Maersk: Peak season "much earlier" this year

Maersk said the peak season for the container shipping market arrived "much earlier" than in previous years as customers moved goods to Europe in advance to avoid potential disruptions.

"In Europe, latest observations indicate that the peak season will be much earlier than in previous years due to a number of factors," Maersk said in its latest market watch.

Maersk explained, “We have seen that cargo owners have been strategically moving cargo to European ports in advance to avoid any potential future disruption, while increased consumer spending has also contributed to the growth in demand.”

With geopolitics disrupting trade, cargo owners want to ensure their goods are delivered on time.

Maersk said, "With widespread disruption to major trade routes having an impact on freight rates and capacity, cargo owners are looking to secure space as early as possible to ensure necessary inventory levels in their target markets."

As the summer holidays continue, many hubs and terminals in Europe are facing reduced labor supply.

Maersk said it has "currently limited impact on operations and continues to monitor the situation and liaise with local terminal authorities."

In Rotterdam, Maasvlakte II's overall operational performance is stable, but some delays are expected for westbound vessels arriving in Europe due to bad weather around the Cape of Good Hope.

Maersk said, “To mitigate further disruption to services and other vessels, we are focusing on ensuring service reliability and eliminating the knock-on effects of these delays. Density remains high in the terminal yard and customers are eager to take delivery of cargo as early as possible to help clear the ”

‌The peak season of the container shipping market is usually in the third quarter of each year, from July to September. The normal peak season, mainly after the summer vacation, is when retailers begin to prepare inventory for the fall and winter seasons as well as Thanksgiving, Christmas and New Year's.

In recent years, especially since the outbreak of the epidemic, the pattern of peak season has undergone significant changes. The shift from a single concentrated peak to multiple peaks throughout the year is driven in large part by changing consumer behavior and the rapid growth of e-commerce, which has transformed the way people shop and interact with brands. This new trend in the distributed season requires businesses to be more agile and responsive than ever before. Additionally, this shift blurs the lines between what was once considered “off season” and “peak season.” As consumer demand is now influenced by a wider range of factors, including social media, influencer marketing and global events, businesses must adapt to these changes to capitalize on opportunities and mitigate risks. This requires constant monitoring of market trends, customer preferences and external factors that could trigger unexpected demand surges.

Maersk said the global economy continued to outperform earlier forecasts as it showed greater resilience, supported by U.S. economic expansion and slowing inflation. There are already signs of optimism for trade growth, with both sea and air freight volumes climbing this year compared with 2023. There are signs that this strong performance will continue into the second half of the year, although headwinds, especially geopolitical issues in the Middle East and Europe, may dampen market sentiment.

Global economic growth forecasts remain optimistic, with GDP growth expected to be approximately 2.6% in 2024. Growth in the U.S. and some emerging markets exceeded expectations in the second quarter. The global Purchasing Managers Index (PMI) showed that manufacturing activity fell back in July, with the PMI falling below 50 for the first time this year, indicating contraction in China, the United States and the European Union. In the euro area, consumption growth has been slow despite a strong labor market and rising wages.

The ocean freight market outlook for July 2024 highlights a mixed scenario for global demand and capacity supply dynamics. Container shipping demand continues to show resilience, with year-on-year growth of 4.8% from March to May 2024. The growth was driven by strong import demand from regions such as North America, Latin America and Africa, while export activity in China remained strong. In terms of shipping capacity supply, new ship deliveries have increased significantly, with an increase of nearly 1 million TEU in the second quarter of 2024 alone. The wave of newbuilding deliveries has played an important role in managing supply chain disruptions and restructuring route networks following the Red Sea crisis. Although newbuilding orders have begun to decline, they remain high, reflecting the container shipping industry’s long-term investment in capacity expansion.

Additionally, layup and demolition levels remain low, suggesting that available capacity is being actively utilized, which is crucial given strong demand in some regions.

Overall, while demand in the container shipping market remains strong, increased capacity and concerns about weak manufacturing activity are likely to challenge maintaining this balance in the coming months. Maersk expects global container volume growth to be between 4% and 6% in 2024.

Spot freight rates on the Asia-US West Coast route have been trending downward since July, but volumes at the Ports of Los Angeles (LA) and Long Beach (LB) have not followed the same downward trajectory.

The import heavy containers of the LA/LB ports in July reached 936,000 TEU, which is the highest record since May 2022. The latest data from the Southern California Marine Exchange suggests that August figures were equally strong. In August, LA/LB saw an average of 19.6 container ships berthing per day, exceeding the average of 19.4 ships per day in July. The number of berthing ships reached 26 on August 26, which is the highest single-day data since September 2022. Previously, the peak reached 35 ships in January and November 2021.

The Drewry World Container Index (WCI) shows that as of August 22, the spot freight rate from Shanghai to Los Angeles was US,401/FEU, down 14.8% from the recent high of US,512/FEU as of July 11.

The Shanghai Export Container Freight Index (SCFI) shows that as of August 23, the current market freight rates from Shanghai to the basic ports in the West and East US are US,955/FEU and US,546/FEU, respectively, compared with US,103 as of July 5. /FEU and ,945/FEU fell 26.5% and 14% respectively.

In short, if you only look at spot market freight rates, the “peak season” appears to be weakening. However, spot freight rates are affected by the balance of supply and demand, especially the impact of the delivery of a large number of new shipbuildings. But data shows that cargo volumes at the LA and LB ports have not followed the same downward trajectory, with August data still very strong.