Market Update – 3rd March 2023

Despite China being dogged by lockdowns, their factory activity posted its biggest improvement in more than a decade. 

Specifically, China’s manufacturing purchasing managers’ index rose to 52.6 last month, the highest reading since April 2012. Even after three years under strict Covid restrictions, China is still capable of unleashing a reopening that may just stabilise global trade. 

Although, the same isn’t true for the likes of South Korea and Japan, both of which have struggled to kickstart their trading levels. 

Thailand and Taiwan posted positive PMI readings however, along with Vietnam, Myanmar and Indonesia. 

In Europe however, Germany have seen factories in contractionary territory for an eighth straight month, while France’s producers sank below 50 level after briefly peering above it in January this year. 

We’re unsure exactly how this will impact the world’s supply chains, but early signs are good. In the meantime: 

Transportation trends         

Land:        

• The size of the road freight transportation market in Europe is expected to grow by USD 58.43 billion from 2020 to 2025. The growth momentum of the market will accelerate at a CAGR of 3% during the forecast period.
• The UK Government has announced a Boost for bus, coach and HGV driver recruitment with proposed reforms to training rules. These proposed changes to training along with a cheaper, shorter periodic test could help drivers to remain in or return to the sector.
• The European Commission has approved, under EU State aid rules, a €1.1 billion German scheme to compensate rail transport operators using electric traction in the context of the recent spike in electricity prices. The measure will contribute to ensuring that the rail sector remains competitive while preserving the environmental performance of electric rail. 

Air:    

• The restart of production at Chinese plants may be fuelling the first indications of a potential rebound in the aviation cargo market. While air freight rates “continued to edge marginally lower” last week, according to data source TAC Index, there have been signs of “first shoots of revival” after recent “steep price declines” for some time.  
• Analysts predict that the present surge in aircraft conversions won’t last, but that conversions will continue to outnumber new units in the freighter market 70:30. 
• As importers and exporters look to falling marine freight rates and better ocean dependability, South Africa is about to transition away from air freight.  

Sea:      

• Currently, shipper-owned containers (SOCs) may be less expensive to hire than those held by carriers, despite the oversupply of equipment and declining freight rates.  
• The container industry is paving the way for transportation to move into new frontiers by spending heavily in methanol propulsion.  
• Bulk and tank ships older than 25 are now formally prohibited from entering Indian seas.  
• In India, specialised feeder lines running on coastal or regional short-haul routes have started to modernise their capacity as the government changes its ship-age policy. This is a precursor to the transition of the country’s supply chain. 
• There appears to be no slowing of the decline of Asia-US cargo spot rates ahead of the customary transpacific yearly contract rate bargaining season.  

Industry news 

• A recent report released today shows that the UK manufacturing sector saw an increase in output in February 2023, the first time this figure has risen in eight months. Experts believe this is a sign of supply chains beginning to ease. 
• The “Windsor Framework,” which the UK and EU revealed this week, contains modifications to the Northern Ireland Protocol that have been hailed by UK logistics leaders.
• According to former US four-star general David Patraeus, supply networks must adjust to new conditions and the global economy’s seismic shift from globalisation to “slowbalisation”.  
• China’s heating coal consumption and steel production are now once again growing annually. Prior to this, neither the production of steel nor the burning of heating coal had increased year over year since the middle of December. Now, China is experiencing promising new shifts in the manufacturing sectors, which have benefited the spot market for dry bulk shipping.  
• On Friday last week, the European Union passed a tenth set of sanctions against Russia, with lawmakers focusing heavily on shipping making it even harder for companies to navigate new laws.  

Looking forward     

As we enter spring, we’re seeing more and more organisations shake-off the slump they suffered earlier this year and energise their supply chains. If that’s you, or you’d like any support with the issues above, then get in touch today.