Ocean rates are at a historic low, but “2024 will be more normal – if there is anything that can be considered normal in this industry now”, said Trine Nielsen, head of ocean for Flexport, reports The Loadstar.
European market update
In yesterday’s European market update, Flexport showed that, as supply continued to outstrip demand, rates were at pre-pandemic levels, which was “good news for customers”.
However, Ms Nielsen suggested carriers could have some cause for optimism going into the new year.
She said: “We do not expect carriers to accept continued rate declines, hence, regular rate increases are expected to be announced.”
She said the announcements of new rate increases were “starting to pay off”, and demand was beginning to increase.
Ms Nielsen explained: “If inventory is high, we see demand decline, and if inventory is low, we expect there will be a hike in demand.”
Nearly half of Flexport’s customers reported they had “too much inventory” in Q1, and only 33% had ‘the right amount’. However, by November, only 30% reported they had too much, and 58% had the correct levels, which the company said meant “demand is more normalized now than it was at the beginning of the year”.
Ms Nielsen predicted the blanking of sailings on Far East-North Europe routes would be less drastic going into January, while some carriers have reported near-full capacity for the last two weeks of December. Schedule reliability for the route remains stable at around 65% but is still below pre-pandemic levels.
Europe-North America rates have continued to drop this year and winter blank sailings have been scheduled to align with holiday-related demand decrease. Rates for the route are expected to remain stable into the new year, Flexport predicted. And while schedule reliability for this route had increased to 65%, from 38% in Q1, it is still below pre-pandemic levels, it added.
But Flexport warned that going into the new year, almost one in three vessels would be delayed and blank sailings would bring operational instability.
It advised: “Prepare for fluctuations in rates and schedules, don’t trust the proforma schedules, and allow some buffer in your planning,” it said.
And Flexport also had a warning for air shippers.
“Stay close to your freight forwarders and planners,” it advised as its market update reported overall demand this month was down 10.4% on December 2022, while capacity was up 6.5%.
“The airfreight market goes hand in hand with the global economy,” said Flexport regional airfreight manager Milena Milenkovic.
Consequently, rising dollar strength was cited as one of the main factors that could lead to an increase in demand for 2024, according to IATA.
Ms Milenkovic said November had been the first month in which demand was higher than supply – with e-commerce being cited as the main driver.
“Increase in e-commerce volumes from Hong Kong and China to Europe and the US inflated global air cargo demand by 5% YoY in November,” she said.
Since 1 December, China has eased visa restrictions for visitors from the Netherlands, Italy, Germany, France, and Malaysia, which, Flexport said, was “good news” for air cargo, as increased tourism meant increased belly capacity.
However, Ms Milenkovic warned shippers that the Chinese New Year holiday, which begins on 10 February, would likely result in delays as factories closed and communications could be slower. She added that warehouses and operations would begin to close in the 10 days leading up to Christmas.
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Source: The Loadstar
