Maersk Asia Pacific market update (May 2022)

The Russia-Ukraine situation continues to create uncertainty for the global economy as the conflict enters its fourth month. Concerns over food and energy supplies, combined with rising prices are weighing on European sentiment. Many other global markets continue to show robust demand levels at this time.

Responding to supply chain challenges Maersk has launched a new rail-sea service between Asia and Europe through Central Asia. Departing from various locations in China, the service connects Europe via Kazakhstan, Azerbaijan, Georgia, and Romania in about 40 days. In China, the logistics situation is showing signs of improvement even as the would major commercial centers such as Shanghai continue to fight to contain COVID-19 outbreaks. While the shortage of trucking capacity means customers are facing delay in cargo shipments, the pick-up of import cargoes has recovered to around 75% of pre-lockdown levels. Vessel waiting times are minimal, typically less than 1-2 days. As lockdown restrictions are lifted, we could see a major volume rebound.

This month, we share the latest trends and current challenges. We also explain Maersk’s latest solutions to help your keep cargo moving. If there are new topics you would like to talk about, please let us know via our survey here.

Market Trends

Global economic growth slowed in Q1 led by a contraction in the US, surging inflation in many economies and the on-going negative impact from COVID-19 related lockdowns, particularly in Asia. This was partly balanced by slightly more positive readings from Europe, while economic activity in Latin America is providing some signs of resilience. Global economy is expected to grow at a slower pace than previous forecasts as uncertainly from the Russia/Ukraine conflict adds to the previously mentioned factors.

Within this outlook, global container demand is forecasted to sit between -1% and +1% in 2022. Higher energy prices, lower consumer demand and volatile financial markets will also impact trade flows globally, in addition to the impact of the crisis in Ukraine. That came after global container trade volumes declined by 0.9% year-on-year in Q1 2022 although compared with pre-pandemic levels average growth was 2.4% (CAGR) compared with Q1 2019. Outbound volumes from North America, the Far East and Oceania saw the biggest falls in Q1, dropping by 12.8%, 10.3% and 8.7% respectively. But intra-Asia volumes grew 4.3% and inbound volumes to North America rose 3.3% in Q1.

The containership orderbook has risen sharply and currently stands at around 26% of the existing fleet at the end of Q1 2022, the highest level since 2012, according to data from Alphaliner. But conversely the volume of new vessel orders dropped sharply in Q1 2022, Alphaliner data showed.

Trending Topic

US West Coast labor talks: Negotiations between the International Longshore and Warehouse Union and the employers’ group, the Pacific Maritime Association (PMA) started on May 10. The labor agreement for all 22,000 workers employed at 29 US West Coast ports expires 1 July. Both sides are confident an agreement will be reached, though industry reporting reflects uncertainty as to what may be in store. US Labor Secretary Marty Walsh expressed optimism a deal will be reached after consulting with multiple parties in the negotiations and said he is ready to get involved as needed. The PMA and the ILWU said in a joint press release that “they expect cargo to keep moving until an agreement is reached”. The PMA has created a webpage for posting contract negotiation update.

Maersk’s GCA (Great China Aare) CHB (Customs House Brokerage) management system Genesis will go live and open to customers very soon following testing. Genesis will allow declaration data exchange, automate clearance status updates and provide analysis including customs inspection reports to help customers optimize operations and reduce cost.

To find out more about ‘Genesis’, please contact the GCA(Great China Aare) CHB(Customs House Brokerage) product team at gcachb@maersk.com.

Ocean Update

Key Market Outlook Across Trade Lanes

Air Update

Australia and New Zealand: Airfreight shipments with China continue to be disrupted by lockdowns there. Capacity is extremely tight and best offered on spot basis. The absence of Chinese carriers is adding to capacity tightening and rate pressure. Qantas will add Trans-Tasman cargo capacity between Sydney and Auckland in Q3 although Air New Zealand will introduce smaller aircraft between Melbourne and Auckland that will be keep prices high with available space on ad-hoc pricing terms. Dnata is adding a new import cargo terminal in Sydney.

Japan: Air cargo capacity is tightening between Japan and Europe because carriers are weight restricted due to the diversionary flight paths in place to avoid Russian airspace. Continuing lockdowns in Shanghai is leading to a reduction in the number of weekly freighter flights by 14 major carriers in May to a total of 229 flights.
The three main Japanese airlines increased fuel surcharges in May by about JPY40 per kg on long-haul flights and JPY10-JPY20 on Asian flights. Surcharges are expected to increase further in June.

Vietnam, Cambodia and Myanmar: For Vietnam, customers have the option of splitting large shipments across multiple flights. Lockdowns in some cities in China are leading to reduced airfreight demand from Vietnam, Cambodia and Myanmar with some airlines cancelling flights.

Inland Services Update

Truck drivers in Shanghai and other areas including Ningbo, Qingdao, Xiamen, Shenzhen and Guangzhou continue to face restrictions including the need for negative test results, a health code or local pass depending on the location. Barge services grew as an alternative to trucking to improve the efficiency. An increase in the number of confirmed cases in Taiwan is causing concern for the potential impact on warehousing operations and productivity.

ICR: The first train on our newly launched Middle Corridor service through Central Asia has arrived and a second will arrive in France shortly. The revamped service has been developed following feedback from our customers and has been launched at the perfect time to help ease current logistics woes. Over 90% of the Middle Corridor rail service is electrified.

Australia and New Zealand: The Oceania market is seeing a leveling out from recent disruptions across inland ports. Consequently, our focus will now switch to developing rail connections across the eastern seaboard – ensuring our customers have access to the connectivity which supports our integrator strategy.

Japan: Import cargo volumes from Yokohama container yard to Tokyo off-dock container yard are stable. There is still excess trucking capacity to meet demand.

Indonesia: Inland volumes are expected to rebound in June following the Eid festival. Exports of palm oil are expected to see a significant drop after the government banned exports although there were signs in mid-May the ban could be lifted. Trucking capacity is expected to be sufficient to meet demand.

Thailand: The supply of trucks is very tight due to the reduction in fuel subsidies in May which could potentially drive the price of diesel to THB35/litre. We are sending advisories to our customers increasing the Fuel Surcharge percentage as part of Inland rates.

Vietnam, Cambodia, Myanmar: Fuel prices continue to rise across all three countries. We have opened a new inland hub – SADEC in Vietnam’s Mekong Delta which can be connected by barge.

Major Ports Update

Major ports update (Vessel waiting time indicator)

Remark: Numbers are dynamic and subject to change.