OCEAN FREIGHT​

Big capacity boost for Latin American-related services

• The global container fleet grew 10.6% between 1 June 2023 and 1 June 2024. This huge capacity injection of 2.85 Mteu slots has helped carriers to deploy more ships in liner services between Asia or the Indian Subcontinent and Europe, where more units are needed for the re-routings via the Cape of Good Hope due to the Red Sea crisis.

• As consequence of this, capacity increases on all other trades were well below 10.6%, with the Latin American region the only exception.

• The total capacity of vessels deployed in deep sea and regional liner services to and from Latin America increased from 3.5 Mteu on 1 June 2023 to 4.1 Mteu (+17.4%). The chart shows the far-reaching impact of the Red Sea crisis on the deployment of the overall container fleet. Carriers operating weekly services between Asia and Europe had to add between 25% and 30% more ships to their loops to keep them fully staffed.

• Many carriers including Wan Hai Lines, COSCO SHIPPING Lines & OOCL, SeaLead, MSC and ZIM have announced the start of new Asia - West Coast of North America loops in June or July. This requires the deployment of at least 35 additional ships with capacities ranging from 3,000 to 16,600 teu.

Global fleet deployment by trade and yearly comparison

Source: Alpahliner 2024-27

AIR FREIGHT

Ocean and airfreight rate differential narrows

• The air freight industry is witnessing a notable uptick in demand, with recent data indicating a significant increase in the volume of goods being transported by air. This surge in demand has put considerable strain on available capacity, leading to challenges in meeting the growing needs of businesses and consumers alike. Specifically, the demand for air freight has been observed to perk up, with certain sectors reporting a substantial rise in shipments. For instance, the e-commerce sector, driven by the ongoing pandemic-induced shift towards online shopping, has seen a remarkable increase in air freight volumes.

• Moreover, the rate differential between ocean and air freight is narrowing, suggesting that shippers are opting for air freight over sea transport due to its superior speed and reliability, even at a higher cost. This shift is particularly evident in the trans-Pacific trade lanes, where the time-sensitive nature of goods, such as electronics and consumer goods, necessitates faster transportation options. The narrowing gap in rates reflects the increasing preference for air freight among shippers looking to minimize transit times and ensure timely delivery of goods.

Air rates over ocean rates ratio, jun2018 – May 2024​

Ratio/multiplier

Source: AirCargoNews, TheLoadStar

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OCEAN FREIGHT​

Carriers cutting back on vessel space allotments for NVOs

• In the current ocean freight industry landscape, capacity constraints are a pressing issue, exacerbated by an early peak shipping season, diversions around southern Africa to circumvent conflict zones, and looming labor disruptions in key ports. These factors, combined with an overall increase in demand, create a tight market condition where carriers struggle to fulfill their space allotment commitments to Non-Vessel Operating Common Carriers (NVOs) and retailers.

• In response, carriers are focusing on maximizing profits by securing high-paying spot cargo, often at the expense of contractual obligations. Amidst these challenges, there are glimmers of hope with reports of easing congestion in select Asian ports like Singapore, Malaysia, and China. This relief is partly attributed to operational improvements and the redirection of cargo flows. Additionally, increased transshipment activity through India's Mundra Port offers an alternative solution, albeit with its own set of challenges as India grapples with congestion issues.

• While these developments signal some alleviation of the capacity constraints, the overall situation remains dynamic, influenced by a myriad of factors that continue to shape the ocean freight industry's landscape..

Total monthly TEU volume of US containerized imports from Asia, with YOY change

• The US imports from Asia up yoy. In May were 1.44 million TEUs, up from 1.39 million TEUs in April, according to PIERs. Carriers are maximizing spot market revenues and implementing peak season surcharges to tackle high demand.

Source: JOC, AJOT, AJOT-2

AIR FREIGHT

Robust Transpacific air cargo market set for busier summer than usual

• The Transpacific air cargo market is set for a busier summer than usual, with spot rates remaining elevated. The eastbound corridor from Northeast Asia to the US has witnessed a rebound of over 30% in spot rates compared to the previous year.

• In the first week of May, average ocean container spot rates from Northeast Asia to the US West Coast were more than double the levels seen 12 months earlier. The average air cargo spot rate on the Transpacific trade during the same period was nearly nine times higher than ocean container spot rates.

• Furthermore, general cargo spot rates from Southern China and Hong Kong to the US were USD 5.24 per kg and USD 4.23 per kg respectively, representing an 85% increase compared to 2019. These figures indicate a strong demand for air cargo, driven by disruptions in ocean freight services and the resilience of the US economy. Shippers and freight forwarders may consider alternative routes to optimize capacity utilization and cost management in anticipation of another potentially robust peak season ahead.

Weekly air general cargo and ocean dry container spot rates from Northeast Asia to the US, ending 5May

Source: XENETA

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OCEAN FREIGHT​

Sudden container crunch sends ocean freight rates soaring, setting off global trade alarm bells

• The beginning of peak shipping season, coupled with the longer transits to avoid the Red Sea, and bad weather in Asia, have hit the flow of trade on key routes. Ocean carriers are skipping ports or decreasing their time at port, and not picking up empty containers, in an effort to keep vessels on track for delivery.

• Freight spot rates up some 30% over the past few weeks and already expected it will be heading higher. Sending cargo to Europe and US by ships will become more expensive from June as shipping lines are introducing surcharges to meet the additional cost by routing the vessels through the Cape of Good Hope.

• Xeneta ocean freight rates show the rallying spot market and the widening spread between spot and long-term rates. “The bigger the spread between long and short term rates, the greater the risk of cargo being rolled,” said Emily Stausbøll, senior shipping analyst at Xeneta.

• Due to the longer route to avid Red Sea, containers are out on the water longer and not available to be reloaded. The availability of containers has been slowed even further by the bad weather impacting port operations in China, Malaysia, and Singapore. Logistics experts tells, “Trade lanes from Asia to Latin America, Transpacific routes, and Asia to Europe are all experiencing space constraints,”

• With 2024 retail sales in the U.S. forecast at an increase between 2.5% and 3.5%, it expects the current market trend and space situation will continue through June at least.​

Short- and long-term market rates for 40-foot equivalent units from East Asia to the U.S.

Source: CNBC, thehindubusiness, theloadstar

AIR FREIGHT

October air cargo demand sub-seasonal compared with past five years

• Global air cargo volumes and spot rates edged up marginally in October, but overall demand remained muted, diminishing hope of a traditional year-end revenue boost for airlines and freight forwarders.

• In comparison to last year, the global air cargo spot rate declined at its slowest pace of -30% in October. This is attributed to the slight uptick in global cargo volumes as well as a slowdown of cargo capacity growth in a month in which global belly capacity returned to its pre-pandemic level, albeit this recovery is varied across major lanes.

• Market players said this current demand is driven by ecommerce rather than B2B general cargo.

Industry data shows a 2% month-over-month improvement in airfreight volumes in Oct, which was sub-seasonal compared to the previous five years, while general air cargo spot rates edged up 2% versus Sep to USD 2.28 per kg, rising above seasonal rates in the opening two weeks of Oct for the first time since mid-May 2023 before falling back to below the seasonal level.

Source: The Loadstar-1, The Loadstar-2 ​_____________________________________

OCEAN FREIGHT​

Shipping braces for impact as Panama Canal slashes capacity

After its driest October on record, the Panama Canal will severely restrict transit capacity to conserve water. Shipping will feel the effects in the months ahead, with different vessel types facing different fallout. The Panama Canal Authority had previously reduced daily transit reservation slots from 36 to 32. On Tuesday (Oct 31), it announced that reservation slots will be limited to 25 as of Friday, 24 starting Nov. 8 and 22 on Dec. 1. The number of reservation slots will fall to 20 on Jan. 1, 2024, then 18 starting Feb. 1.

Trade patterns have already seen a major shift. Ship-position data from MarineTraffic shows that the majority of dry bulk vessels loaded with U.S. cargoes in that size category are now taking the Suez route and avoiding the Panama Canal. Any restrictions to Suez Canal transits due to an escalation of the Israel-Hamas war would lead to even more rerouting of U.S. agribulk exports, and even longer voyages via the Cape of Good Hope.

The sequential coastal shift average heavily favored the East/Gulf Coast ports from mid-2021 through this Aug, but has now reversed. In Sep, that difference flipped to the West Coast ports’ advantage of 8.2 percentage points. Long Beach posted its best Sep ever in terms of overall throughput, with imports up 19.3% y/y. Long Angeles’ imports rose 14.3% y/y.

West Coast Vs East/Gulf Coast % Change In Volume 3 Month Trailing

Source: Freightwaves-1, Frieghtwaves-2, Freightwaves-3

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Month-Over-Month Blank Sailings Trend

percentage change blank sailings on total monthly sailings​

(Data as of Nov 24, 2023)

ASIA to North Europe

ASIA to Mediterranean

ASIA to USWC

ASIA to USEC

Source: Drewry

AIR FREIGHT

Air cargo revenue tumbles for the US majors, but they eye a strong Q4

• Major US airlines have experienced a decline in air cargo revenue, although they remain optimistic about a strong fourth quarter. American Airlines, Delta Air Lines, and United Airlines all reported decreases in cargo revenue for Q3 compared to the previous year. However, the airline executives are positive about the outlook for the fourth quarter. They highlight the growth in certain sectors such as e-commerce, automotive, and pharmaceuticals, which has contributed to strong revenue performance. Additionally, the airlines emphasize the increase in cargo ton miles and the stabilization of yields in some areas and hopeful for a robust performance in the coming months.

• Besides, China's air cargo industry is demonstrating resilience as well. Various stakeholders, including airlines, airports are taking proactive measures to expand their freighter fleets, establish new routes, enhance infrastructure, and improve operational efficiency. SF Airlines, the largest cargo airline in China, is expanding its fleet to 86 freighters to become a world-class carrier. China's civil air transport has seen positive recovery with increased transport turnover and air cargo volume. The Ezhou Huahu Airport, China's first cargo-focused airport, has experienced significant growth.​

The overall rise was again led by firmer prices out of China with the index of outbound routes from Hong Kong gaining a further 2.7% WoW and from Shanghai, up even more strongly by 4.1% WoW

Source: The Load Star, Xinhua, stattimes

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OCEAN FREIGHT​

Retailers pivot in fast-moving trans-Pacific as carriers accelerate blank sailings

• Facing the prospects of low-single-digit volume growth through the Lunar New Year in February, carriers so far this month have effectively reduced almost 22% of trans-Pacific capacity through blank sailings. That’s up from 11.5% in September and 13.1% in August. Container lines have so far announced capacity cuts of 6.4% in November and 1.7% in December, those numbers are expected to increase significantly in the coming weeks as more blanks are announced. THE Alliance announced to suspend two East - West loops. One of these is the Asia – Europe loop ‘FE5’ and the other is the transpacific service ‘EC4’. Overall, capacity measure will make a total of 22 neo-panamax ships redundant.

• Market shows slower demand for container shipping. According to the National Retail Federation, the inventory-to-sales ratios in the U.S. for retail trade are back to the pre-pandemic levels. Retailers have been working to destock throughout the year, resulting in leaner operations and improved inventory flow. The NRF CEO believes that the industry is well-positioned for the post-holiday season and future selling seasons.

Carriers accelerate trans-Pacific blank sailings in October

(Data as of Oct 24, 2023)

Inventory-to-sales ratios for retail trade

​(excluding motor vehicle and parts dealers)

Source: Alphaliner#43, JOC, retaildive

Month-Over-Month Blank Sailings Trend

(Data as of Oct 27, 2023)

Source: Drewry

AIR FREIGHT

Is the air cargo market finally showing signs of improvement?

• Emerging reports suggest that the air cargo market may finally be showing signs of a slight mprovement after a year and a half in the doldrums. While WorldACD data shows that air cargo demand increased a bit, F Flexport also reported a pick-up in demand last week, particularly out of Asia.

• in August, bucking an industry downtrend, which it attributed to strong e-commerce volumes. The company recorded air freight increases last month both on year-on-year terms and also compared to the volumes seen in July. E-commerce remains a bright spot for the business, with tonnage continuing to see positive growth.

• On the other hand, Bournemouth airport’s freight division Cargo First announced doubling capacity to Chengdu in China from three to six weekly services. The increase was a huge vote of confidence in Bournemouth as an e-commerce gateway to the UK, with the airport’s location, lack of slot constraints, flexibility and speed, and European Cargo’s growing fleet capacity, “a winning combination”.

Airfreight rates – Baltic exchange airfreight index​

Source: Air Cargo News-1, Air Cargo News-2, The Loadstar, Asia Cargo News

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OCEAN FREIGHT​

Boxship inactivity flat in first half of September

• After a persistent downward trend in the first half of the year, the global inactive container ship fleet remained stable with only slight fluctuations in the months of June, July, August and September.

• Over the past fortnight, a slight capacity growth in terms of carrier controlled idle tonnage was offset by a drop in non-operating-owner controlled idle tonnage and in the count of vessels in drydock. This period of stability is expected to end in the coming weeks. Carriers have already outlined ‘blank sailing’ initiatives as the Chinese Golden Week holidays are expected to create a demand lull in early ​
• October. The holidays also mark the start of the traditional slack period in liner shipping that typically last through all of Q4 and into Q1.

• With China’s Golden Week holiday on the horizon, Container xChange predicts blank sailing rates will jump to 16% during weeks 38 to 42 of this year, specifically on trade routes from Asia to Northern Europe as well as the Mediterranean.

Inactive fleet capacity (TEU) & proportion to total cellular fleet (%)

Source: Alphaliner#38, Supply Chain Brain ​

AIR FREIGHT

Asia Pacific Airlines Mark 17 Months Of Consecutive Decline In July

• According to Asia Pacific Airlines (AAPA), international air cargo demand — measured in freight tonne-kilometres (FTK) is falling by 0.6% year-on-year in July as the persisting slowdown in global activity continued to weigh on demand for air freight transport.

• Amidst a weakness in demand for both consumer and intermediate goods, Asian airlines experienced an 8.4% drop in international air cargo demand during the first seven months of the year. The ongoing restoration of flights led to an increase in belly-hold cargo space, contributing to an expansion in offered freight capacity. As a result, the average international freight load factor declined by 5.5% points to 60.9% for the month.

• AAPA director-general commented, ‘In the passenger business segment, demand is expected to remain strong, underpinning further growth in passenger traffic — although uncertainties in the wider macroeconomic environment. The outlook for Asian airlines remains positive, as carriers continue to grow networks to meet travel demand and return gradually to profitability.’

Traffic Update – Preliminary ​

(International Scheduled Services of Asia Pacific Airlines)

Source: asiacargonews, aircargonews

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OCEAN FREIGHT

Shipping ‘Traffic Jam’ At Panama Canal: It’s Not A Crisis (Yet)?

• The recent "traffic jam" of ships at the Panama Canal and seems it is not considered a crisis at the moment. Despite the canal facing a historic water shortage due to drought, the constraints have not significantly impacted American consumers or global supply chains.

• The average waiting time for container ships remains insignificant, while the waiting time for other types of vessels has increased. The official data from the Panama Canal Authority shows that the current queue is only 30% higher than normal, not more than twice normal levels.

• On the schedule reliability of vessels from Asia to the North America east coast through the Panama Canal, there is a slowdown trend since its peaked in April 2023 at 46.2%, down to 38.8% in July. The data doesn’t include the 160+ ships that were waiting in August, implies its common sense the trend line of reliability is going down.

• While the situation at the Panama Canal is being closely monitored, shippers and customers are being flexible to adapt to canal constraints, such as dropping off containers at Pacific hubs for transshipment or redirecting cargo to West Coast ports or the Suez Canal. At this point leaders will need to create contingency plans to make actionable decisions to minimize the impact that could bring in the future.

Source: Freightwaves-1, Freightwaves-2

Air Freight Market Update

Price War Keeps Air Cargo Rates Below Natural Level

• Air cargo volumes, load factors and rates have moved sideways in recent weeks after steadily declining 7% to 10% since March 2022 due to a slowing global economy, bloated inventories and improved ocean shipping reliability. The rate of decline began slowing in February and leveled off in May and June, bringing a sense of stability to the market.

• Airfreight market conditions vary by region. The Freightos Air Index for China to North America has been relatively stable for several weeks, mostly because of better e-commerce volumes, but recently dipped to $3.74/kg.

• Looking ahead, the summer months for the air cargo industry will likely remain muted in terms of growth, given the continuing uncertainties around the market. The possibility of no peak season in the ocean freight market could provide a boost to air cargo’s recovery later in the year if shippers need urgent shipments or consumer spending suddenly picks up. However, Xeneta expects any airfreight peak will be short-lived and not at the level seen previously.

Source: Freightwaves, Supply Chain Dive, Xeneta

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Ocean Freight Market Update

Trans-pacific Shipping Rates Rise As Carriers Make Capacity Cuts

• Spot rates have been on the rise for three straight weeks, rebounding to levels last seen in early 2023 and late 2022. U.S. import bookings remain above pre-COVID levels, and multiple analysts are now highlighting positive rate effects from reduced vessel capacity.

• Drewry attributed rising trans-Pacific spot rates to “capacity reductions due to an increase in blank [canceled] sailings,” fallout from labor disruptions in British Columbia and “a more optimistic outlook on cargo demand in North America.”

• “There is growing optimism for the Aug. 1 rate hike, especially on the trans-Pacific, where utilization has been very strong.” analysts commented.

• U.S. imports were up by single digits versus pre-pandemic levels during the first half of 2023. Data implies U.S. imports should remain at healthy levels through Aug and into the first half of Sept. If U.S. import volumes hold steady or increase in Aug and carriers reduce trans-Pacific via blank sailings, spot rates could continue to trend toward profitability.

Source: Freightwaves-1, Freightwaves-2

Air Freight Market Update

Europe-to-us Air Cargo Rates Set To Slacken Further Before Regaining Ground During The Year-end Peak Season

• Since reaching a high in December 2022, the air freight spot rate from Europe to the US has fallen by 65% this year. In June (or until 18 June) the rate stood at USD 1.96 per kg, 29% higher than the same period in 2019, but still lower than global rates.

• Downward pressure on the Europe-US corridor will likely continue in the third quarter, mainly due to higher cargo-carrying capacity, which is closely related to passenger seasonality (leisure travel during summer holidays in the Northern Hemisphere).

• Xeneta expects the Europe-US rate to experience only a slight uptick, but to remain above 2019 levels. This is due to both muted cargo demand and lower jet fuel prices compared to 2022, which are unlikely to provide enough thrust to boost the current air freight rate. Ongoing pressure from labor shortages and rising labor costs is also likely to drag on. However, year-end cargo capacity adjustments resulting from airlines’ winter season starting from the end of October should pull some overcapacity out of the market and limit the potential for further rate falls.

(% changes to the same month in 2019)

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Ocean Freight Market Update

NVO Share Of US Imports From Asia Growing In Post-covid Ocean Market

There is a growing percentage of Asia import trade handled by non-vessel-operating common carriers (NVOs) versus moved under direct shipper-carrier contracts. In May, NVOs handled 53.9% of US imports from Asia, excluding less-than-containerload volume, according to PIERS. The NVO share was 46.2% in late 2021 (Fig.1)
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Meanwhile, the U.S. domestic intermodal providers have lowered contract rates through the end of the year for smaller shippers as they look to attract business to rail amid a weak demand environment (Fig.2). Union Pacific Railroad (UP) and COFC Logistics, a wholesaler for BNSF Railway, have updated contractual rates for low-volume shippers. UP slashed rates 3.5% across more than 200 lanes in the US for the balance of 2023, while COFC cut rates 5% on average across 32 lanes. The cuts implemented by UP and COFC are an attempt to address pricing pressure, which is one reason domestic container volume has fallen 6.9% yoy through May.

Fig 1 - Carrier direct vs NVO control of Asia imports (PIERS)

Fig 2 - Contract rates, intermodal and truckload (on 120 US lanes)

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Source: JOC-1, JOC-2

Air Freight Market Update

Industry confidence in the passenger outlook exceeds cargo

• The latest IATA survey points to a positive outlook for both passenger traffic and cargo volumes over the year ahead. 86% of respondents expect passenger demand to expand over the course of the next 12 months, and 52% of respondents expect higher cargo volumes. For cargo, an additional 28% expect volumes to be largely unchanged a year from now, leaving 20% of respondents expecting lower volumes.

• Cargo load factors on major route areas outperform industry average. With 26.5% of total CTKs in 2022, the Asia Pacific – North America route area was the busiest market, followed by the Asia Pacific – Europe route area, with 19.0% of total CTKs in 2022, before its recent decline early this year. The fact that the two largest markets sport these elevated and steady CLFs reflects the strategic capacity adjustments airlines made when air cargo demand experienced significant year-on-year declines following Russia’s invasion of Ukraine early in 2022.

• Air cargo capacity increased in Apr as carriers launched summer flight schedules, further driving down spot rates. Overall capacity jumped 7% YoY in Apr, largely driven by additional summer belly space with the increase in passenger flights. Capacity in the Europe to North America tradelane was up 26% compared to March 2023, according to Clive Data Services.

Quarterly Forward Business Expectations (12 months ahead)

Source: IATA-1, IATA-2, Supply Chain Dive

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Ocean Freight Market Update

Continuing US inventory problem

• Global decline in container demand abated sharply in March 2023 on most major trade lanes, with a major exception: US imports from Asia, which have now continually dropped at a pace fluctuating around -20% Y/Y. This has often been explained by US inventory correction. However, from the point of view of sales, data from the US Census Bureau clearly shows that the process of clearing inventories is not progressing rapidly.

• Since inflation impacts both sales and inventories, an inventory to sales ratio is not impacted by inflation. The data shows that for manufacturers, the size of inventories have stagnated and certainly not decreasing. Both retailers and wholesalers on the other hand are seeing an increasing trend. This means that the size of inventories relative to sales continues to increase, and if any underlying inventory correction is going on, it is clearly insufficient.

• Retail sales rebounded in April. Overall retail sales in April were up 0.4% from March and up 1.6% year over year. Retailers have already placed holiday orders this year, said Jack Kleinhenz, chief economist for the NRF. We expect things to be normal in the second half of the year.

• The American Association of Port Authorities earlier this month called out demand risks in general retail merchandise and household durable goods, which account for more than half of U.S. ocean imports.

Net Domestic Production + Import (USD) vs TEU Import Y/Y change

Source: Yahoo, NRF, Sea Intelligence