- Ocean carriers are preparing to blank around half their advertised sailings from Asia.
- It is against a background of extremely weak demand forecasts.
- Sailings will be shifted from Asia to North Europe and the US after Chinese New Year on 22 January.
High inventory levels in Europe and the US, coupled with uncertainty surrounding future consumer demand, has seen orders canceled or postponed, resulting in Chinese factories preparing to shut down well ahead of the CNY holiday.
Inventory Levels
Apparel marker Inditex said in its earnings call this week its inventory levels on 31 October were 27% higher year on year, and 15% higher on 8 December. It would not be drawn on its orderbook for next year. In its latest North America market update, Maersk said this year “more shippers are opting to wait until the holiday period concludes, as stocks shipped earlier in 2022 are already in position to fulfill demand”.
Meanwhile, after several consecutive weeks of double-digit falls, container spot market indices plateaued this week, suggesting the bottom may have been reached.Indeed, joining the port of Los Angeles monthly media briefing this week, ONE CEO Jeremy Nixon said he expected short-term rates would remain flat into 2023, and added: “I think we are effectively on the bottom of those spot market rates.” But he warned of a “big drop” in exports from Asia after the CNY holiday, and a “very soft” February and March.
Spot Rates
Elsewhere, on the Asia to North Europe trade lane, the average spot rates recorded by the publishing indices this week ranged from a reading of $2,167 per 40ft by the Freightos Baltic Exchange, down to $1,674 per 40ft by the WCI. Spot rates from Asia to Mediterranean ports were also stable this week, with, for instance, the WCI reading unchanged at $2,909 per 40ft. The transatlantic trade lane remains the outlier, with headhaul North Europe to US east coast short-term rates still at least three times higher than before the pandemic.
The strength of the US dollar against the euro and sterling, along with the increased focus on sourcing products from Europe instead of China, has enabled the trade to stay robust despite the downturns elsewhere. Spot rates on the transatlantic are primed to collapse in the coming months.
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Source: Theloadstar
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