Market Update – 7th July 2023

Trade economists announced this month that the high-end UK manufacturing firms that feed into EU supply chains are going to be increasingly squeezed by post-Brexit trade.  

Nearly 50% of UK manufacturing exports to the EU are so-called “intermediate” in nature. That is to say, they feed components into EU supply chains that are then often exported onwards to the rest of the world as finished products. 

UK global exports in the first three months of 2023 were still 17% below the levels before the EU-UK trade deal came into force three year ago. 

As a result, the UK’s more advanced manufacturers will be replaced by lower-productivity domestic manufacturing in the longer term. 

Look no further than the UK’s auto industry. This sector has struggled to attract investment to build the battery factories necessary for the electric car revolution. 

The same could happen to the likes of other high-value sectors such as machinery, chemicals and computer equipment manufacturing. And with manufacturing accounting for nearly 50% of UK exports, unless something is done a steady decline looks inevitable. 

In other news:  

Land:   

• The TRU program aims to revolutionise trans-northern UK travel by making sweeping improvements along the 70-mile route between Manchester and York.  
• US trucking volumes improved in May after falling last month, but observers are still showing no signs of recovery in the second half of the year. 

• New data from Slovak Hydrometeorological Institute shows that road transportation’s share in greenhouse gas emissions has tripled since the 1990s. This is a result of an increase in road freight along with more vehicles on road. It is the only nation whose emissions are consistently on the rise.

• Road freight has been leading the recovery in South Africa’s logistics sector. The Ctrack Transport and Freight Index (Ctrack TFI) reached a new record high of 122.2 points in May 2023, up from 121.7 points in April. This is the fifth consecutive month of improvement for the index. 

Air: 

• The index and shipping companies report that the air freight market has tightened, and fares have risen slightly.
• With purchasing executives repeatedly failing to understand the post-pandemic market, the fourth quarter is likely to see huge demand for air freight volumes.

• The International Air Cargo Association (TIACA) recently concluded its third regional event, the TIACA Event Africa. The event brought the local air cargo community and international delegates together to discuss the intricacies of doing business to/from and within Africa.

Sea:  

• The protected containership charter market is now showing strong indicators that the poor demand for maritime freight is starting to have an impact.  
• In response to rising demand for container exports to the Middle East, Incheon Port has started direct container service to the Persian Gulf for the first time in five years.

• Maritime analysts are bearish on the outlook for liner shipping as progress in destocking in the US and Europe has proved disappointing.

• Container companies are worried about a worsening trade outlook for the second half of the year as tightening monetary policy dampens consumer demand.

Industry news  

Climate change is emerging as another motivation for investment firms to diversify away from China. London-based Legal & General Investment Management (LGIM) sold its stake in China Cosco last week, blaming the shipping company for not doing enough to decarbonise.  

In a letter to the US health regulator Pfizer wrote that it expected supply of the paediatric drug to be exhausted by the end of the quarter. As a result, experts are calling for more integrated supply chains.

Congestion at Mandra port last week, following disruptions from hurricanes along India’s west coast, has severely limited the shipping lines’ ability to maximise export lifts.

Republicans have introduced a new bill in the U.S. Senate that, if passed, would fine docker unions up to $2 billion a day and make strikes effectively impossible.   

Looking forward  

That’s it for this week’s report, if you have any questions about the stories covered today or need support with your current supply chain, please get in touch.