DHL: Incoming capacity poses fresh challenges for ocean freight

• Demand outlook - Various events such as war in Ukraine, the energy crisis and inflation are lowering consumer spend, and thus demand in goods. "With the downward shift in market rates, it is crucial to provide our customers with the best solutions to optimize their costs in the months to come," said Kelvin Leung, CEO, DHL Global Forwarding Asia Pacific.

• Capacity - With a huge number of new large containerships hitting the water in 2023 at a time of stagnating demand, the liner shipping market might be headed towards structural overcapacity which could impact profits.

• China - While port-related congestion issues in Europe and the U.S. have lessened, supply chain disruptions are continuing in China which show no signs of easing pandemic-driven restrictions, thus dampening both international trade and China's own economic growth.

• "We are closely monitoring the situation in China, and hope to see some loosening of the restrictions by next year. This would allow manufacturers to plan production and deliveries more efficiently. It would also boost growth and confidence in the important Chinese domestic market," added Leung.

• Economic outlook - The latest PMI surveys signalled that the downturn in global economic activity is showing no sign of relenting. Bennett Parrish, Global Economist at J.P.Morgan, added, "With demand weak, geopolitical and market volatility high, and inflationary pressures still elevated, the growth outlook remains downbeat for the remainder of the year."

• The eurozone economy looks set to contract in the fourth quarter given the steepening loss of output and deteriorating demand picture seen in October. The U.S. economy is also struggling with manufacturing activity growing at its slowest pace.

• Shifting rates - The combination of a lowered demand, along with growing capacity, has led to a drop in rates. Across many trade lanes, cargo volumes are weakening, and spot freight rates are projected to move back to pre-pandemic levels.

The DHL Ocean Freight Market Update is a monthly report by DHL Global Forwarding which tracks and analyses the latest developments of the global ocean freight market. Read the full analysis on DHL's Logistics of Things here.

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