According to the company’s website news release on September 27, 2022, container shipping is facing strong headwinds amid an increasingly pessimistic economic outlook due to a sharp slowdown in western economies as inflationary pressures and higher energy costs weigh on sentiment. Recent figures show regional container growth has declined in most major areas, while container rates have slumped. And while port congestion in Europe and US shows signs of improving, dock strikes in the UK will add to supply chain disruption.
But on a brighter corporate note, Maersk completed its acquisition of Hong Kong-based logistics company LF Logistics in August to bolster its warehousing network and logistics capabilities in Asia.
Market Trends
A worsening economic outlook is weighing on the container shipping markets as economic data points to a sharp slowdown in the US and Europe. The global manufacturing orders-to-inventory ratio fell further in August while manufacturing orders also fell back slightly. At the same time, US and Europe inflation levels are at a record high of 8.3% and 7.4% respectively excluding food and energy costs. Regional container trade growth declined further between May-July and most major regions are seeing negative growth with export volumes from Asia falling by 1.1% and import volumes dropping by 8.3%. Import volumes to North America fell 2.3% and containerized imports to Europe 4.5%. Africa and intra-Asia were among the few regions where container volumes grew, with inbound to Africa rising 8.1% and intra-Asia climbing 3.7%. Ocean spot rates are in steep decline with the Shanghai Containerized Freight Index (SCFI) dropping significantly since June to around $3,000 per TEU in September, back to the same level as December 2020.
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China’s National Day holiday: Operational changes including blank sailings and vessel slidings will take place on Asia-Mediterranean Europe and transpacific to take into account the Golden Week National Day holiday October 1-7 and vessel delays. The blankings and voyage resets will affect some of Maersk services into mid-October. That comes as the company continues to see sluggish consumer demand due to high inventories and inflation in major western economies. For details of the affected sailings please contact your local customer services team Local Information | International shipping | Maersk or check out the customer advisory page on Maersk.com.
LF Logistics: The acquisition of Hong Kong-based contract logistics company, LF Logistics, was completed at the end of August. The firm, which will be rebranded to Maersk, has premium capabilities within omnichannel fulfilment services, e-commerce and inland transport in the Asia-Pacific region. “With the addition of LF Logistics, Maersk gains unique and best in class capabilities to servicing the important and fast-growing consumer markets in Asia,” said Ditlev Blicher, Regional Managing Director of Asia Pacific at A.P. Moller – Maersk. Following the acquisition, Maersk will add 223 warehouses to the existing portfolio, bringing the total number of facilities to 549 globally, spread across a total of 9.5 million square meters. Maersk’s existing fulfilment capability will now be combined with LF Logistics’ operating methods, technology, and supplier relationships to deliver world-class fulfilment solutions globally. The acquisition is another step forward, enabling us to deliver on Maersk promise to be customer’s trusted integrated logistics partner. Coming together as one company the company is better positioned to ensure the timely and reliable flow of the goods, while adding flexibility and efficiency to your supply chain.
Ocean Update
The changes to the macroeconomic environment are accelerating the pace of market normalization and enabling ports to decongest, which in turn will make put pressure of the value proposition offered by carriers. Throughout the pandemic, Maersk has been working hard on improving the quality of the company’s product offering and the company is confident that once the markets have normalized this will become evident to the company’s customers, who will see Maersk as a strong partner for their global supply chain needs.
UK port strikes: Strikes at Felixstowe and Liverpool have had and will continue to have a major impact on vessel scheduling and landside and intermodal operations. The next strike at Felixstowe is due to take place between September 27-October 5, while the walkout at Liverpool will occur between September 20-October 3. Maersk has advanced or delayed the ETAs of 12 sailings on Asia-Europe and other services to maximise the availability of labor before and after the strikes. A LO2 service will call at London Gateway instead of Felixstowe. For most recent updates on strike action at UK ports, please check her
European port congestion: There is an ongoing improvement in congestion at major European ports and productivity is picking up yet schedule delays, blanking and port omission are continuously expected in the coming months. At Bremerhaven and Rotterdam there has been a reduction in vessel waiting times and yard density levels have become more manageable. Rising water levels on the Rhine have reduced barge transportation delays and inland capacity bottlenecks via Antwerp and Rotterdam and helping to normalize rail and truck transportation. In Hamburg, while the company is seeing an improvement in the overall situation, yard density levels remain high, causing low port productivity and increased berth waiting times.
For Retail Customers
Retail industry has needed to correct large-scale imbalance of inventory caused by volatile changes to consumer demand and shop closures due to Covid 19. Businesses must adapt to a new norm of supply chain management.
As consumer behavior returns to more pre-pandemic lifestyles in 2022, global industry professionals remain optimistic about the future of the retailing industry. Euromonitor International projects a modest positive forecast CAGR of 6% from 2021 to 2026. When comparing the performance across the various channels within retailing, this same group of professionals expects new digital shopping methods such as online marketplaces and direct to consumer to post some of the strongest rates of growth.
More than 60% of global retail professionals expect e-commerce penetration to be at least 20% of total retail sales. This share will continue to grow in the retail space and one can expect this percentage to exponentially increase in the years to come.
Industry professionals are adapting new business models and embracing technology to drive these new revenue streams to meet consumers where they are and how they want to shop. The likes of the rise of marketplaces, direct to consumer brands and subscription services also mean the future of physical spaces must be reconfigured to ensure relevance.
Some of the biggest challenges faced by industry professionals to develop an omnichannel strategy include the integration with existing system set-ups, lack of internal resources and expertise. Incorporating new business models requires retailers not only to make bold financial decisions and gather necessary resources, but also a shift in mindset to how the business will be conducted in the future. To be able to successfully make the transition will require significant uptakes from all relevant stakeholders and many capable sets of hands to be able to succeed.
The post-pandemic consumer is constantly shifting priorities, which forces those in the retail industry to react accordingly by constantly re-evaluating their strategic priorities. In the next five years, retail professionals will be placing more emphasis on sustainability, new digital technologies and business models and expanding into new markets. This will help drive the wants and needs of future generations of digitally-enabled and socially-conscious consumers
Creating impactful in-store experiences and increasing digital investments to better engage with digital natives in the next 12 months will allow retailers to commence a comprehensive omnichannel strategy that will not only optimize store formats and in-store experiences, but also blend the physical and digital retail landscapes together.
The priority for supply chains will shift away from cost and towards resilience and reducing exposure to regional or global disruptions. Demand for higher levels of supply chain integration will grow as flexibility becomes more important.
The retail industry is scrambling to address an inventory imbalance by slowing down the production and delivery of low demand goods while simultaneously increasing the production and delivery of high demand goods. At the same time, global supply chains remain heavily disrupted with limited and changing transport options, acute staff shortages, economic uncertainty, and suppliers operating beneath capacity.
Air Update
The global air cargo market is facing a mixed outlook with high fuel prices helping to support freight rates which remain significantly above pre-COVID-19 levels but demand growth is likely to flatten, according to a second quarter report by consultant Seabury. That comes as air cargo capacity is continuing to recover to pre-COVID-19 levels globally. Return of capacity between Asia and Europe is comparatively slow due to various impacts such as Russia-Ukraine conflict and Covid-19 control in China. Seabury said several freighter operators service Asia-Europe via the Middle East due to airspace closures over Russia and Ukraine.
Greater China: Air cargo capacity on key corridors has been reduced. For the US market, an on-going dispute over traffic rights between China and the US has led to airlines cancelling flights. In Europe, the impact of COVID-19 outbreaks and summer holidays has led to a shortage of ground handling staff leading to some flight cancellations to Frankfurt and Amsterdam. Power restrictions in China due to the drought and heatwave reduced airport efficiency which led to landing restrictions.
The company is hopeful of a traditional peak season from September partly fueled by new product launches from high-tech firms such as Apple. Chinese Mainland and the Hongkong SAR markets are seeing an improvement in both the lower and higher weight categories, although transit times have yet to improve with an average 5-7 days processing time. Hong Kong fuel surcharges decreased from September 1 from HKD7.00/kg to HKD6.10/kg on chargeable kgs.
Maersk’s commercial department launched Project Jupiter in early September and the first aircraft is expected to operate in November.
Australia and New Zealand: There continue to be freight cost savings on major inbound corridors in September. Airlines are looking for volume growth so are hesitant about introducing peak season surcharges which could see customers shop around among other airlines.
Volumes from Ho Chi Minh City into Australia remain at August levels as do volumes from Hanoi into New Zealand. Airlines report that large volumes will continue to be split over several flights which will impact transit times.
From Chennai, India, freight costs have fallen some lower weight categories with a slight increase for higher weight limits. Pakistan remains a spot market for the coming month because capacity is less stable.
Trans-Tasman airline capacity options remain limited and freight rates are best offered on spot levels.
Inland Services Update
China: A preferential zero tariff has been introduced from September 1 on more than 8,000 products originating from 16 developing countries including Togo, Djibouti, Guinea, Cambodia, Laos, Rwanda, Bangladesh, Mozambique, Nepal, Sudan, Chad and Central Africa Republic.
Warehousing operations in Chinese Mainland, Hong Kong SAR and Taiwan are operating normally even as the peak season starts and there are on-going COVID-19 outbreaks.
Maersk has changed the name of its ICR service to Maersk Cross Border Rail to reflect the growth of rail connections within the Asia Pacific region and Europe. The company will increase train frequency from China to Laos in September and the Maersk middle corridor will connect China railway services to the APM Terminal at Poti via the Caspian Sea and from there extend to the eastern Mediterranean or Europe through the company’s ocean network.
Japan: Container drayage volumes are stable. Truck drivers are trying to increase freight prices due to rising fuel prices due to the Ukraine conflict and the fall in the value of the Yen.
Vietnam, Cambodia, Myanmar: Demand may slightly increase in Q4 but the company may not see the peak season as in previous years due to the impact of the economic slowdown and inflationary pressures in western economies.
Philippines: Philippine manufacturing sector continues to grow significantly with external trade climbing 11.4% in July on record imports.
