The first signals regarding the high inflation rates and negative future prospects are affecting the ocean freight market. Early movements of changing customer behavior in spending less become visible. Falling demand and cancellations push the market rates to some of the lowest in almost 24 months. Nevertheless, due to investments made by ocean freight carriers last year effective in the upcoming year it’s expected that the extra equipment will become available in the market.
Another phenomenon within Europe is the high occupancy rate at warehouses and terminals. The last months a bulk of containers arrived, including many backlog orders. The booming inbound resulted in high stock levels, unlike the hesitation of the end customers and decrease of demand, which caused a lower through-put at the warehouses and resulted in high inventory levels. As reaction, the volume of new orders are somewhat behind compared to one year ago.
The slowdown in import orders, the hesitation of demand and the high stock levels have its effects on the ocean freight rates. Spot rates in container shipping have fallen by as much as 10% last two weeks. The Xeneta benchmark shows the rate development within the Asia – European flow. As figure 1 outlines that since long period (24 months) short term rates fall below the long term rates.
Can we say that due to the ease on the situation (supply vs demand), we are out of the woods? The supply chains that are ocean based around the world are still vulnerable and minor interruptions or disruptions can still have a huge impact.
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Each monthly update we will highlight the developments within the Ocean freight market including the following topics:
- Trending topic
- Space & rate developments
- Port developments & congestion
- Freight Indices & Container Availability
- How to mitigate risks