October 2023 freight market report

The European Union’s surprise decision to end container shipping lines’ exemption from competition law next April and imposing carbon taxes on them from January, mean the lines already have a challenging 2024.

Situation Summary

Some airlines have resumed services to Israel, though charter requests are becoming increasingly harder to fulfil.

Operations continue at most sea freight terminals, but a backlog of vessels is growing, with MSC noting increased waiting times at Ashdod.

Ocean rates for goods shipped to Israel from Asia and western Europe initially fell, but that may change as insurance costs increase and?carriers pass along war risk premiums, with some underwriters reviewing cover provisions for Ashdod, although Haifa remained unaffected.

Ocean

After a full year of month-on-month falls in ocean freight rates, the Xeneta Global Index (XSI) recorded its first gain in 13 months, edging up 0.2% in September.

Although the latest figures are 62.2% lower than last August’s all-time high, of 453.2 points, the development will be welcomed by a carrier industry desperate for any indication of market improvement.

As carriers look to manage a market plagued by overcapacity, they have chosen to ensure profitability on a small number of high volume trades, shifting capacity away from these and onto lower volume trades, which is why there is a small increase in the import index.

In September, the index for Far East exports, the world’s largest trade, grew to 164.1 points, marking a 1.4% rise after thirteen consecutive monthly declines.?

TransAtlantic rates have been showing signs of stabilising, as carriers modify their deployed fleets, by adjusting the vessels’ size/capacity to demand.?

Spot rates have been more of a mixed bag, with those on the transPacific having more than doubled in the same quarter thanks to the implementation of strict capacity management by carriers.

However, other trades are still experiencing record low spot rates, with carriers seemingly choosing to “sacrifice” rates pressure on some routes, through added capacity, while reducing sailings on others to bolster prices.

Air

The global air cargo market has been relatively flat for three months in a row and September produced no surprises, with traditional seasonality pushing up demand and we expect a similar trend in October.

Recent rate increases may suggest a stabilising market, they are still well-below last year and where they started this year, and supply continues to enter the market on some lanes.

In addition to returning capacity, rising average fuel prices account for half of the overall rate increases on certain lanes in September and current events in the Middle East may further impact fuel prices.

While the market may see a better-than-expected finish to 2023, inflationary pressures and energy prices continue to restrain discretionary spending, so while inventories may have bottomed the likelihood of significant restocking is unlikely.

In the absence of positive macro and market conditions the uptick in rates is arguably driven by supply rather than demand and with the air cargo market entering this new phase, we are not anticipating big moves up or down, while the market finds its equilibrium, and it may be well into next year before we start to see a full-blown recovery.

Road

Peak season traditionally runs from October to January, with many businesses relying on road transport to get their products from A to B, to meet customer orders.

Influenced by the return of the HGV levy, fuel costs, higher business overheads and congestion charges, the traditional road freight price uptick seems to have come earlier this year and shippers need to be planning ahead to make sure their products aren’t left stranded in warehouses.

The industry is facing uncertainty around Net Zero targets, which means previous and upcoming plans are being put on hold, particularly with new doubts about how forthcoming future EV infrastructure investment will be.

What’s for sure is that hauliers and couriers are raising their prices ahead of the traditional Christmas peak, but the ongoing driver shortage could cause problems if demand rises significantly, which will add to price pressures, as will surging diesel prices.

But no matter what’s happening around them, road haulage firms will want to capitalise on Christmas demand, especially with the UK’s 2024 growth forecasts looking underwhelming.

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 us for our immediate attention.