MARKET OUTLOOK ADVISORY #5 2022 - Back to (un)normal?

The consumer spending nose-dive continues at an unparalleled pace, putting a major dent in the demand bubble with the Trans-Atlantic trade being the only exception.

And while rate levels were indeed expected to moderate significantly, no one expected it to happen overnight. The pace of development over the last weeks and months has taken all parties in the industry by surprise.

So, do the declining rate levels across air and ocean freight on majority of trades mean that we are back to “normal”?


The simple reason being that the last two years have shown that the simple equation of supply and demand is no longer the only truth when assessing future development.

Congestion issues persist, not only in the US but also in major European ports. In the US, we still see containers stuck at terminals and rail ramps for months. The average idling time at European ports remains around 5-7 days, and in many cases, carriers decide to skip specific port calls (slidings) to mitigate the impact of port congestion.

Port strikes threat ever present

The threat of port strikes continues to loom both in the US, the UK and latest also in South Africa. In the US it is over three months, since 1 July, where the collective agreement expired, and the parties have not yet been able to reach an agreement. This effectively leaves West Coast dockworkers working without a contract. In the UK, 600 port workers will be on strike from 24 October to 7 November as part of a long-lasting dispute on pay rises. In South Africa more than 50.000 port workers are involved in a strike that spans across all major South African ports and again, the heart of the dispute is salary increases amidst historic high inflation levels.

An array of blankings

So, what about the “blankings” phenomenon which has loomed over the ocean freight market for the last 2-3 years.

A headline on The Loadstar on October 20 says the following:

Ocean carrier voyage blankings causing chaos and confusion for shippers”¹

While carriers might have been caught off guard in terms of the drastic slump in demand it is now expected that the blanking programs across all alliances will kick into a higher gear. It is yet too early to determine the effect of same. If there had been doubts on whether ocean carriers would sit passively by as rates slump, then we now have the answer. An array of blankings have been announced during the last couple of weeks and the waiting game is now on in terms of whether this is sufficient for carriers to turn the rate development tide. What is certain, is that this will have an immediate impact on schedule reliability and cause further delays.

Slow steaming ahead while airfreight takes a softer landing

Looking a bit further ahead, ocean carriers have IMO 2023 as the big-ticket item impacting actual capacity and supply levels. Many vessels will not be compliant with the new regulations in time, leaving further slow steaming as the only option in order to comply. This will ultimately result in a need for adding an additional vessel to each string. On the opposite side of this point is the new capacity that will come into the market during 2023, as part of the large new-build program, which all carriers have invested in, with MSC leading the way.

Adding to the uncertainty is the potential risk of new lockdowns in major port cities in China in a response to an increase in COVID-19 cases. Presently, this is causing disruption in cities as Tianjin, Shanghai and especially in Ningbo. A development certain to result in shipment delays on both ocean and airfreight.

Ocean freight is taking the bulk of the attention in the current market. The logical reason for this being, that the airfreight market is less impacted by the current development. Airlines are more seeing a soft landing in terms of rate levels, as opposed to the hard landing seen on the ocean freight side. Airfreight tonnages remain soft with the traditional Q4 season not expected to materialize.

In the last edition of our advisory, a large portion of the content was devoted to the macro-economic development. The topic remains equally relevant. However, the situation is like-for-like exactly the same with record high inflation levels causing havoc across the global financial markets. This coupled with record-high energy prices, especially in Western European households, has put consumption of traditional commodities sourced overseas to a grinding halt. Record-high inventory levels in both Europe and the US is also part of the reason why demand has faded away overnight.

The slump in global consumption remains the absolute main driver for the current market development and less so that the underlying infrastructural issues have been resolved. Consequently, when demand rebounds at some point, it is our assessment that some of the challenges we have seen over the last couple of years may resurface.

For more in-depth analysis, please fasten your seatbelt as we walk you through some of the specific impacts and developments within air, ocean, and rail freight. Get the full version here.

All information is given to the best of our knowledge and is subject to change.