May 2023 freight market report

Global air freight capacity was up 15% last month, while European road transport capacity is increasing and any recovery in the container shipping market is likely to be overwhelmed by the flood of new vessels entering the market.

Situation summary

Vessel capacity utilisation remained high from Asia in April, with a slight recovery in cargo volumes and despite the market softening in May, the container shipping lines have been restrained in their blank sailings programs, with only 3.1% of capacity withdrawn in April, and 2% this month.

Road freight capacity issues have eased, but with continuing driver shortages any volume recovery will swiftly apply upward pressure on rates, while global air freight volumes are down 11.1% compared to 2022, while capacity has grown by 4.5% compared to the same period in 2019. 

Ocean

The container shipping lines’ blank sailing program from Asia into Europe is largely failing to balance the supply and demand equation in their favour, while the backhaul space situation is relaxed and while there are no issues with capacity, some vessel delays and blank sailings/suspension of services are still in place.

On the transpacific, carriers implemented a GRI in April, but the announced May increase has yet to materialise, with volumes softening.

While the transatlantic has been more resilient than many other trades, it is softening as weak US demand and surplus capacity impacts Europe to North America routes.

The Asia to Mediterranean trade-lane is looking more positive for carriers with carriers reporting that demand is healthy.

Air

The air freight market, which stabilised in April, is starting to see a downward rate trend due to additional PAX capacity being deployed during the busy summer period, with carriers now starting to compete for belly cargo. 

Rate developments through April were somewhat inconsistent, with some routes seeing reductions, while others have seen little or no change due to unpredictability of supply and demand, while jet fuel prices in Europe have been fluctuating more than usual due to the upcoming summer travel season 

Purchasing managers’ indices for new export orders and for China had both fallen below the 50-mark in March, indicating declining confidence, but corporate sentiment is improving, with positive indicators, such as production and new orders, reaching 9 and 12 month highs respectively. 

Slack consumer demand may have impacted demand for air freight, but there is some indication that inventory restocking may become critical and could trigger a peak season in 2023, Air Cargo News reported earlier this month. 

Road

While it’s typical for road freight activity to dip after the Easter holiday season, this year’s drop is bigger than usual and suggests the market may be be recalibrating after price surges in 2022, but it’s doubtful we’ll return to pre-pandemic conditions, especially with capacity shortages remaining a major concern. 

The stagnation in freight demand from Q4 2022 has continued into 2023, flattening the driver shortage curve, but nothing has changed in the long-term outlook of the profession, with the share of young drivers extremely low and any jump in demand from European economies will further exacerbate the shortage of drivers, which in turn will limit economic growth. 

While fuel costs have fallen from their 2022 high, they remain elevated compared to 2021 and any further freight rate falls from falling demand will be limited by supply-side pressure that has created a higher cost base and capacity constraints driven by driver shortages, which will prevent freight rates from reaching historic lows. 

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 EMAIL [email protected] or contact Stefan Holmqvist for our immediate attention.