June 2023 Back to normal The global container market dynamics are essentially back to normal. However, “normal” has never been equal to being stable; something that is very much visible in the events currently unfolding. From a global perspective, demand measured in TEU*Miles declined by -3.2% in April compared to last year. This is, of course, a decline, but looking at the context is important. From September to February, the market saw double-digit contractions each month. This level of a declining market stopped in March and April. Compared to 2019, volumes are up 1%. Most deep-sea trades show improvements, the main negative developments – at least among the largest trades – being confined to the Asia to North America trade and the intra-Asia trade. Asia to North America is challenged by the fact that despite an inventory correction, data measuring the level of inventories in the US do not yet show a material reduction. On the other hand, the Indian subcontinent, the Middle East and Africa showed sizeable growth in April for regional imports and exports. In terms of supply chain congestion, the latest data on reliability for the month of April essentially showed full reversal back to normal conditions. Global on-time performance was quite low at just 64%; however, in a historic perspective, this is at the lower end of any condition that can be referred to as normal. The situation is not good but is within the range of normality. Freight rate levels have largely followed seasonal developments for key spot rates from Asia to North Europe and the US West Coast. Atlantic spot rates from Europe to North America continue to drop sharply every week; however, this is a normalization process as rate levels are still materially higher than pre-pandemic levels, and this trend should therefore be expected to continue. This brings to the forefront three issues of critical importance to the market dynamics in the coming weeks and months: US labor issues, water shortage in Panama and slow steaming. These are all elements that we have seen before, and they can be seen as part of the normal market dynamics. As initially stated: Normal does not mean stable. The US Labor issues are currently highly unpredictable and essentially change by the day. They lead to sudden closures of individual container terminals, thus causing delays and congestion issues. As long as those conditions are relevant, no one can predict which terminals will be impacted and for how long. The core of the issue is a failure of the union (ILWU) and the terminals (PMA) to renew the labor agreement which expired a year ago. Best-case scenario: the situation will be resolved, and the terminals will once again operate with no ad-hoc closures. Worst-case scenario: a repeat of 2002 when the ILWU and PMA were not able to reach an agreement, causing a 10- day full closure of all terminals on the US West Coast. These ports handle 40% of the US cargo, and no other port will be able to pick up the excess. The issue is compounded as the port worker union on the Canadian West Coast, covering Vancouver and Prince Rupert, might also join in the debacle. At the time of writing, the latest development was the closure of the port of Seattle. Technically, this appears as a lockout arranged by the employer rather than a strike. The background is go-slow actions arranged by the union which prompted the employer to seize operations, similar to the situation that eventually caused the 10-day closure in 2002. DSV – Global Transport & 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 s ustainable 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.
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