Surveys conducted by US based freight forwarders are showing that factories in China could be experiencing a slow in orders that will hit the maritime container industry in September.
According to consultant Jon Monroe, in order to get an accurate understanding of the near future demand factory orders can offer an early warning as these orders are made up to 60 days before cargo is loaded onto vessels.
Monroe said that he had seen a number of surveys conducted by forwarders in China, and “At least one of them conducted a survey of factories that warned of dropping orders in September. So, I asked the Worldwide Logistics team in Shanghai oversee a similar survey of factories within our China network. While we are still seeing strength, some are no doubt slowing down.”
August itself remains strong according to forwarder data, but it is weaker than July. While there is some cause for concern Monroe also points out that September loadings remain uncertain.
“The survey came back with some factories experiencing a reduction of orders while others experienced an increase of orders,” explained Monroe, but September consumer confidence is starting to wane, he added.
Measures of consumer confidence can be erratic, but as a long-term measure of whether people will buy and when they will buy, it can be seen as a general guide. IBM has released its latest monthly survey of consumer concerns with Covid-19 as the focus.
“The survey concluded that attitudes are shifting as 72% of the consumers surveyed become increasingly uneasy about the potential impact of the virus on their lives and that of their families,” writes Monroe.
In the same survey only 13% of respondents believed the economy would return to pre-pandemic levels of activity, while 35% said they would not enter a shopping mall this year and a further 53% said they would reduce their use of public transport.
Consumers are changing their behaviors in order to protect themselves from what they believe to be a deadly virus. Consumers are very cautious about going outside their house and prefer to work remotely for some time. Only 13% believe the economy will bounce back to where it was prior to COVID-19. 35% of those surveyed said they do not plan on going to shopping malls this year. Approximately 53% of those surveyed said they will reduce their use of public transportation or not use any public transportation.
Even so June sales showed a 7.5% increase over May and E-commerce contributed to this increase, with the expectation that E-commerce sales will soar 18% this year.
“So, what does this mean for container imports and demand?” Asks Monroe. The answer is, “It might be that as more consumers stay inside, and they adapt to online purchasing. There is little choice. More and more consumers are purchasing everything online, but it starts with groceries. Groceries are the one category that seems to be up year-over-year in spite of the economy being shut down.”
Overall, the Transpacific saw a return of 18 vessels to the trades this month. Though forwarders have reported a slight decrease in activity.
“It looks like the first two months of the second half (July/August) is falling in the carrier’s favour,” according to Monroe, who added, “We can expect the second half to taper off at some point but if the carriers can hold rates through September, they will have a good, no, a great year. In the meantime, spot rates just went up effective 1 August Maersk announced freight of all kinds rates of US$3150 to the US West Coast and US$3500 US East Coast.”
Freightos’ FBX index has reported that this week China-US West Coast prices fell 3% compared to the previous week to US$2676/FEU. Though this rate is 74% higher than the same time last year.
On the China-US East Coast trades prices also dipped 3% to US$3236/FEU and are 10% higher than rates for this week last year.
Eytan Buchman, CMO at Freightos commented, “The additional capacity caused ocean rates to fall slightly this week, for only the second time since mid-May, with China to US West Coast prices down 6% from their early July peak.
“As a result of sailing constraints, shippers are reportedly being asked to book two weeks in advance to ensure their shipment will get on the desired sailing. It is possible that as these backlogs are cleared with August’s increase in available capacity, shipments rolling will decrease along with the current pressure on rates – as long as volumes remain steady.”