As retail orders decrease, sea shipping time decreases

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Signs of overstocking increased, resulting in slower orders from major retailers, suggesting lower demand in the freight market in late June. Free Gutos report. The average sea shipping time so far in June has decreased by nearly 25% since the beginning of the year. Inventories of certain retail products, such as furniture and electronics, are increasing as consumers shift their spending to soaring costs of services and / or necessities.

According to a recent survey of freightos.com marketplace users, SMB importers are also experiencing these trends. More than half of the respondents reported that they placed their peak season orders early in the hope of increasing inventories. Two-thirds say they are already experiencing a decline in demand, 84% of which is due to inflation.

The minimal port congestion in Shanghai shows that there are still no signs of a sickening demand surge that many expect to follow the reopening of Shanghai. Over the past two months, port congestion has continued to improve in LA / Long Beach as well, with a record number of containers processed in May, and currently less than 20 vessels are awaiting mooring.

Freightos.com data on end-to-end sea shipping from China to the United States confirms this improvement, showing that the average transit time so far in June has decreased by nearly 25% since the beginning of the year. Than the norms before the pandemic.

Graphic showing that shipments from China are moving faster

Congestion relief can help maintain more capacity in rotation. Signs of increased inventories and lower demand still cannot easily respond to strong volume forecasts, but trans-Pacific container prices are still (moderately) declining at the time.Last year has already begun to rise: Asia-US West Coast price Interest rates rose 11% in June 2021, while they had fallen 17% so far in June.

Important insights:

  1. A survey of SMB importers on the Freightos.com marketplace reflects recent reports of rising retail inventory and declining demand.
  2. More than half of the respondents reported that they placed their peak season orders early in the hope of increasing their inventories.
  3. Two-thirds say they are already experiencing a decline in demand, 84% of which is due to inflation.
  4. Congestion continues to ease in LA / Long Beach, with Freightos.com China – US sea shipping times down 25% from the beginning of the year to the same level as a year ago.
  5. Sea speeds across the Pacific have slowed so far this month, but have risen in June 2021 with the start of the peak season. Whatever the driver, whether it’s a relative improvement in container flow, a relative improvement in volume with the rebound in Shanghai, or a decrease in potential demand, many shippers’ spot rates are now below contract rates. increase. This trend can become even more volatile when many carriers and shippers may prefer better reliability.

Asia-US rates:

  • Asia-US West Coast prices (FBX01 Daily) fell 3% to $ 8,934 / FEU. This rate is only 1 percent higher than at the same time last year.
  • Asia-US East Coast prices (FBX03 Daily) fell 1% to $ 11,589 / FEU, 16% higher than last week’s price this week.

Whatever the underlying factors for more readily available space and rate of decline, relative improvements in container flow, reduced volumes associated with Shanghai’s rebound, or potential declines in demand have so far crossed the Pacific. Spot rates for many shippers in both Europe. Below the contract rate. Marine contracts are notorious for not being respected during market fluctuations. A new form of enforceable or index-linked contract is working to solve this problem. However, in the short term, some carriers are reported to be penalizing no-show contract shippers in support of savings in the spot market.

Some measures Orders for imported goods to the US decreased Sufficient arrival and backlog in April and May The container was still being processed In April, we will increase the volume by 5% from last year. Volumes in May and June are even higher than in April and are projected to increase by 7.5% from 2021, with July and August not too late, making it the third-highest monthly volume ever.

The recent drop in orders almost certainly reflects the decline in manufacturing while Shanghai was closed. However, the long-anticipated changes in consumer spending from commodities to services with the decline of the pandemic appear to have surfaced in the last two months, partly due to the decline in underlying demand. It may have been.

Major retailers like Target Wal-Mart reports that certain items such as furniture and electronics are in stock too much. Target is working to cancel new orders and reduce inventory. The shift to services, along with soaring prices for essentials, is driving some of that excess inventory.But some spending is heading for other types of demand growth Products such as apparel..

Many observers expect the volume from China to skyrocket as Shanghai restarts. However, if potential net demand actually deteriorates during the blockade, or if enough importers have already pushed orders forward, it will not surge in the short term compared to last year’s peak, and peak season. There may be less confusion and less pressure on prices.

On the other hand, summer volume forecasts are higher than last year, well above pre-pandemic levels.port congestion Is still a problem, and if the traffic increases significantly, the capacity is waiting side by side, which can increase latency and price.

The same applies to container charges. On the one hand, the trans-Pacific rate plummeted during the blockade. Interest rates on the Asia-US West Coast fell another 11% this week, dropping nearly 40% from late March. Air freight charges It also fell 38% in May to less than $ 9 / kg. Interest rates are expected to continue to decline if consumer demand declines are the main factor. But on the other hand, analysis of Cargo futures market Prices are not expected to fall that much in the short term, rising in the second half of the peak season and suggesting that they should continue to rise next year. Contract rates are also rising.

What to do with all this?

Overstocking and changes in consumer spending are clearly new developments, a concrete sign that inflation and the decline of the western pandemic are beginning to change the market. On the other hand, as Shanghai reopens and the peak season progresses, there may still be enough demand and congestion to increase delays and maritime charges, but probably not the extreme seen last year. Taken together, this mixture of sometimes competing signs may signal the start of a gradual return to new normality.

https://epsnews.com/2022/06/27/ocean-freight-moves-faster-as-retail-orders-decline/ As retail orders decrease, sea shipping time decreases

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