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Ocean shipping order drops by 20%, signal a drop in consumer demand

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Ocean shipping is seeing a significant consumer pullback with logistics managers reporting a 20% drop in ocean freight orders for the months of September and October. With cut across many products, including machinery, housing, industrial, and some apparel, Logistics CEOs believe that the decline in demand is due to a combination of too much inventory coupled with a lack of clarity on consumer demand.

The logistics industry executives expect the number of waiting for ships to drop over the next several weeks after seeing historic vessel calls.

The apparel and footwear industry has no definitive trend, though inventory issues are becoming more prevalent. Nike’s overstock problems announced last week in its earnings weighed on the stock.

As per Seko Logistics orders for expensive items like smart parcel lockers, integrated server racks, ultrasound machines, and time-sensitive cargo like retail displays are still strong.

DHL Ocean Freight does not see any indication of a 20% drop off in orders, but it anticipates a flat demand in October in the build-up to the Chinese national holiday of Golden Week. Issues like the ongoing threat of labor action among rail and port workers in some geographies, port congestion in Europe, and weather-related schedule disruptions are expected to lead to more canceled sailings and port omissions, partially offsetting some of the rates decreases out of Asia Pacific.

Ocean shipping rates are dropping, and ships are being canceled

With ocean shipping rates on a decline, the ocean carriers are now indulging in tactical canceled sailings to match the vessel space with orders, which they hope will stop the decline in prices. 

In a note to clients, HSL Logistics said its vessel cuts were by nearly 50% and that the pullback in vessel capacity may continue into 2023 until demands pick up before Chinese New Year, which is in late January.

It will take time for the cut in capacity to stop the freight rate slide. Asia-US West Coast prices (FBX01 Daily) fell 8% to $2,978/Forty Equivalent Units (FEU) an 82% low than the same time last year, says Freightos adding that the Freight prices for the Asia-US East Coast route (FBX03 Daily) decreased 5% to $6,952/FEU, and are 63% lower than the rates for this week last year.

The outbound tender rejections also point toward a decline in orders. 

The higher percentage of rejections indicates tighter capacity; the lower the percentage shows looser capacity. 

“Right now we are tracking at 2019 levels and are down 80% from where we were a year ago. Looking at spot rates excluding fuel surcharges, we are currently 31% below where we were last year,” said Kevin Hill, Head of Communities and Research for FreightWaves.

The CNBC Supply Chain Heat Map shows vessel congestion on the East Coast continues and the impact of Hurricane Ian will delay the clearing out of vessel congestion, according to MarineTraffic.

During the period of September 12-18, the Port of Savannah reached the highest number of weekly average days waiting at anchor since April 2022, according to Alex Charvalias, supply chain in-transit visibility lead at MarineTraffic. “Because of Hurricane Ian, zero vessel calls have been recorded at the Port of Savannah since September 29. There is no question this new disruption by Ian will increase the existing congestion even more.”

Source: CNBC

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