Market Update and Outlook

Container shipping is facing strong headwinds amid an increasingly pessimistic economic outlook due to a sharp slowdown in western economies as inflationary pressures and higher energy costs weigh on sentiment. Recent figures show regional container growth has declined in most major areas, while container rates have slumped. And while port congestion in Europe and US shows signs of improving, dock strikes in the UK will add to supply chain disruption.

 

 

Market Trends

 

A worsening economic outlook is weighing on the container shipping markets as economic data points to a sharp slowdown in the US and Europe. The global manufacturing orders-to-inventory ratio fell further in August while manufacturing orders also fell back slightly. At the same time, US and Europe inflation levels are at a record high of 8.3% and 7.4% respectively excluding food and energy costs. Regional container trade growth declined further between May-July and most major regions are seeing negative growth with export volumes from Asia falling by 1.1% and import volumes dropping by 8.3%. Import volumes to North America fell 2.3% and containerized imports to Europe 4.5%. Africa and intra-Asia were among the few regions where container volumes grew, with inbound to Africa rising 8.1% and intra-Asia climbing 3.7%. Ocean spot rates are in steep decline with the Shanghai Containerized Freight Index (SCFI) dropping significantly since June to around $3,000 per TEU in September, back to the same level as December 2020.

 

 

European port congestion: There is an ongoing improvement in congestion at major European ports and productivity is picking up yet schedule delays, blanking and port omission are continuously expected in the coming months. At Bremerhaven and Rotterdam there has been a reduction in vessel waiting times and yard density levels have become more manageable. Rising water levels on the Rhine have reduced barge transportation delays and inland capacity bottlenecks via Antwerp and Rotterdam and helping to normalize rail and truck transportation. In Hamburg, while we are seeing an improvement in the overall situation, yard density levels remain high, causing low port productivity and increased berth waiting times.

 

 

For Retail Customers

Retail industry has needed to correct large-scale imbalance of inventory caused by volatile changes to consumer demand and shop closures due to Covid 19. Businesses must adapt to a new norm of supply chain management.

As consumer behavior returns to more pre-pandemic lifestyles in 2022, global industry professionals remain optimistic about the future of the retailing industry. Euromonitor International projects a modest positive forecast CAGR of 6% from 2021 to 2026. When comparing the performance across the various channels within retailing, this same group of professionals expects new digital shopping methods such as online marketplaces and direct to consumer to post some of the strongest rates of growth.

More than 60% of global retail professionals expect e-commerce penetration to be at least 20% of total retail sales. This share will continue to grow in the retail space and one can expect this percentage to exponentially increase in the years to come.

Industry professionals are adapting new business models and embracing technology to drive these new revenue streams to meet consumers where they are and how they want to shop. The likes of the rise of marketplaces, direct to consumer brands and subscription services also mean the future of physical spaces must be reconfigured to ensure relevance.

Some of the biggest challenges faced by industry professionals to develop an omnichannel strategy include the integration with existing system set-ups, lack of internal resources and expertise. Incorporating new business models requires retailers not only to make bold financial decisions and gather necessary resources, but also a shift in mindset to how the business will be conducted in the future. To be able to successfully make the transition will require significant uptakes from all relevant stakeholders and many capable sets of hands to be able to succeed.

The post-pandemic consumer is constantly shifting priorities, which forces those in the retail industry to react accordingly by constantly re-evaluating their strategic priorities. In the next five years, retail professionals will be placing more emphasis on sustainability, new digital technologies and business models and expanding into new markets. This will help drive the wants and needs of future generations of digitally-enabled and socially-conscious consumers.

Creating impactful in-store experiences and increasing digital investments to better engage with digital natives in the next 12 months will allow retailers to commence a comprehensive omnichannel strategy that will not only optimize store formats and in-store experiences, but also blend the physical and digital retail landscapes together. The priority for supply chains will shift away from cost and towards resilience and reducing exposure to regional or global disruptions. Demand for higher levels of supply chain integration will grow as flexibility becomes more important. The retail industry is scrambling to address an inventory imbalance by slowing down the production and delivery of low demand goods while simultaneously increasing the production and delivery of high demand goods. At the same time, global supply chains remain heavily disrupted with limited and changing transport options, acute staff shortages, economic uncertainty, and suppliers operating beneath capacity.

 

Air Update

 

The global air cargo market is facing a mixed outlook with high fuel prices helping to support freight rates which remain significantly above pre-COVID-19 levels but demand growth is likely to flatten, according to a second quarter report by consultant Seabury. That comes as air cargo capacity is continuing to recover to pre-COVID-19 levels globally. Return of capacity between Asia and Europe is comparatively slow due to various impacts such as Russia-Ukraine conflict and Covid-19 control in China. Seabury said several freighter operators service Asia-Europe via the Middle East due to airspace closures over Russia and Ukraine.

Greater China: Air cargo capacity on key corridors has been reduced. For the US market, an on-going dispute over traffic rights between China and the US has led to airlines cancelling flights. In Europe, the impact of COVID-19 outbreaks and summer holidays has led to a shortage of ground handling staff leading to some flight cancellations to Frankfurt and Amsterdam. Power restrictions in China due to the drought and heatwave reduced airport efficiency