According to the freight rate monitor FBX, published by Freightos and the Baltic Exchange, average rates remain on a par with a year ago as the demand for critical supplies are boosting airfreight rates from China to Europe ever higher, pushing cargo into other modes of transport, notably shipping, keeping those rate levels buoyant to a degree.
Larger importers are cancelling orders, but many more moderately sized businesses remain committed and apparently unaffected by the calamitous decline in demand.
Smaller concerns “using the Freightos.com freight marketplace continued to ship goods, with last week’s number of shipments up 11% from the previous week and down only 2% over the same period last year,” said Eytan Buchman, Freightos’ CMO.
Shipbroker, Braemar, quoted the Director General of the OECD (Organization of Economic Co-operation and Development), Angel Gurria, who said that for every month of a global lock down, the OECD estimates that the annual (2020) global GDP growth rate could decline by 2%. So for a three-month lock down, world GDP growth could shrink by 6%.
However, change is on the way with Braemar also quoting HIS Markit’s PMI that monitors the expected demand going forward.
“The IHS Markit Brazil Composite PMI (purchase managers’ index) plunged to 37.6 in March 2020 from the previous month’s 50.9, signalling the steepest month of contraction in the private sector since the series began in March 2007.
“The IHS Markit Eurozone Construction PMI dropped to 33.5 in March 2020 from 52.2 in the previous month. The latest reading pointed to the sharpest contraction in construction activity since February 2009. New orders slumped to an over eleven-year low and the job shedding rate accelerated to decade high.”
Job seekers in the US climbed by 6.6 million people in the month to 28 March, according to the US Department of Labor. Demand will as a result be hit again by the lack of consumer confidence that will follow this rise in jobless in the key North American trades.
Buchman cites the Wall Street Journal when he argues that, “The US and much of Europe are bracing for what could be the peak weeks of the outbreak. But, despite a focus on essential goods, some delays and disruptions, and new measures to protect its own workforce, the logistics industry has continued to function and keep goods moving.”
There is an expectation that there will be a flood of demand on the charter market, as orders made before the lockdowns in Europe and North America will start to be fulfilled, and with the time charter market stagnant, as seen in Braemar’s chart above, there could be a sudden rush for tonnage when the lockdown ends. Or perhaps after the owned tonnage is re-employed. Maersk’s acquisition of warehousing and distribution company, Performance Team, is looking better every day.
