May 2023 Signs of a market pick-up Market data which has emerged over the past month indicates that we might be past the bottom of the current market downturn. But this comes with two caveats: One trade lane which still does not show a pick- up, and also an impact from the injection of new capacity. Starting from the perspective of freight rate developments, it is important to note that different rate indices show different aspects of the market. Spot rate indices are the ’tip of the sword’ and indicate the sho rt-term volatile part of the market. For the deep-sea trades from Asia to Europe they appear to have hit a bottom level at end-March followed by a slight rebound, with the same pattern appearing in the Pacific trade to the US West Coast in mid-April, but not in the Pacific trade to the US East Coast. The Atlantic rate development is still negative but only at a slowly declining pace considering that the level remains highly elevated compared to pre-pandemic normality. For the Asian export trades, it is normal seasonal behavior to see spot rates decline after the Chinese New Year. What is noteworthy is that the pace of the decline into Northern Europe has been slower than what could be expected for the season, and that the pick-up in rates is happening a month earlier than what is normal for the season indicating budding underlying market strength. The market strength is supported by the latest demand data from Container Trade Statistics covering all cargo loaded in the month of March. Globally, TEU*Miles declined by 2.7%, but this was a substantial improvement compared to the previous six months which saw declines in the range of 10% to 12%. For the past eight months, global demand measured in TEU*Miles was below the pre-pandemic level in 2019, but in March this changed, and demand is now again above the 2019 level. Most major trade lanes showed solid improvements, most notably for Asia to Europe which grew 8% year-on-year as well as Asia to South and Central America which grew 28%. It therefore appears that the early rebound in rate levels to Northern Europe has some fundamental support in terms of growing demand. However, the trade from Asia to North America did not experience any improvement. Compared to last year, volumes declined by 21% in March making this the seventh consecutive month with volumes declining by more than 20%. At the same time, official data for US inventories still do not show any decline. The only positive aspect is that inventories are also no longer growing, but with seven months of sharp reductions in the physical volume of imports it is a cause for concern that inventories are not declining. Despite the continuing challenges in the US, the overall global improvement in demand is also slowly being reflected in the capacity data. Asia to Europe has seen a decline in blank sailings over the past month indicating that the carriers’ utilisation rates are slightly higher again. In terms of operations, the market is almost back to normal. Global average reliability improved to 63% in March. Whilst this is not a strong performance, it is quite close to being normal. In the period from 2017 to 2019 just prior to the pandemic, global reliability ranged from 66% to 76% in the month of March, which should therefore be seen as a range of normality. DSV – Global Transport and Logistics At DSV, we keep supply chains flowing in a world of change. We provide and manage supply chain solutions for thousands of companies every day – from the small family-run business to the large global corporation. Our reach is global, yet our presence is local and close to our customers. More than 75,000 employees in over 80 countries work passionately to deliver great customer experiences and high-quality services. We aspire to lead the way towards a more sustainable future for our industry and are committed to trading on nature’s terms. DSV is a dynamic organisation that fosters inclusivity and diversity. We conduct our business with integrity, respecting different cultures and the dignity and rights of individuals. Visit dsv.com and follow us on LinkedIn, Facebook and Twitter.
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