Our November freight market report highlights key developments in air, sea and road freight, to keep you informed and to provide valuable supply chain insights, that will aid your decision making.

Situation summary

The threat of strike action has been lifted at the Port of Liverpool, after 600 workers agreed a pay deal with employers, but no deal has yet been agreed at Felixstowe and the threat of further action remains. Heathrow ground handlers at dnata and Menzies will take part in three days of strike action this month over their pay dispute.

We are monitoring the situation at Felixstowe and Heathrow closely and will pass on developments.

The westbound trade from Asia hardened this week, but generally continues to soften, while transatlantic demand remains high, but schedule integrity remains poor, with extended waiting times at some ports in Europe and the US.

The build up to the traditional air freight peak season, that usually sees a sharp increase in demand and rates from Asia between September and October, has not materialised, but capacity has recovered globally and time-sensitive solutions are optimised.

Diesel prices, driver shortages and drought in Europe have all played a significant role in pushing average European road freight rates up again in Q3, but data from the end of the quarter suggests that prices may soften.

Ocean

With two good quarters (and not a bad third, due to long-term contracts) the carriers are still highly profitable, but earnings are now dropping from the third quarter and rates are volatile across the board.

Transatlantic demand remains high and despite the container shipping lines’ efforts to recover vessel transits times, schedule integrity remains low with extended waiting times in Europe and the US, which are still leading to recovery-led blank sailings.

Blanking sailings from Asia, during what should be the ocean freight peak season, illustrate how difficult times are for the container shipping lines, with almost 300 idled vessels passing the 1M teu capacity milestone and likely to go much higher, as carriers prepare to suspend services rather than blank sailings.

Blank sailings were highest on the Asia to Europe trade lane in September with an average of 41% compared to 27% in October and is forecast to rise again to 31% in November. On the transatlantic trade lane, blank sailings averaged 36% in September, compared to an average of 32% on the Transpacific.

With an increasing decline in liftings the biggest carriers have reiterated their strategy to take out capacity to meet demand, but the speed of the decline in exports from China has caught many off guard and made the reactive blanking strategies of most carriers ineffective at halting the erosion of spot and short-term rates.

Despite rates recovering into the US and Europe this week, analysts suggest that more radical capacity reduction plans will be necessary to avoid a collapse in contract rates and HSBC have said that the container shipping lines need to do much to stabilise freight rates ahead of upcoming contract negotiations for the Asia-Europe route, in November and December.

Air

While airfreight rates in Asia have been dropping in recent months, there was a short-lived price increase in the first half of October, due to cancelled flights from China during Golden Week and high demand for e-commerce cargo.

Freight rates remain well above 2019 levels, and while the continuing return of capacity has softened yields in recent months, rates are unlikely to be affected, mostly due to jet fuel price hikes and service disruptions.

With softened demand and sufficient capacity across most significant routes, we are expecting aggressive spot markets on most trade-lanes, which provides a massive opportunity for shippers of time-sensitive cargoes.

Global capacity is 5% lower than 2019, but 18% higher against last year, with belly capacity up 23% and rates could further ease as capacity continues to recover.

With the re-opening of Japan’s border and the easing of hotel quarantine for arriving passengers in Taiwan and Hong Kong, more passenger services are expected, with additional belly capacity likely to be added.

Space constraints from China are improving after Golden week cancellations, while air space closures continue to impact EU,UK and US carriers; increasing costs and transit times.

UAE flag carrier Emirates has ordered five new Boeing 777-200LR freighter aircraft, with two to be delivered in 2024 and the remaining three in 2025.

Road

Diesel prices, driver shortages and drought in Europe have all played a significant role in pushing average European road freight rates up again in Q3, despite lower consumer spending.

The continuing war in Ukraine, the energy crisis, and spiking inflation and interest rates across Europe has dampened consumer spending and with it demand for freight.

The UK and EU’s inflation rates have already exceeded 10%, with some EU member states experiencing massive increases; Estonia 22.4%; Lithuania 22.0%; Latvia 21.8%; and 11.6% in Germany, the the highest level since 1951.

The UK economy is expected to contract around 0.2% each quarter from Q4 this year through to Q2 2023, while European economic growth appears to have stabilised, with GDP growth of around 3.2% forecast for 2022.

Rising price inflation and economic uncertainty are becoming more apparent in the transport logistics sector, with decline in demand in the third quarter and forecasts that this trend will continue into 2023.

This decline in demand is also reflected in capacity indexes, which indicate that the supply of capacity in the market is generally improving, while some bottleneck situations remain.

This quarter’s smaller spot and contract rate rises may signify that the market has adjusted to higher costs whilst higher production costs and lower consumer spending have eased the demand-side pressure on rates.

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 for our immediate attention.