Customers are continuing to face a raft of challenges as the Russia-Ukraine conflict weighs on the longer-term outlook for the global economy amid concern that inflation and higher energy prices will lead to lower consumer demand, damaging international trade. The short-term, however, is more positive. Cargo volumes through Shanghai are returning to pre-lockdown levels and demand from US consumers is pulling forward the peak shipping season on North American trades. Maersk continues to do its best to mitigate the impact of on-going port congestion, with the deployment of extra loaders where possible, the rescheduling of services and in New Zealand, the launch this month of our Coastal Connect service to improve port connectivity.
Market Trends
The Russia-Ukraine conflict and the ensuing sanctions imposed on Moscow are adding to inflationary pressures globally and raising fears of a possible recession. The situation is adding pressure on central banks to tighten monetary policies including increasing interest rates. Key to the outlook for trade is how consumers and businesses react to the elevated uncertainty, higher prices, and policy changes. In the near-term, global expansion will continue, supported by pent-up demand and the re-opening of economies. But longer-term, substantial monetary policy tightening will increasingly weigh on economic activity with additional concerns about the outlook for China which has COVID-19 led economic consequences. Potential scenarios depend heavily on the path of inflation and the geopolitical fallout from the war in Ukraine.
Trade Outlook
Global trade volumes declined by 2.5 percent in May compared with a year earlier and year-to-date growth is down by a similar level, although these come off last year’s elevated levels. Container imports into Europe were negatively impacted by the Ukraine conflict as volumes following the imposition of sanctions and a broader weakening in demand. Imports into Asia were depressed due to COVID-19 lockdowns in China and a general slowdown in China’s housing market. Imports into North America were stable at a very high level. The outlook remains highly uncertain, and we mainly see downside risks to our base scenario.
Trending Topic
Shanghai situation: With Shanghai gradually returning to normal after the two-month city-wide lockdown in April and May, factory production is picking up and demand rebounded nicely in July with positive signs of a seasonal peak on many trades. Trucking in the city area has also been fully restored. Intra-provincial trucking is also back to pre-lockdown levels although truckers are subject to local testing requirements. The current situation is dynamic and subject to change, so we suggest you check with your local Maersk team for the latest information.
Ocean Update
Port Congestion: Terminal congestion, especially in North America and Europe, is continuing to adversely affect schedule reliability. Strikes in Germany, especially at Bremerhaven, Hamburg and Wilhelmshaven, have exacerbated the disruption caused by vessel delays. At Rotterdam, Maersk is exploring several congestion easing options including off-dock options and redirecting cargo to facilities elsewhere including Zeebrugge and Gdansk. We are also resetting some transatlantic and Asia-North America services either by changing voyage numbers to reflect actual departure dates or vessel sliding. Please check Maersk customer advisories for the latest information.
Air Update
Greater China: Volumes have fallen in July due to the impact of summer holidays. There is minimal impact on airfreight from sporadic COVID-19 outbreaks in China. Carriers have cancelled several flights to Europe and North America due to lower cargo demand. Air cargo freight rates have also fallen, making air cargo more attractive to customers. In Hong Kong, capacity has increased as airlines reintroduced more flights after the government eased COVID-19 restrictions Fuel surcharges increased from July 1 from HKD5.10/kg to HKD6.10/kg on chargeable kgs.
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Australia and New Zealand: As China slowly returns to pre-lockdown operational levels, extra airline capacity has led freight rates to fall across all origin airports into Oceania. There is still a cargo backlog at Shanghai which is lengthening the transit times between international airports. The Trans-Tasman markets remain challenging for consumers as airlines continue to hold off releasing new capacity.
Vietnam: Freight rates are falling as capacity is increasing.
Indonesia: Markets are mostly stable but extended transit times impact supply chains.
Japan: Operators are coming under increasing pressure to make domestic transportation of pharma products GDP compliant following the influx of COVID-19 related vaccines into Japan with calls for the creation of a quality certification system. So far, the Japanese version of the GDP guidelines have not yet been legislated and are not enforceable. International logistics will continue to be disrupted due to lack of space and restrictions on cargo handling at airport facilities.
Inland Services Update
Greater China: Maersk’s intermodal sea-rail and barge services are back to normal after COVID-19 related disruption. For trucking, some potential surcharges could be levied including highway toll fees and lead times may also face challenges. Warehousing operations in mainland China, Hong Kong and Taiwan are operating normally as we move into the peak season.
ICR: We launched ICR services from China to Thailand, Laos and Vietnam in May which are attracting increasing interest from customers.
Australia and New Zealand: Berthing delays across all ports caused by severe weather on the East Coast are impacting final ETA, destuffing and final availability of cargo for delivery to end consignees. Congestion at Auckland caused by labour shortages and vessel bunching is leading to vessel delays of up to eight days which is impacting container availability, final delivery to end users and extended transit times. The new Stink Bug (BMSB) season starts around September 1 until May 31, 2023. Updated rates will be released in August with confirmation of China as an emerging risk market.
Japan and Korea: The volume of container drayage is stable, and a slight slackening is expected in August due to the holiday season.
Thailand, Malaysia and Singapore: The three countries are not seeing the same level of the recovery in volumes experienced by Greater China. They could also be hit if there is a downturn in demand from developed countries due to rising inflation and fuel prices.
Major Ports Update
Source: Maersk
