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Ocean shipping is showing a significant consumer pullback, with logistics executives telling CNBC they saw a 20% drop in ocean freight orders in the months of September and October. The fall in demand affects many products, including machinery, housing, industry and some clothing. Logistics CEOs tell CNBC the reason is a combination of overstocking and a lack of clarity about consumer demand.
The trend towards ocean shipping reflects recent comments from logistics industry executives. Georgia Port Authority executive director Griff Lynch said he expects the number of waiting ships to drop over the next few weeks after seeing historic ship calls.
For apparel and footwear, executives say there is no definitive trend, although inventory issues are becoming more common. Nike’s excess inventory, disclosed in its earnings last week, weighed on the stock.
“Inventory levels are high as consumer behavior continues to shift off-price,” said Brett Rose, CEO of United National Consumer Suppliers. “Bigger brands are very aware of the current season and trends. A Bloomingdale’s consumer doesn’t want last season’s shoes or handbags. These items will appeal to consumers from retailers like TJ Maxx, Marshalls, Ross Stores,” he said.
Seko Logistics tells CNBC that orders for expensive items like smart parcel lockers, integrated server shelves, ultrasound machines and time-sensitive cargo like retail displays are still strong.
DHL Ocean Freight tells CNBC it currently shows no signs of a 20% drop in orders. However, with no rush expected in the run-up to China’s National Day of Golden Week, the company expects demand to be flat in October. The continued threat of industrial action among rail and dock workers in some regions, port congestion in Europe and weather-related schedule disruptions are likely to drive more port cancellations and omissions, offsetting some of the rate declines from Asia-Pacific.
Ocean rates are falling, ships are being cancelled
To cap prices, shipping companies are conducting so-called tactically canceled sailings so they can match ship space with orders they hope will halt the price drop. In a note to customers, HSL Logistics said its vessel cuts were down by nearly 50% and that the decline in vessel capacity could continue into 2023 unless demand picks up ahead of the Chinese New Year, which occurs at the end of January.
It will take some time before capacity reductions can stop the decline in freight rates. According to Freightos, prices between Asia and the US West Coast (FBX01 Daily) fell 8% to $2,978/forty equivalent units (FEU). This rate is 82% lower than at the same time last year. Freight rates for the Asia-US East Coast route (FBX03 Daily) fell 5% to $6,952/FEU and are 63% lower than this week’s rates last year.
Another data point that signals a drop in orders is the outbound bid rejections.
The higher percentage of rejections indicates tighter capacity; The lower the percentage, the lower the capacity. “Right now we are tracking 2019 levels and are 80% down from a year ago. Looking at spot rates excluding fuel surcharges, we’re currently 31% down from last year’s levels,” said Kevin Hill, Head of Communities and Research for FreightWaves.
CNBC Supply Chain Heat Map shows ship congestion persists on the East Coast and the impact of Hurricane Ian will delay ship congestion relief, according to MarineTraffic.
During the September 12-18 period, the Port of Savannah experienced the highest number of weekly average waits at anchor since April 2022, according to Alex Charvalias, Supply Chain In-Transparent Visibility Lead at MarineTraffic September No ship calls recorded in the port of Savannah. There is no question that this new disruption from Ian will add to the existing congestion.”
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The CNBC Supply Chain Heat Map data providers are Everstream Analytics, an artificial intelligence and predictive analytics company; global freight booking platform Freightos, creator of the Freightos Baltic Dry Index; logistics service provider OL USA; supply chain intelligence platform FreightWaves; supply chain platform Blume Global; third party logistics provider Orient Star Group; marine analytics company MarineTraffic; project44 for maritime visibility data; maritime data company MDS Transmodal UK; Xeneta sea and air rate benchmarking and market analysis platform; leading provider of research and analysis Sea-Intelligence ApS; crane global logistics; and Air, DHL Global Forwarding; freight logistics provider Seko Logistics; and Planet, provider of global, daily satellite imagery and geospatial solutions.