By Ricie Lin.    Photo：Attie Heunis

CPI (Consumer Price Index) in December 2022 was 6.42%, which has decreased from 7.12% of November 2022. This trend represents that FED’s policy of increasing interest rate really caused impact on people’s consumptions. However, 6.42% is still very far away from the normal 2% inflation, so market expects FED will continue the high interest rate to cool down the economy, even causing the recession if they have to. 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, which will eventually decrease the inflation till the number accepted by the FED. Through the numbers of PMI (Purchasing Management’s Index), we can find out the economy is really under the contraction period. 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 in first quarter and second quarter of 2023. However, to maximize their profits, shipping lines will continue using the blank sailings to restrict the supply of their spaces in the market. Between Week 3 (January 16-22) to Week 7 (February 13-19), total 700 scheduled voyages were cancelled on major trade lanes of Cross Pacific, Cross Atlantic and Asia to Northern Europe and the Mediterranean. There will be 158 voyages canceled during the 5 weeks. During this period, 68% of suspensions occurred on the trans-Pacific eastbound trade, 25% on the Asia-North Europe and Mediterranean trade, and 8% on the trans-Atlantic westbound trade. Even the blank sailings can control the space allocation in the market, the rate will be remained at low point or even forced to decrease because there will be less demands on ocean freight and airfreight arrangements.

FCL market rate reference in week 5:

• Asia main ports to USAWC USD 1500~1800 per 40GP; 
• Asia main ports to USAEC and Gulf USD 3000~3500 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 5:

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.

Appreciate if you could share TGL Blog among your friends who are interested in first-hand market information of supply chain and updated economic incidents.