July 2023 freight market report

A subdued peak season, followed by a lengthy slack period, will prompt further rate erosion and while the Asia to Europe sea freight trade-lane has been relatively healthy, record numbers of new-build capacity being delivered through this year and next, will pressure rates, unless the container shipping lines take decisive action. 

Situation summary

Blank sailings in June were lower than previous months, as the carriers tried to secure additional booking on their newly deployed vessels, achieving load factors of 85-95%, which in turn affect rate levels.

Airfreight rate softening between May and June is not unusual and prices tend to fall incrementally during the summer, but it remains to be seen if they will pick up again in September ahead of the summer peak season.

The latest data shows that year-on-year haulage and courier prices remain stable, despite inflation pushing prices up elsewhere, though this stability may be short-lived as the HGV levy is reintroduced and staff shortages become a concern.

Ocean

Freight rates from Asia continued to soften in June and into July, as did BAF surcharges, with no fuel increases expected in July, although further blank sailings must be anticipated and with ocean carriers in the red, they may soon consider stopping loops.

The trade press has reported that container lines have been racking up loss-making voyages on the transpacific market and while US imports may have picked up, the Asia-Europe trade-lanes have been kept in the black by a robust Mediterranean market.

The delivery of a number of 24,000 teu ultra-large vessels in the coming months, which can only be deployed on Asia-North Europe alliance loops, could start a downward spiral of rates on the trade-lane, unless demand picks up significantly.

The timing couldn’t be worse for the introduction of the new mega-ships and the cascading of incumbent vessels to other trades will put downward pressure on rates on those routes.

With a new container ship order book of 7.60 Million teu, which is equivalent to almost a third of the existing liner fleet, it does look like the carriers are subverting their own market, through excessive capacity injection.

However, the container shipping market has been here many times in the past, given the cyclical nature of shipping and it is not a given, that new capacity should necessarily subvert the market, because the carriers have the ability to manage capacity, even in the face of large supply/demand discrepancies, as they have clearly demonstrated over the last couple of years.

Air

Airfreight rates declined again in June as demand slowed in the quieter summer period, with the Baltic Exchange Airfreight Index (BAI) showing that average rates from Hong Kong to North America are nearly 44% down on 2022, while average rates to Europe are down 40.4% for the same period.

Rate softening between May and June is not unusual as demand reduces during the summer holiday period and capacity increases as passenger aircraft belly-hold capacity is added for the summer season.

Prices tend to fall incrementally during the summer before starting to pick up again in September ahead of the summer peak season.

The fall in rates this year also reflects weaker market conditions and while declines do now seem to have plateaued, it remains to be seen if the market will pick up again in September.

Global air cargo tonnages in June show a continuation of the flat trend that started at the beginning of the month, while average rates continue their slight slide.

Road

While some road freight lane rates have softened and are likely to soften further, due to the decline in market volume, they have been relatively stable, though elevated compared to pre-pandemic levels

The latest data from the TEG Road Transport Price Index shows that year-on- year haulage and courier prices remain stable, despite inflation pushing prices up elsewhere, while the latest European Road Freight Transport Report from Transport Intelligence (Ti) shows a picture of a weak recovery, with some unpredictable factors creating an uncertain, challenging and complex market environment.

The European road freight market grew 3.5% in real terms in 2022, owing largely to Europe’s recovery from the COVID-19 pandemic and the stimulus packages working at full speed in the first half of the year.

However, the market moderation seen in the second half of 2022 has spilled over into 2023 and the European road freight market is projected to lose speed in 2023, expanding by only 1.4% in real terms.

In March 2023 capacity continued to exceed freight demand, but since the beginning of the second quarter, an increase in freight volumes or a decrease in capacity could be observed, and while this is in line with typical seasonal trends we expect the road freight market to be flat in 2023, though the downward trend in rates may not continue.

Our teams in the UK and across Asia continuously scan the evolving global multimodal operating environment, to identify potential issues and adapt operations, to avoid pitfalls that may challenge our customers’ supply chains.

We share the most important news and developments, so that you can make informed decisions that protect your supply chain.

To discuss any questions or concerns you might have, about the issues highlighted here, please reach out to Stefan Holmqvist or EMAIL us for immediate attention.