Market review; July
Over seven months have passed since the Galaxy Leader was hijacked by Houthi rebels from Yemen, and despite numerous US and coalition strikes, attacks on merchant vessels have increased.
Conflicts in the Middle East often extend for years, influencing container shipping lines’ long-term planning, which may include ordering more vessels despite the risk of future overcapacity.
New ocean freight capacity injections have surged on the Far East trades to Europe, Indian Subcontinent and US and these additions will continue through August.
Despite the added capacity, firm demand is keeping capacity utilisation tight on many routes, with continued rate increases on the Asia-North Europe route due to schedule disruptions and port congestion.
The latest air freight data for July shows stable volumes during the quieter summer period, though still significantly higher than last year.
AIR
Airfreight rates on key trades out of Asia remained firm in June, despite the typically quieter summer season.
The Baltic Exchange Airfreight Index (BAI) reported year-on-year increases of 22% from Hong Kong to Europe and 17% to North America, with slight increases from May levels.
This strength is attributed to robust eCommerce activity from major Chinese exporters like Temu and Shein, as well as disruptions in ocean shipping making air cargo relatively more attractive.
Outbound routes from Hong Kong saw a 2.3% increase in June, leading to a 21% year-on-year rise, while outbound Shanghai, despite a 2.7% month-on-month decline, was still 42% higher than last year. Significant year-on-year rate increases were also noted from other major Asian markets, including India and Vietnam.
Despite economic uncertainties, air cargo demand remains robust, with a strong outlook for the rest of the year, with potential spikes in spot rates later due to pre-booked capacity for peak seasons like Thanksgiving and Christmas.
SEA
The global demand for ocean freight container shipping hit an all-time record high in May, despite capacity challenges from diversions and port congestion, increasing 7.5% on 2023.
Capacity injections on routes from the Far East to the Indian Subcontinent, Latin America, and the US West Coast increased by 9%, 6%, and 5% respectively, but despite the new capacity, vessel utilisation remains tight, with rates still rising on the Asia-North Europe route due to schedule disruptions and adverse weather.
Average spot rates have significantly increased, with Far East to US West Coast rates up 200% since April, and similar surges for routes to North Europe and the Mediterranean.
New build deliveries during the first half of 2024 saw the addition of 257 container ships totalling 1.65 million TEUs, primarily allocated to Asia-Europe services, reflecting the strategic focus on these high-demand routes.
ROAD
In 2023, the European road freight market contracted by 2% due to economic slowdowns and challenging macroeconomic conditions. However, it is projected to grow by 1.5% in 2024, with an expected compound annual growth rate (CAGR) of 2% from 2023 to 2028.
The TEG Road Transport Index showed a 1.45% monthly rise in June, while haulier prices increased by almost 3%. Despite these increases, courier prices remained relatively stable.
The outlook for early 2024 remains subdued, with market recovery dependent on strengthening household demand from higher real incomes and disinflation. Key risks include potential increases in energy prices, tighter lending criteria, and volatile inflation.
Transporeon’s latest data indicated a 7.5% year-on-year decrease in European road freight capacity in June 2024, marking the sixth consecutive fall.
Despite the challenging market, freight rates remain high due to rising driver costs, road toll adjustments, and investments in decarbonisation. Road tolls, especially in Belgium and Germany, and increasing investments in green technologies are contributing to the rising costs for road freight carriers.
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.