The decline in demand for goods due to concerns about the economic crisis and high inflation made the import demand of retailers decrease. This leads to a further drop in freight rates in early 2023.
According to Reuters, global freight rates continued to decline in the first two months of 2023 as manufacturers and distributors struggled to reduce inventories and cope with rising interest rates. Meanwhile, consumers are tending to be more cautious in shopping.
Container traffic in the first two months of the year decreased compared to the same period last year, indicating that the inventory liquidation cycle is not over yet.
Singapore’s seaborne container shipments fell in February, down 6% year-on-year, and at the same time, this was one of the sharpest declines since the first wave of the disease.
Japan’s air cargo through Narita Airport, fell 33% in January after falling 24% year-on-year in December.
Cargo handling at London’s Heathrow Airport in January fell about 6% year-on-year after falling 11% in December.
In response to this development, freight rates fell to their lowest levels since the first wave of the pandemic, peaking in April and May 2020, as volumes fell and excess capacity emerged.
Shipping rates from China to the US West Coast by sea in March were about $1,000/FEU (a unit of measurement for the cargo capacity of a 40-foot container), down sharply from $16,000/FEU in the US. here a year.
Freight rates from China to Northern Europe have fallen below $1,400 per FEU from nearly $14,000 a year ago, based on the Freightos Baltic Exchange index.
Most of the shipping containers are moved inland by road or rail, so the number of containers transferred has also decreased sharply.
In the US, the number of shipping containers on major rail lines in the first 10 weeks of 2023 fell 9% compared with the same period in 2022.
Drewry’s composite world container index as of March 23 was $1,757/FEU, down sharply from $8,832/FEU over the same period last year.
Drewry’s Composite World Container Index from March 23, 2022 to March 23, 2023. Source: Drewry
The drop in freight is due to the level of people’s spending is tightened due to economic difficulties. This is contrary to the expectation of many businesses about the recovery after the pandemic, the level of consumption of goods and services will increase.
That reversal caught manufacturers and retailers by surprise because they had previously stockpiled large amounts of inventory to prepare for a post-pandemic recovery, but are now unable to consume.
Recently, inflationary Persistent, rising interest rates and a dark economic outlook have begun to affect sales of expensive, interest-sensitive items such as vehicles, computers, and housing-related products.
Since early March, the banking crisis in North America and Europe is likely to tighten credit conditions and deepen short-term declines.
Delaying consumer durables purchases is one of the easiest ways for businesses and households to reduce spending and save cash.
As a result, it seems likely that inventory liquidation and cautious buyer behavior will continue to affect freight activity through at least the second quarter.
After that, the freight recovery depends on the US, Europe and other major economies averting a full-blown recession.
According to VietnamBiz.vn
