By Richie Lin.    Photo：Tom Fisk

Recently, all shipping lines reported their decreasing revenues in first quarter and disappointed forecasts in second quarter of 2023. But they all announced the market will be more and more positive when the peak season is coming closely. Therefore, let’s take a few moments today to analyze if there will be any peak season this year by the economic numbers issued publicly. What is peak season? It refers to a period of time during which a particular industry or business experiences its highest levels of activity, demand, and profitability. The timing of peak seasons varies across different sectors and can be influenced by factors such as holidays, weather, cultural events, and economic trends. Take the retail industry for example, peak season typically includes major shopping periods such as Black Friday, Schools openings, and the holiday season leading up to Christmas. During this time, retailers often see a significant increase in sales and customer traffic as people shop for gifts and take advantage of special promotions and discounts. So you can say that the peak season of retail industry will usually last from September to December each year. It normally takes 3~4 months from giving orders to the Asian factories to receiving the products on the selves of stores. Hence, we can predict the chances of peak season in 2023 by three economic numbers in June.

Firstly, Institute for Supply Chain Management (ISM) announced on June 15th that PMI in May was 46.90. This is the seventh consecutive months under the expansion line. The PMI is usually a number from 0 to 100. A PMI above 50 represents an expansion when compared with the previous month. A PMI number under 50 represents a contraction, and a number at 50 indicates no change. PMI 46.90 in May meant many companies are still negative on the future of economy and will keep deducting orders and productions.

Secondly, by subtracting numbers of suppliers’ inventory from customers’ inventory, we can understand the ups and downs of inventory situation. When the difference between suppliers’ inventories and customers’ inventory widens, it indicates that customer (end-user) inventory is at a low point, and the supply chain is in the phase of replenishing inventories. When the difference begins to decline or even becomes negative, it reflects a continuous increase in end-user inventory and a slowdown in the demand for goods, entering a digesting inventory phase, which also implies the end of the manufacturing cycle. In May, the inventory of manufactures is 45.80 and the inventory of end-users is 51.40. The difference is negative 5.6 points, which meant the economy is in contraction period. The main target is to digest the inventory instead of manufacturing products for the future consumptions.

Thirdly, CPI in May was 4%, which indicates that inflation is under control. However, the core CPI also has 5.33%. CPI is a widely used measure of inflation that tracks the average price changes of a basket of goods and services commonly consumed by households. It includes a broad range of items, including food, housing, transportation, medical care, and more. However, certain components of the CPI, particularly food and energy prices, tend to be more volatile and can be influenced by temporary factors such as weather conditions, geopolitical events, or changes in oil prices. By removing food and energy prices, the core CPI aims to provide a more stable measure of inflation, enabling policymakers and economists to analyze the underlying trends and assess the effectiveness of monetary policy. After reviewing that core CPI is still 5.33% in May, FED indicates that they still reserve the possibility of increasing another 3 base points of interest rate within 2023. Whether FED keeps increasing the interest rate or not, the consumptions and expenditures in 2023 will be hugely slashed compared because there is less and less money left to buy unnecessary products.

Based on the PMI, CPI issued in June, we can conclude that there will be no peak season in 2023. Since it take 3~4 months from received orders by the factories to received products on the shelves of stores, there will be no substantial sales in the following September to December. And shipping lines will be disappointed if they still wait the peak season to increase the rates for better revenues.

FCL market rate reference in week 25:

• Asia main ports to USAWC USD 1300~1500 per 40GP; 
• Asia main ports to USAEC and Gulf coast USD 2300~2500 per 40GP; 
• Asia main ports for IPI points of USA is USD 3500~4000 per 40GP. 
• Asia main ports to Europe base ports and West Mediterranean: USD 2000~3500 per 40GP.

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