Global logistics shrinkage leads to tripling of port outage rate

International Business News  –  The decline in global logistics is evident. the rate of container ships out of service at the end of February reached three times the rate before the New Crown outbreak, and the 2023 volume of air cargo is expected to decrease by 4% from the previous year. As a result of the economic variation, the U.S. retail industry has seen a surge in inventories, and imports and exports of appliances and other goods are declining. The downturn in logistics also reflects the fact that inflationary pressure on cargo is easing.

In terms of container ships, the trend of downward capacity adjustments as cargo decreases has strengthened. According to French research firm Alphaliner, the rate of ships cancelling their voyages and standing by in ports reached 6.4% at the end of February. The rate increased to three times that of the same period of the previous year and further deteriorated from about 5% in January, compared with about 2% before the New Crown epidemic. Unprofitable maritime companies are thought to emerge as well.

The decrease in cargo transportation is more significant in the routes connecting Asia and North America. Data from the Japan Maritime Center (located in Tokyo’s Chiyoda Ward) showed a 20 percent drop in traffic in January, the fourth consecutive month of a two-digit decline. Freight rates in early March (Shanghai to the U.S. West Coast) also fell 85 percent from their peak in February 2022.

Yusen Logistics said the rate of container ships that stopped and cancelled scheduled sailings due to low loading on routes connecting Asia and North America was 25% in January and reached 27% in February. On a pure calculation, one out of four to five ships did not sail as planned.

Although there are also many container ships that will not be able to sail regularly in 2022, the situation is completely different. As of last year, the reason was a significant decline in the ability to cope with stacked cargo at ports due to a combination of increased demand from homes under the new crown epidemic and a shortage of handling employees. Although there is cargo that needs to be transported, but had to stop sailing, becoming the main reason for global supply constraints.

“Tight supply and demand has been easing rapidly since last fall, and cargoes have decreased significantly,” said the head of a major Japanese shipping company. Demand for furniture and home appliances, for example, has fallen as a result of the decline in U.S. home sales and other sales due to monetary tightening.

Behind the decrease in logistics volume there is also a surge in inventories brought about by reduced demand. Supply constraints continue to ease and inflationary pressure on goods is easing.

U.S. retail inventories increased by 10% in January compared to a year ago, to about $740 billion. Data from the National Retail Federation (NRF) show that container imports at major U.S. ports fell 26% in February to the lowest level since May 2020, the early stages of the new crown epidemic. The 2-digit decrease is expected to be maintained from March to May.

According to Yusen Logistics, “In Europe and the United States, inventories of consumer goods have exceeded appropriate levels. The downturn in shipping volume may continue in the future.”

In addition, air cargo will also continue to decrease. Data from the International Air Transport Association (IATA) shows that global air cargo shipments decreased by 15% in January, 11% lower than the same month in 2019 before the New Crown outbreak. The decline is expected to be 4 percent in 2023.IATA says “households’ spending power is subdued” and believes it will take longer to hit bottom.

Structural changes in logistics are not limited to volume reductions. The pattern of cargo movement is also changing due to the impact of the U.S.-China confrontation, among other things. Container traffic from China to the U.S. (including Hong Kong) decreases by 3.2% in 2022, the first decrease in three years. Signs of avoiding imports from China are emerging with an 8.9% increase in ASEAN departures and a 4.8% increase in India departures.

Supply chain decoupling due to the Russia-Ukraine conflict and the new crown epidemic highlights the risks to the global supply chain. The trend of establishing complete supply chains within countries and friendly countries is likely to intensify, and signs of global logistics restructuring are likely to continue in the future.