- Terminals in Europe to stay congested, container rates reached near bottom levels
- Holiday season to hit early exhaustion of inventories; retailers might end up replenishing their fresh inventories sooner than expected
- Companies turn to alternatives to grow supply chain capacity for responding to present market disruptions; India, Singapore, Vietnam, and Malaysia strongly emerge as prime alternatives
Hamburg, Germany, 28 December 2022:
The holiday season, now at its peak, is going to trigger an early burn-out of inventories in the US, which resultantly will kickstart the inventory replenishment cycles a bit sooner than the supply chain and shipping industry predicted earlier this year. This would cause an increase in demand the export hubs as the US starts to work on balancing its order-to-inventory ratio, as discussed in a recent webinar hosted by Container xChange, the leading online container logistics platform for container trading and leasing globally.
The webinar shed light on some of the pertinent challenges faced by the container logistics industry worldwide and discussed some of the market trends likely to appear in the industry.
Global trade is undergoing an opportune shift in supply chain reliance on China to newer emerging SE markets as the country tightens its zero covid policy and struggles with increasing labour costs amidst other market disruptions. Furthermore, China has grown out of the low-cost countries (LCC) label, which has made way for other southeast Asian countries like India, Singapore, Vietnam, and Malaysia to mark their presence into multinational companies’ long-term regional presence imperative.
Predicting how the trade volume shift might look like in 2023, Mr. Eric Johnson, Director at S&P Global and Senior Technology Editor at JOC.com said, “There is an evident drop in trade between China and the US and the UK, and one of the major trends that have caught the attention of the supply chain and shipping industry is that imports from China to the US and UK have gone down. However, import volume into the US as a whole from all regions hasn’t gone down at the same rate as from China specifically which strongly corroborates the trade shifting elsewhere.”
Companies globally are focusing on creating regional alternatives to curb supply chain disruptions cropping up due to high labour costs, fresh lockdowns in the country and protests in the country.
With the dramatic fall in consumer demand and more containers available, the spot rates on transpacific routes between some countries in East Asia and the US have also dropped drastically.
The spot rate of a 40 ft container in the China-West Coast route fell by 20% to $2,361 in October. The typical premium rate a year back was $20,000. Across the Atlantic, shippers in the US have witnessed a 20% dip in ocean freight orders, and ocean carriers have cancelled half of their sailings to make sure that their vessel’s capacity matches the demand.
One-way pickup charges for standard containers from China to North America are declining month on month since May 2022 from $1773 to $344 in October. (One-fifth of what it was in May)
Container xChange Platform Data
The concepts of “minimization of logistics risks” and “diversification of supply chain” are not new. Countries and businesses are working harder than ever to eliminate their supply chains’ excessive reliance on just one market. As part of a China plus one strategy, businesses are currently assessing and launching projects to test the waters by entering into fresh countries to meet their supply chain demands.
The speed of this diversification is actually closely correlated with the additional disruptions we will observe in China as a result of numerous variables, including the Zero COVID plan, additional production shutdowns, and escalating geopolitical tensions. If they happen more quickly, diversification will follow suit.