Container bookings from Asia to Europa have notably weakened. Unless shipping lines cut back more service capacity, freight rates will keep trending down, says Florian Braun, Head of Ocean Freight EMEA (Europe, Middle East, Africa) at freight forwarder Flexport. Still, he thinks freight levels will stabilize above historic averages.[ds_preview]
Energy shortages, inflation and flagging growth are hitting ocean freight demand. What’s the pulse of activity right now?
Braun: Normally we would expect volumes to rally ahead of Golden Week but this is not the case this year. Based on our own as well as external data, I would estimate that container liftings from Asia to Europe are down around 5% year-on-year right now. This is before the actual slack season kicks in. In particular, consumer goods flows have contracted and warehouses been filling up as people have less disposable income because of inflation.
Rates are slipping fast – do you expect a »hard landing« instead of gradual normalisation?
Braun: No doubt, the deterioration in rates is sharper than usual for this time of year. This reflects the reduced vessel utilisation of around 70% nominally on Asia-Europe today. It requires 80% or more to turn this trend around. But given the poor economic outlook, it will depend on capacity adjustments by the lines to bring utilisation back up. We don’t know what action they will take, though. We can only look 6 weeks ahead based on schedules so we know that some 20% of weekly capacity in the Asia-Europe trade will be blanked post-Golden Week in October. What happens after that, is anybody’s guess. If alliances don’t continue cutting back or blanking capacity, rates will keep drifting lower.
What’s the outlook then for 2023?
Braun: As it stands, container fleet growth will begin to outstrip demand growth from now, supported also by freeing up of capacity due to easing congestion. However, we don’t foresee a return to the low freight levels of former years. Rates are going to remain higher than in 2019 also because slot costs of carriers have increased as well in the meantime. An important issue for us in upcoming negotiations with container lines is integration of systems and data to improve transparency and reliability. This is high up on the agenda and absolutely key for improvements in service quality along the door-to-door transport chain.
Finally a word on the port situation in North Europe which has become a hotspot of congestion this year. How do you cope with it? Are you changing routings for containers where possible?
Braun: It is no secret that vessel waiting times are much higher in Hamburg than in other ports. In early September we counted 13 ships in transatlantic and Far East services waiting to berth in Hamburg versus just one or two in Bremerhaven, Rotterdam or Antwerp. Therefore we have advised clients to use services to Bremerhaven or to Rotterdam rather than to Hamburg where possible, even if it involved slightly longer trucking, rail or barge distances to import warehouses. Delays via Hamburg were just too severe.
Interview: Michael Hollmann
