Freight Firms Under Pressure as Global PMI Shows Sharpest Drop in New Export Orders in Eight Months Due to Weakened Demand
# Manufacturing Decline, Container Prospects Slump
Carriers are already under pressure from weak demand, and the latest Global Purchasing Managers’ Index (PMI) New Export Orders Index (NEOI), which showed its fastest decline in eight months, will undoubtedly disappoint them further.
Nick Savvides, European Journalist
September 27, 2024
Reading Time: 3 minutes
The NEOI fell from 49.6 in July to 48.9 in August, indicating a third consecutive month of worsening trade conditions. Trade has slowed down in both developed and emerging markets, but India maintained moderate growth in goods exports in August (the latest available data).
Additionally, the global PMI shows a contraction in manufacturing, predicting further deterioration in future freight volumes.
“Chinese goods exports fell for the first time in 2024, indicating an overall decline trend in manufacturing this year,” said Dimerco, a global freight forwarding company.
The Taiwan-based listed freight forwarder in Taipei noted that recent interest rate cuts by the Federal Reserve may stimulate global commodity trade.
Despite concerns over strikes on the US East Coast and potential major import tariffs following the November election, transactions continued to grow in August, according to Dimerco.
“An early peak season signals an earlier off-season. The expected handling volumes for September through December are 2.31 million, 2.08 million, 1.92 million, and 1.89 million TEUs respectively. If these forecasts hold true, the total port volume in 2024 could reach 24.98 million TEUs, a 12% increase from 2023,” said Alvin Fuh, Vice President of Ocean Freight at Dimerco Express Group.
Dynamar analyst Darron Wadey stated, “By the end of 2024, approximately 470 vessels with a total capacity of about 3.2 million TEUs are expected to be delivered.”
Wadey also noted that this significant increase in capacity, particularly large vessels, means that freight rate adjustments should have started a year ago. “It was only the Red Sea and US East Coast situations that accidentally supported the market. When the market does adjust, delays and continuous increases in new ship deployments will lead to more severe declines.”
Drewry Shipping Consultants’ analysis shows that between September 9 and October 7, an increase in blank sailings is expected, with a total of 53 sailings canceled out of 90 during this period. Of these cancellations, 67% occurred on the Eastbound Pacific route, 21% on Asia to Europe trade, and 12% on Atlantic trade.
Despite these cancellations, Dimerco noted that freight rates are still declining across all major trading routes.
New entrants are considered another factor in carriers’ inability to maintain freight rate levels.
“Although the three alliances have increased blank sailings, some independent carriers have deployed 11 additional vessels for Westbound Europe and 14 vessels for Eastbound Transpacific to cope with expected cargo surges before China’s National Day Golden Week. However, this year’s expected surge in Chinese cargo ahead of October 1 did not materialize, leaving these new ships without residual cargo,” Dimerco’s monthly analysis report pointed out.
Wadey said that trade balance can only be achieved through long-term and stable trade growth, adding “what is needed is a strategic rather than reactive ship ordering policy.” He noted that this necessary shift is generational. “In the short term, US political events may lead to a surge in freight volumes by the end of 2024… but what about 2025 and beyond?”
Drewry’s Global Container Freight Index fell further by 7% this week, closing at $3,691 per 40-foot container.
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