- The global Purchase Managers Index’s New Export Orders Index (NEOI) has sharply dropped.
- A decline in China’s exports reflects significant shifts in manufacturing, while the U.S. continues to grow amidst political uncertainties.
- The increase in shipping capacity and rising blank sailings present further challenges for maintaining freight rates.
Carriers will be further troubled by the latest global Purchase Managers Index’s (PMI) New Export Orders Index. They were already facing pressure from dwindling demand. Also, experienced its most rapid decline in eight months, reports Seatrade Maritime.
Decline in New Export Orders Index
The NEOI fell to 48.9 in August from 49.6 in July, signaling deteriorating trade conditions for the third consecutive month.
Traded goods have slowed down in both developed and emerging markets. India showed modest growth in goods exports during August, the most recent month for which data is available.
Contraction in Manufacturing
Moreover, the global PMI has indicated a contraction in manufacturing. It suggests a further decline in cargo levels in the near term.
“China’s goods exports fell for the first time in 2024, signaling a broader decline in manufacturing as the year progresses,” said global freight forwarder Dimerco.
Federal Reserve’s Role in Trade Recovery
Dimerco, headquartered in Taiwan, noted that the Federal Reserve’s recent interest rate cut could potentially revive global goods trade.
In August, trading in the U.S. continued to grow, despite concerns about a possible East Coast port strike and a November election. It could introduce major import tariffs on goods.
Forecast for Handling Volumes
“The early peak season suggests an earlier-than-usual start to the slow season, with expected declines in handling volume from September to December, projected at 2.31m, 2.08m, 1.92m, and 1.89m TEU, respectively. If these forecasts hold, total port volume for 2024 could reach 24.98m TEU, a 12% increase from 2023,” said Alvin Fuh, VP – ocean freight at Dimerco Express Group.
Increase in Vessel Deliveries
Dynamar analyst Darron Wadey stated, “Approaching 470 vessels bringing around 3.2m TEU in capacity are expected to be delivered by the end of 2024.”
This significant increase in capacity, particularly for larger vessels, implies that any necessary correction in freight rates should have already begun over a year ago, according to Wadey.
Wadey noted, “It is only the happenstance of the Red Sea and US East Coast situations that have, artificially, buoyed the markets. When the markets do correct, therefore, the falls will only be more dramatic because the inevitable has been delayed whilst the stream of new ships coming online continues.”
Rising Blank Sailings
According to Drewry Shipping Consultants’ analysis, blank sailings are expected to rise between 9 September and 7 October, with an additional 53 blanked sailings, totaling 90 for the period.
About 67% of these canceled services were on the Pacific eastbound, while 21% were on the Asia to Europe trades and 12% on the Atlantic. Even with these canceled services, rates continue to decline across all major trades, according to Dimerco.
Challenges from New Entrants
New entrants are also contributing to the challenges lines face in maintaining rate levels.
“While the three major alliances are increasing blank sailings, several individual carriers have deployed 11 extra vessels for Europe WB and 14 for TPEB to handle the expected cargo surge before China’s Golden Week. However, the anticipated pre-October 1 cargo rush in China did not materialize this year, leaving no backlogs or rollover cargo for these extra loaders to transport,” stated Dimerco’s monthly analysis.
Long-Term Trade Rebalancing
Wadey asserted that rebalancing trade can only be achieved through long-term and steady growth, coupled with “a strategic rather than knee-jerk ship ordering policy.” These necessary adjustments are generational, he said, “in the short term, political events in the US might lead to an end-2024 rush for cargoes again… but then where does that leave 2025 and beyond?”
Drewry’s WCI index dropped another 7% this week, closing at $3,691/FEU.
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Source: Seatrade Maritime
