Global Freight Market Update: Navigating Shifts and Challenges in December 2023

Introduction: A Shifting Landscape in Global Freight

As we approach the end of 2023, the global freight market continues to evolve, presenting both challenges and opportunities for shippers and freight forwarders alike. From route changes to market pressures, the industry is experiencing significant shifts that demand attention and strategic planning. In this comprehensive update, we'll explore the key trends and developments shaping the freight landscape, with a focus on how Digital Logistics Solutions can help navigate these turbulent waters.

Key highlights from recent industry data include:

• Route changes bypassing the Panama Canal for some U.S. East Coast/Gulf to Asia services
• Pressure on spot rates in the Transatlantic Westbound (TAWB) market
• General Rate Increases (GRI) implementation in the Far East Westbound (FEWB) market
• Global air cargo experiencing a 3% decrease in tonnages and a 2% increase in global average rates
• Shifting import patterns affecting U.S. freight market dynamics

Ocean Freight: Navigating Choppy Waters

U.S. Exports and Panama Canal Challenges

One of the most significant developments in ocean freight is the routing changes related to the Panama Canal. Some key services from the U.S. East Coast and Gulf to Asia are now bypassing the canal entirely. This shift is likely due to ongoing drought conditions affecting the canal's operations, forcing carriers to seek alternative routes. For shippers, this could mean longer transit times and potential cost increases, highlighting the need for flexible and adaptive logistics strategies.

Transatlantic Westbound (TAWB) Market Dynamics

The TAWB market is experiencing interesting shifts in port-pair connections. The Mediterranean to U.S. East Coast connections have seen a level shift in favor since the pandemic, while some ports like New Orleans have lost direct Europe services. Conversely, ports like Saint John have been introduced as direct port calls. These changes underscore the importance of staying informed about port options and service routes when planning shipments.

Spot rates in this market are under significant pressure, falling below 2019 levels. The combination of weak demand and overcapacity is challenging the sustainability of this trade. In response, carriers are expected to introduce more blank sailings, with average capacity decreasing by 25-40% between weeks 52 of 2023 and week 2 of 2024. Shippers should be prepared for potential rate increases as carriers attempt to stabilize the market.

Far East Westbound (FEWB) Market Trends

In the FEWB market, carriers are implementing General Rate Increases (GRIs) to boost rates despite the absence of significant cargo rushes or general capacity issues. For December, liners are pushing for increases of $300-500 per FEU in the first half of the month, with an additional $400-600 per FEU in the second half. This strategy appears to be an attempt to secure higher rates going into 2024.

Capacity adjustments are also occurring, with some services being suspended or modified. For instance, the THEA FE5 service suspension has led to adjustments in Ocean Alliance's FAL1/FAL3 services, resulting in a 16-18% capacity cut. These changes are particularly impacting South East Asian ports, especially in Vietnam and Thailand, where capacity is tightening. However, the impact is expected to be short-lived, with a return to normal anticipated in the coming weeks.

Air Freight: Global Trends and Regional Variations

The air freight sector is experiencing its own set of challenges and shifts. In week 47 of 2023, global air cargo saw a 3% decrease in tonnages alongside a 2% increase in average rates compared to the previous week. The Thanksgiving-related decline in North America was less severe than last year, indicating some stabilization in seasonal patterns.

Regional variations are significant:

• Notable decreases in tonnages from North America to Europe and Asia Pacific
• Increases in volumes from Africa to Europe and from Europe to Central and South America
• Year-over-year, global volumes are up 2%, with significant capacity increases from several regions, particularly Asia Pacific
• Decreases in tonnages from North America and Europe

While current average rates are 21% lower than last year, they remain 42% above pre-COVID levels, indicating a market still adjusting to post-pandemic realities. These trends highlight the need for shippers to stay agile and consider multi-modal options when planning their logistics strategies.

North American Market Shifts: The Atlanta-Ontario Dynamic

A noteworthy development in the North American freight market is the shift in import patterns affecting major logistics hubs. Atlanta, once a beneficiary of diverted imports during the pandemic, has seen its share of the total U.S. freight market volume decrease by more than 11% over the past year. Conversely, Ontario, California, has experienced a recovery of over 14% in its outbound trucking market share.

This shift is attributed to several factors:

• Supply chain reconfigurations as pandemic disruptions ease
• A more cost-effective transportation market
• Challenges affecting alternative routes, such as drought impacting the Panama Canal and conflicts disrupting the Suez Canal

These changes are prompting importers to return to the Los Angeles and Long Beach port complex, reversing the pandemic-era trend of diverting shipments to Eastern ports. This shift underscores the dynamic nature of freight markets and the importance of adaptable logistics strategies.

Security Concerns in Key Shipping Lanes

Recent events have highlighted security concerns in critical shipping lanes, particularly in the Red Sea region. An attack on an OOCL container ship by a Houthi drone near the Yemen coast has raised alarm bells for vessels operating in the area. The incident, which resulted in engine damage and water ingress, underscores the need for heightened security measures and potential route adjustments for ships traversing these waters.

This security challenge adds another layer of complexity to global shipping routes, potentially impacting transit times and costs for shipments moving through the region. Shippers and freight forwarders must stay informed about these developments and consider alternative routing options when necessary.

Manufacturing Sector: A Barometer for Freight Demand

The health of the manufacturing sector is a crucial indicator for freight demand, and recent data suggests ongoing challenges. The Institute for Supply Management's Purchasing Managers' Index (ISM) for November remained at 46.7%, indicating continued economic contraction in the manufacturing sector. Key points include:

• Soft manufacturing orders
• Depleted inventories
• Expectations for subdued activity, especially in new orders

S&P Global's PMI index, while slightly more positive at 49.4, still points to a decline attributed to weak demand and low stock levels. These indicators suggest that freight volumes may remain under pressure in the near term, particularly for industries closely tied to manufacturing output.

Navigating the Challenges with Digital Logistics Solutions

In the face of these complex and evolving market conditions, Digital Logistics Platforms like FreightAmigo offer valuable tools and resources to help shippers and freight forwarders navigate the challenges. Here's how our Digital Logistics Solution can support your operations:

• Real-time Rate Comparisons: With market rates fluctuating rapidly, our platform allows you to compare door-to-door freight quotes across multiple modes, including international courier, airfreight, sea freight, rail freight, and trucking solutions. This feature enables you to make informed decisions based on the latest market conditions.
• Global Shipment Tracking: Our system connects with over 1000 reputable airlines and shipping lines, providing real-time tracking of your shipments. This visibility is crucial when dealing with route changes and potential delays.
• Integrated Customs and Insurance: Streamline your operations by arranging customs clearance and cargo insurance directly through our platform, ensuring comprehensive coverage for your shipments.
• Automated Documentation: Reduce errors and save time with our automated shipment document generation, a critical feature when dealing with changing regulations and route requirements.
• 24/7 Expert Support: Our round-the-clock logistics expert support ensures you have access to professional guidance whenever you need it, helping you navigate complex market conditions and make informed decisions.

Conclusion: Staying Agile in a Dynamic Market

As we've seen, the global freight market continues to present a complex and evolving landscape. From route changes and market pressures to security concerns and shifting manufacturing trends, shippers and freight forwarders face numerous challenges. However, with the right tools and strategies, these challenges can be transformed into opportunities.

By leveraging Digital Logistics Platforms like FreightAmigo, businesses can gain the agility and insights needed to navigate these turbulent waters successfully. Our comprehensive suite of tools, from rate comparison to automated documentation, empowers you to make informed decisions, optimize your supply chain, and stay ahead of market shifts.

As we move into 2024, the ability to adapt quickly and leverage digital solutions will be key to success in the freight industry. Stay informed, stay agile, and let FreightAmigo be your partner in navigating the ever-changing world of global logistics.