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Market review; 23rd May

Global economic indicators are moving positively, with GDP growth above market expectations, manufacturing PMI at its highest level in almost two years and the OECD’s Composite Leading Indicator suggesting continued moderate global growth.

The number of containers transported around the Cape of Good Hope will soon reach five million TEU. The diversions have been absorbing new containership deliveries, which have increased the global fleet by almost 10% annually, while the idle container vessel fleet comprises just 62 vessels, representing less than 0.5%.

Overall downward pressure on air freight spot rates are expected, except on trade lanes where the ongoing spike in eCommerce and lingering uncertainty around Red Sea disruption are expected to bolster rate levels.

Carriers have been pushing spot rates increases, GRIs and surcharges on all Asia outbound lanes, due to the increased demand and load factors coupled with equipment challenges in more ports and we expect these increase attempts to continue into the summer.

Ocean freight market demand has grown consistently over the last two quarters and while new container ship deliveries continue, with 300K teu due every month this quarter the diversion around the Cape of Good Hope, strong demand increase, and additional summer service deployments are absorbing this capacity.

The tightening of vessel space availability from Asia has sent the Shanghai Containerized Freight Index (SCFI) to its highest level since September 2022, rising 19% after last week’s holiday, with sharp increases on all long-haul routes ahead of the summer peak season.

Global air cargo demand kept climbing in April, rising 6% above the same period last year, with eCommerce fashion and consumer sectors driving growth and helping the Asia-Pacific market rebound, while transatlantic flows declined.

There has also been significant movement in the cost difference between air and ocean freight, which makes the air option particularly attractive.

Rates on services from Hong Kong to North America are now 6% ahead of last year’s levels, while rates from Hong Kong to Europe increased 12% as demand continues to surge.

Air freight’s booming eCommerce demand is led by the fashion and consumer sectors, with the surge in demand exceeding 50% from some southern origins, with eCommerce firms Shein and Temu sending over 600,000 packages to the US every day.

The deterioration in consumer sentiment in the UK and EU did not leave the road freight market unscathed last year, with a significant decline in total volumes. 

The trend continued early in 2024, however demand trends typically increase through spring and the beginning of summer. 

Capacity in April 2024 fell by -4.2% from March, suggesting that European road freight capacity is approaching potential supply chain bottlenecks as demand is picking up, and the Spot Price Index increasing 7% YoY. 

The capacity tightening we’re seeing may be driven by inventory restocking after inventories were widely reduced in 2023 following the order rush of 2022. Moving forward, lack of capacity coupled with an increase in consumer demand may further drive up spot and contract prices. 

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.

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.