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Reliability improves in declining market

The latest set of market data that became available at the beginning of the new year only confirms that the demand for sea freight is still declining.

From an operational point of view, there is good news for shippers. Global ocean freight reliability has continued to improve, with 57% of all ships arriving on time at the end of November. While still not a great performance, this is an improvement on the 30% by January 2022.

On the main shipping routes, the greatest improvement was seen for cargo from Europe to Asia, where reliability increased from 13% at worst to 52% now. In contrast, congestion on the US east coast led to the least improvement being seen among the major routes: from Asia to the US east coast and from Europe to the US east coast, where on both routes more than 40% of ships still do not arrive on schedule.

Drop in freight volumes means deliveries on schedule

Average vessel delays have also improved significantly, meaning only 5.5% of the global container vessel fleet is unavailable due to delays. If operations continue to improve at the same pace as the market has seen in the past 10 months, it means that global operational performance could return to normal by the end of March 2023.

good news that is at the same time part of the cause of the market decline. It means that from January to November, we saw a net capacity growth in the global fleet of about 8.5%, purely due to the release of capacity from endless queues. This capacity increase was unnecessary given the simultaneous collapse in sea freight demand.

Global container volumes, measured in TEUs, fell -9.5% in November from a year earlier and are also down -2.5% from pre-corona demand in 2019. The decline is particularly strong on major trade lanes. Freight volume from the Far East to Europe was down -18% year-on-year and volume from the Far East to North America was down -26% year-on-year.

Known risk factors should not be ignored

Carriers tried to cancel many sailings to better align capacity with actual demand. This proved somewhat successful at the end of December, when you saw a considerable stabilisation of rates compared to the sharp drop-in spot rates in the months before. But the level was still quite low according to spot rate data from the 'Drewry World Container Index'.

Finally, at the beginning of 2023, we already see that we should not neglect known risks. In the first weeks of January, we already saw the port of Lisbon hit by a cyber attack and a large bulk carrier run aground in the Suez Canal.

Fortunately, the cyber-attack had no major impact on operations and the grounded vessel was refloated and released within hours. However, these incidents clearly show the lesson that every supply chain operator should have learnt by now: Make sure you have your contingency plans in place.

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