Freight Forward - Slowing Down
Welcome to Freight Forward, where each Monday, I’ll recap what happened in supply chains the previous week through?JOC.com?articles and additional sources and also what to expect for the week ahead.
I’m Cathy Roberson, a supply chain writer, and researcher. For this weekly series, I serve as a research analyst for the Journal of Commerce (JOC), for whom I identify trends, provide thoughts and input into stories and assist with parcel last-mile queries.
As the end of 2022 draws near, ocean freight demand is slowing and spot rates are declining across all transportation modes. However, port expansions continue, ocean freight demand for some remains strong, parcel rates are rising and demand for warehousing continues.
2023 will see a changing of the guard at A.P. M?ller – Maersk as Vincent Clerc, currently, CEO of the carrier’s ocean and logistics business will succeed S?ren Skou as CEO of the company.
“The strong tailwinds that benefited the supply chain industries during the pandemic are coming to an end,” Uggla?said in Monday’s?statement. “With an increasingly challenging outlook, the board believes Vincent holds the right experience and capabilities as CEO to pursue and oversee Maersk’s strategic and organizational development in the years to come.”?
US imports from Asia declined for the third consecutive month in November.?Asian imports declined 12.6% from November 2021 to 1.3 million TEU, according to container statistics released Wednesday by PIERS, a sister product of the?Journal of Commerce?within S&P Global. November’s drop follows year-on-year declines of 11.8% in October and 4.2% in September.?
Shippers and forwarders forecast that the decline in volumes in the eastbound trans-Pacific will continue to accelerate in early 2023 as a number of factories in China will begin furloughing workers in early January rather than waiting for the annual Lunar New Year celebrations to begin on Jan. 22.?
“Typically, they take two weeks out,” Seroka said. “This year we’re looking at four to five weeks. So effectively, the factories will start to close down around the seventh of January ... through about the sixth of February,” said Gene Seroka, executive director of the Port of Los Angeles.
When the factories reopen and have ramped up to full production, it will take about 12 to 14 days for vessels leaving Asian load ports to reach the US West Coast, so February will be an especially weak month for cargo volumes, Seroka said.?
Jon Monroe, who serves as an adviser to non-vessel-operating common carriers, said advance bookings by customers for trans-Pacific vessel departures into January are dropping quickly. Some clients are saying their orders in the coming months will be down 30% to 40% from last year because of waning demand from their customers, Monroe told the?Journal of Commerce.?
Indeed, Asia-based freight forwarders say some carriers have stopped accepting spot bookings on mainline trans-Pacific and Asia-Europe services from South China due to a capacity crunch caused by lines blanking sailings and shippers consigning cargo earlier than normal ahead of Lunar New Year.??
Forwarders said cargo owners, faced with declining order volumes, are shipping orders well ahead of the Lunar New Year holiday so they can close factories for an extended holiday break.??
Meanwhile, The trans-Atlantic benefitted from shifts from the trans-Pacific and growth in US trade with Europe. Spot rates have remained positive. But spot rates could soon fall according to Sea-Intelligence’s data for December 2022 to February 2023 with capacity growth scheduled to soar from mid-December and reach a temporary apex close to New Year’s Eve on both the North Europe and Mediterranean trade routes to North America.?
Still,?some folks do not believe that increases in capacity will lead to an imminent rate collapse.?
“The trans-Atlantic is not immune to global trade, so I am also expecting it to soften,” Rolf Habben Jansen, CEO of Hapag-Lloyd,?told a media briefing this week.?
“But the utilization at most of the ports that are being called is still high, so it’s not that easy to significantly add capacity,” he added. “I also think that is not necessary because congestion is easing on the US East Coast and in Europe, so there will be enough capacity to carry the demand.”
Port Expansions
Ports America, the largest US marine terminal operator, and Mediterranean Shipping Co. plan to invest $800 million via a partnership with the state of Louisiana to build a $1.5 billion container terminal in New Orleans.??
The terminal will allow New Orleans?to handle larger ships and will have stronger intermodal and rail connections than the port’s Napoleon terminal, which is operated by Ports America.??
Port officials hope the opening of the first berth, slated for 2028, will help attract more retailers, which will then bring more container services.
“Access to global markets represents expanding opportunities for both urban and rural communities,” Louisiana Gov. John Bel?Edwards said in a statement. “The powerful impact of this world-class logistics asset will benefit not only residents and businesses in south Louisiana, but it will also benefit advanced manufacturing, agribusiness, and energy workers all across the state.”??
“There is a significant amount of volume moving through other ports that should be moving through our port at Wilmington,” Brian Clark, executive director of the North Carolina State Ports Authority, told the?Journal of Commerce. “Historically [North Carolina import and export] cargo moved through other ports based on lack of services and capability. Supply chains grew up in other directions and not necessarily through Wilmington. So our focus has been to reduce impediments, not because of loyalty but because it’s the most efficient way to move cargo.”?
A key differentiator, Clark said, is lower costs stemming from shorter overland first- and last-mile moves, Clark said.?
“If the cargo can move at a lower cost due to a shorter inland distance, it’s a benefit for that shipper or BCO [beneficial cargo owner],” Clark said. “That is our sales pitch to attract the service and volume through the port of Wilmington versus the supply chain as it might exist today.”?
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On Dec. 6, the Maersk unit Performance Team?announced?plans to build a cold storage facility at Wilmington scheduled to open in the third quarter of next year.??
In another recent?announcement, Savannah-based Port City Logistics will break ground early next year on a $16 million transload facility less than a mile from the Wilmington port, focused on rapid transloads from ocean containers to over-the-road trucks.??
“The car carrier market is experiencing exceptional conditions,” Steve Gordon, managing director, of Clarkson’s Research, said in a statement.??
Overall trade is forecast to reach 20.3 million units in 2022, up 8% from 2021, and expected to grow further to 22.7 million units by 2024, Gordon said. Electric vehicles and hybrids, which are larger and heavier than traditional cars, now account for about 25% of global volume in trade.??
Changing trade patterns and port congestion have lengthened voyages and sopped up capacity, Gordon said. Japan and the US remain the world’s largest exporters and importers, respectively, but increasing Chinese exports are lengthening voyages. According to Clarksons’ Shipping Intelligence Weekly of Dec. 9, Chinese exports accounted for 50% of global car-mile trade growth in 2022.??
The car carrier fleet will have expanded by a mere 0.5%by the end of 2022, but there is a new ship?backlog of more than 16% of the total fleet capacity. Some 93%of those new ships, most of them to be built in China, will be dual-fuel liquefied natural gas (LNG). Only a handful will arrive in 2023.?
“We expect the car carrier fleet to grow by just 1.3% in 2023 before increased growth of 6.1%in 2024,” Gordon said.??
Inland spot rates falling into 2023...
“Almost all of our customers, except for the big [beneficial cargo owners], are playing the spot market right now because they figure they're safe at least until March,” one domestic intermodal executive, who did not want to be identified, told the?Journal of Commerce.?
“Shippers are playing it quarter-by-quarter at this point to see what the economy looks like next year,” the intermodal executive said. “Some will turn back to the contract?market in Q2, but others like our lumber shippers like to chase the lowest rate for as long as possible.”
?Arrive Logistics expects truckload spot rates to continue to drop in the first quarter, after some volatility this quarter due to end-of-the-year demand, and then remain relatively stable, with the gap between contract and spot truckload pricing gradually closing throughout the year. The 3PL’s forecast calls for national contract rates to drop to an average of about $2.22 per mile by the third quarter of 2023.?
“That’s still about 15 to 18 cents above the peak from the last cycle,” Spencer said. “There's still a healthy freight environment. When we talk about movement in the market it’s about supply in relation to demand, not supply in relation to historical levels.”??
...But not parcel rates
While downturns in spot rates are impacting ocean freight, air freight, intermodal, and trucking, parcel rates are on the rise and will have a big impact on shippers’ costs in 2023.
But shippers will have more options compared to years past – BOPIS/curbside pickups, lockers, alternative last-mile providers, and technology solutions to better manage costs and service needs.
While shippers are grappling with demand and costs, they are also rethinking and redesigning domestic networks closer to customers. For some like discount retailers, inventory volumes are prompting new distribution facilities.
Ollie’s Bargain Outlet — a discount retailer with nearly 470 stores in the US — plans to expand its distribution facility in York, Pennsylvania, and open a fourth distribution center in the Midwest in the first half of 2023 to meet continued high consumer demand for lower prices amid high inflation.?
Ollie’s is seeing “good activity” in flooring, automotive, lawn and garden, domestics, and housewares, Swygert said. “We think we're going to continue to see momentum,” he said. “With the overall inventory challenges that people are facing, a lot of goods are sitting in warehouses.”?
That’s it for this week. Please be sure to hit the subscribe button to receive the latest updates.
Reminder, the next Freight Forward will be published on Jan 2, 2023. ??
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What did I miss? Have a question? Let me know in the comments. I’ll be checking back throughout the week to answer questions, address comments and share additional insights.
In the meantime, here’s hoping everyone has a good freight week ahead!
-Cathy
Sales at Paragon Logistics Ltd , International Trade Israel wines Medjoul Dates , commodities .
2 年and im wondering when the Freight costs from ISRAEL To Canada will Drop :) , your essay well Explained . thanks Cathy ??
Driving Global Growth in Latin America with Agile, Innovative Solutions | CCO | Board Member | Strategic Business Connector
2 年How the increasing volumes of production in Mexico by Chinese companies and others moving fast to manufacture there are impacting the US ports operations? There is any impact or is not been measured?