By Richie Lin 

Institute for Supply Chain Management (ISM) announced The Purchasing Managers' Index (PMI) in December was 48.9. This is the second consecutive months under the expansion line. The PMI is based on five critical survey areas: new orders, inventory levels, production, supplier deliveries, and employment. 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 48.9 in December meant many companies are negative on the future of economy and will keep deducting orders and productions. After reviewing the PMI of biggest market in the world, let’s also check the PMI of biggest factory in the world: China. The PMI of China in December was 47, which meant the economy in China is also in contraction. Since the world’s biggest market and biggest factory are all in the economic contraction, there will not be many materials and products to be arranged in the following months. 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. Shipping lines, airlines and forwarders will face a real winter in first and second quarters on 2023. However, to maximize their profits, shipping lines will continue using the blank sailings to restrict the supply of their spaces in the market. Schedules will become very unstable because shipping lines will cancel vessels from time to time to control the operating costs. It’s hard to predict precisely when the products can arrive to customer’s door if the orders comes unpredictably. Therefore, we recommend customers to set up an overseas warehouse near their customers whereas they are in USA, China, European Union, or Southeast Asian countries. By storing limited inventory in the overseas warehouses, customers can speed up the supply chain to handle the prompt orders from their end-users. They don’t have use the expensive airfreight to fulfill the unexpected request from customers just because they are afraid that their customers will cancel the orders due to waiting too much time.

FCL market rate reference in week 2:

• Asia main ports to USAWC USD 1500~1800 per 40GP; 
• Asia main ports to USAEC USD 3300~3800 per 40GP; 
• Asia main ports for IPI points of USA is USD 4000~5000 per 40GP. 
• Asia main ports to Europe base ports and West Mediterranean: USD 2000~3000 per 40GP.

Airfreight market rate in Week 2:

Airfreight rate might increase abruptly without further notice. The following market rate for your reference. 

• PVG/SZX/HKG/TPE to LAX USD 4.3/kg, 
• PVG/SZX/HKG/TPE to ORD USD 4.4/kg, 
• PVG/SZX/HKG/TPE to JFK USD 5.0/kg.

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