6%
– Additional capacity is up 13.4% in a month
– Rates continues to slide and are expected to continue into June/July
OVERLAND
The first quarter of the year traditionally corresponds to a fairly quiet period in road freight transport, after the end-of-year holidays, but the decline in 2023 is striking by its magnitude, especially in spot prices, which are a good indicator of the state of the supply/demand balance at any given time.
On average, in Q1 2023, spot rates declined much faster than contract rates, in line with the decline in consumer demand within European economies, which reduces the immediate pressure on spot market rates.
– Some trades have seen a softening of rates due to the decline in market volume
– Rates are expected to soften over the year, but would likely remain elevated
– The EU driver shortage continues to impact capacity and prices
– The EU currently boasts the highest average driver age, 47, in the world
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.