However, a strong U.S. labor market backed positive figure in consumer spending.

 

Consumption and production in the world’s major economies are slowing as rising prices reduce both business and consumer confidence. Rising inflation is reducing the volume of goods consumers are willing to buy, and with inflation on an uptrend, retail does not expect this to improve. Companies also face rising production costs, falling demand and rising interest rates, which discourages investment and production growth and further reduces demand for intermediate goods and, In turn, the demand of marine transport exposes the report Ocean Freight Tracker Q3 of Tansport Intelligence (TI).

Shipping lines initially faced large increases in fuel costs; however, bunker prices have stabilized at a higher level and are not expected to exert significant pressure on tariff increases in the second half of 2022. The result is a fall in demand for maritime transport and large tariff reductions in the second quarter and in the beginning of the third.

In this context, the global index delivered by TI in the report has had a downward trend since March. The headhaul route index fell to 434 points, 316 points below its level 3 months ago in April. Headhaul rates worldwide have dropped 152 points year-on-year, yet this remains 249 points higher than its pre-pandemic level. On backhaul routes, fares have also fallen, and July fares are 6 points lower than their April 2022 level and 13 points less interannual.

Evidence shows that global ocean freight rates are normalizing as weaker demand puts less pressure on limited global supply.

Trans-Pacific Route

Meanwhile, tariffs on the Transpacific route have fallen significantly during the second quarter. On the headhaul route, fares stood at $7,152/FEU in July, less than half the April price after a 54.3% drop (four times its pre-pandemic level).

In the backhaul, rates reached US$936/FEU, a 7.3% reduction from April prices and a 12.9% fall year-on-year. This value remains 2.5 times the pre-pandemic rate.

In terms of volumes, major ports on the west coast of Los Angeles, Long Beach, Seattle/Tacoma and Oakland processed an average of 2.3 million TEUs per month in the second quarter. This figure is an increase of 2.5% quarter to quarter, however, this rebound is less than half of what is usually observed at this time of year. This, together with the fact that 2.3 million TEUs represent a 0.8% drop in year-on-year volumes, points to a fall in demand for maritime transport on the west coast of the US (USWC).

Second-quarter volumes do not suggest US market growth and performance in all major USWC ports fell in May, confirming two consecutive quarters of economic contraction.

Although the USA. is in an unofficial recession, a solid labor market has backed a 1.1% growth in consumer spending in June, but rising prices mean that this will result in a lower volume of goods purchased by American consumers.

US demand for shipping appears to be weakening in response to rising prices, and this has allowed sea fares to fall. However, a strong labour market is preventing the destruction of demand along the route, although demand is expected to continue its steady decline.

On the other hand, capacity on the Trans-Pacific route showed an upward trend during the first 6 months of the year, reaching a peak of 682,126 TEUs deployed in the week that began on June 16. Since then, shipping lines have reduced capacity on the route by 5.0%, resulting in 34,597 less deployed TEUs per week compared to the previous 3 months. A contraction of supply on this route may slow the downward momentum of tariffs at the start of 3T

Feeling in the world market

It should be noted that in July 53.6% of those surveyed in the IT Industry Survey expected some overall tariff increases in the next 3 months; however, this figure is considerably lower than the 75.0% expected higher tariffs in April. Very few now believe they will increase significantly. In April, almost half of all participants believed that tariffs would increase significantly, however, it has now dropped to less than a fifth.

 

SOURCE: MUNDOMARITIMO.CL