By Richie Lin.     Photo：Jimmy Chan

 CPI (Consumer Price Index) in February 2023 was 6.0%, which is still far away from the normal 2% inflation, so market expects FED will continue the high interest rate to cool down the economy. Since the interest rate remain at high level, economic activities will be reduced because the cost of money has become much higher. Consumers will hesitate on using credit cards or applying mortgage and companies will restrain on borrowing money from banks to invest on new equipment for production. Furthermore, companies will be forced to lay off personnel to reduce the operating cost when there will be less and less orders. Unemployed people are going to spend less and less on products. Therefore, the high interest rate will cause a vicious cycle of less consumption and high unemployment rate. In the first quarter of 2023, we already saw big tech companies to lay off significant amount of personnel and the bankruptcy of Silicon Valley Bank. And PMI in February 47.7, which is slightly better the number in January but also indicates that many companies are still negative on the future of economy and will keep deducting orders and productions. Basically, it will take 3 months from receiving the orders to actually manufacturing the products. Therefore, economic contractions happening in this month will have at least 3 months’ ripple effects. This means customers will not have many demands on the ocean freight, airfreight or any other types of logistics in the second quarter or even until third quarter of 2023.

The demands of logistics arrangement are surely going down, so the only tool to control the price is by cutting the supply into the market. Since most of countries have opened their borders, airline companies can switch their focus on the passenger businesses. But major shipping lines have no other strategy except blank sailings and slowing down the sailing speed of vessels. Blank sailings can restrict the containers allotment in the market to maintain a fragile balance of supply and demand for the rates if ocean freight. And according to a report recently, the average speed of global shipping vessels is only 13.72 knots, the lowest speed in history. The average speed of container ships in the first two months of this year has dropped by about 3.5% compared with the average in 2022. Among them, the average speed of container ships of 12,000TEU-17,000TEU has dropped by the largest 7%. In addition, some container ship owners said that the actual speed reduction of some ships may have reached double digits. Therefore, customers shall pay much more attention to the transit time from Asia to USA and Europe because it hasn’t come back to the normal level before the outbreak of pandemic. It still took 45~60 days from Asia ports to IPI such as Chicago and Detroit even though there is no big congestion happening in ports or rail ramps. At any rate, Shipping lines will maintain their strategy of blank sailings and slowing down vessels’ speed in the following months.

FCL market rate reference in week 13:

• Asia main ports to USAWC USD 1250~1500 per 40GP; 
• Asia main ports to USAEC and Gulf USD 2200~2700 per 40GP; 
• Asia main ports for IPI points of USA is USD 3500~4200 per 40GP.
• Asia main ports to Europe base ports and West Mediterranean: USD 2000~3500 per 40GP.

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