From the Wall Street Journal:
Ocean carriers are canceling dozens of sailings on the world’s busiest routes during what is normally their peak season, the latest sign of the economic whiplash hitting companies as inflation weighs on global trade and consumer spending.
The October cancellations are a sharp reversal from just a few months ago, when scarce shipping space pushed freight rates higher and carriers’ profits to record levels. Last October, companies like Walmart Inc. and Home Depot Inc. were chartering their own ships to get around bottlenecks at ports to meet a surge in demand for imports.
Trans-Pacific shipping rates have plummeted roughly 75% from year-ago levels. The transportation industry is grappling with weaker demand as big retailers cancel orders with vendors and step up efforts to cut inventories. FedEx Corp. recently said it would cancel flights and park cargo planes because of a sharp drop in shipping volumes.
On Thursday, Nike Inc. said it was sitting on 65% more inventory in North America than a year earlier and would resort to markdowns.The erosion in global economic conditions, from the war in Ukraine to factory shutdowns in China, have dealt heavy blows to trade activity. The International Monetary Fund has cut its forecast for global growth in gross domestic product multiple times this year. Consumer prices are rising at the fastest rates in years in the U.S., countries in Europe and other parts of the world.
One response to the melting demand has been to reduce sailing trips. In September, container capacity offered by ship operators in the Pacific was down 13%, dropping the equivalent of 21 ships that can each move 8,000 containers in a single voyage, from a year earlier, according to shipping-data providers Xeneta and Sea-Intelligence. For the two weeks starting Oct. 3, a total of about 40 scheduled sailings to the U.S. West Coast from Asia and 21 sailings to the East Coast from Asia have been scrapped, according to the data companies as well as customer advisories viewed by The Wall Street Journal. Typically at this time of year, an average of two to four sailings a week are blanked, the industry’s term for canceled sailings.
Carriers also are increasingly canceling trips along key Asia-to-Europe routes, the data providers said.
“In the first week of October, one-third of previously announced capacity will be blanked and for the second week, it will be around half,” said Peter Sand, chief analyst at Xeneta. “The downturn pace in recent weeks has been very fast and it looks like carriers misread the low volumes of a nonexistent peak season.”
The period between late summer and early fall typically is the busiest time of year for the largest carriers, as retailers and other importers build inventories ahead of the holiday shopping season.
Daily freight rates now average $3,900 to move a single container across the Pacific, compared with $14,500 at the start of the year and more than $19,000 in 2021, according to the Freightos Baltic Index.
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Original Source: https://www.wsj.com/articles/cargo-shipowners-cancel-sailings-as-global-trade-flips-from-backlogs-to-empty-containers-11664681947
