This means that in addition to the sharp increase in available capacity, demand is getting weaker further reducing vessel utilization on the major deep-sea trades. The result is clearly seen in the present spot rates and will lead to the following developments in the coming weeks and months. WE WILL EXPERIENCE BLANK SAILINGS We will see an increase in blank sailings from the major alliance carriers – some are already announcing quite a few blank sailings and we are likely to see additional action. It is normal to see an increase in blank sailings in early October as the Chinese Golden Week holiday typically leads to a temporary drop in demand. This time we should expect to see blank sailings extended further into October and November as the market continues to be weak. In the short term this might be effective in slowing the drop-in spot rates on the Asia-Europe trade, but not stop it. Whether it will work on the Pacific into the US West Coast is more questionable as this specific trade has a large amount of capacity operated outside the alliances. The baseline outlook presently is for continued spot rate declines for the coming months, with one particular risk factor that could change the equation. THE UNION IS STILL NEGOTIATING A CONTRACT The union contract between the port workers and the terminals on the US West Coast expired on 30th June. There is still no new agreement. Until now work has continued despite the lack of a new contract and is one of the reasons why the congestion in Los Angeles/Long Beach has been dramatically improved. However, there are increasing reports that this state of affairs might not last if a new contract is not signed soon. Should a strike break out on the US West Coast, this has the potential to rapidly reverse the situation back to what we saw in second half of 2021. If this happens, it will still be a temporary effect only, and once the contract issue is resolved, the rate decline will commence again as capacity would once more exceed demand. Finally, it should be noted that the spot rates are not representative for the entirety of the market. Large amounts of cargo are shipped on contracts which were negotiated earlier in the year. If major strike action on the US West Coast, as well as other potential disasters, are avoided and demand continues to be weak then spot rates will continue to decline and likely trigger a small price war on some trades. This will not be a soft landing into a new normality but more likely a harder landing where spot rate levels initially will go too low before rebounding up to a new higher normality. DSV – Global Transport and Logistics 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. 75,000 employees in more than 90 countries work passionately to deliver great customer experiences and high- quality services. Read more at www.dsv.com
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