We wish to provide some market and outlook for the remainder of 2023 and detail as follows.
As we all know the situation is subject to change depending upon anything which could affect shipping and the supply chain. As we all know one of the most visible signs of disruption was during the pandemic which resulted in shortages and delayed deliveries of consumer items ranging from electronics, furniture, and apparel. That led to a lot of disruptions with shipping patterns, which now appear to be well on the way to correction.
Supply chains are almost back to some normalcy in terms of activity, inventories, and seasonality however there are uncertainties in both the Government policy and physical risk which can all effect consumer buying. There is evidence of a return to a normal supply chain activity and delivery times have improved. The Federal Reserve still are not ready to stop with rising interest rates as they continue to fight inflation. Rates are at their highest since 2001 and could go even higher. Recently rates were increased in July from 5.25 to 5.5 percent and could go even higher with their continued efforts to fight inflation. This can also then have an impact on consumer spending.
We expect that ocean rates may keep increasing at least thru September in view of announced GRI’s and PSS charges. Typically, a peak season is 10-15 percent growth or even more. Carriers would like to return to some normalcy in regards to ocean rates and are striving to remain profitable.
Reports of vessels fully loaded seem to suggest a peak season demand increase however, with demand improved, shipping lines are still focusing on tightening service capacity. This may be in anticipation of new capacity entering the
trans-Pacific lanes in the coming months, which will put downward pressure on rates. Overall, there is a growing optimism for further rate increases in the short term with the current strong utilization. Demand is expected to be weak from mid-October after China Golden Week holidays and rates would likely be reduced during this time.
Tariffs which were implemented on imports from mainland China, imposed initially by the Trump administration, could be completed by the end of 2023. With the uncertainty regarding tariffs reshoring decisions may be reduced and slowed down until the uncertainty is finally resolved. Market Intelligence analysis shows mainland China’s share of U.S.. imports of products covered by Section 301 duties fell to 11% in the 12 months to April 30, 2023, from 18% in 2016. The share of imports of products not covered by tariffs only fell to 31% from 32% over the same period. It is unlikely that the Section 301 tariffs will be reviewed or updated in isolation from wider U.S.-China geopolitical tensions. Those are likely to remain focused on the technology sector. There have already been signs of division in technology supply chains, particularly with the supply of semiconductor manufacturing equipment earlier in the year.
Thanks as always for your continued support.