Signs of weakness within the freight forwarding market

A lack of certainty exists within the freight forwarding market as momentum fails to take hold. In the latest findings, the Stifel Logistics Confidence Index slipped 2.7 points to 55.2. While still above the important 50-level, too many questions remain unanswered – Will a strike be averted at the US West Coast ports, what will happen within the sea freight market now that P3 alliance has collapsed? Is economic growth really slowing?


Stifel Confidence Index: Total

Air Freight

Even though the overall air freight logistics index has improved 4.4 points from June 2013, the June 2014 data suggests the air freight market still remains fragile, declining 1.9 points to 53.8. The Present situation remained the same as for May with Europe to the US the only lane to decline, down 2.0 points to 49.7.

Meanwhile, the six month Expected situation is concerning as it fell 3.7 points to 57.7. All trade lanes declined with the outbound Europe lanes’ decline being the steepest – Europe to Asia declined 4.8 points and Europe to US declined 5.3 points.

Latest figures from IATA (April) suggest that while the freight market improved 3.2% above previous year levels, demand has not. Traffic levels in April were slightly below those of January and 1.1% lower than what was recorded in March. IATA indicated that European airlines saw demand for air cargo fall by 0.7% compared to April 2013. A slower start for carriers as they entered second quarter particularly as GDP growth in the Eurozone was just 0.2% in the first quarter.


Stifel Confidence Index: Air Freight

Sea Freight

The sea freight logistics confidence index declined 3.4 points to 56.7. In addition, the index is only 3.3 points higher than for June 2013. Both the Present and Expected situations noted declines as all trade lanes recorded declines for each situation.

The market continues to be faced with overcapacity and rate fluctuations. With the Chinese authorities rejecting the P3 alliance, carriers are now left scrambling to come up with other solutions. According to Ti’s Senior Analyst, Thomas Cullen, the alliance was an attempt to drive-down costs and thus improve margins, something that remains an imperative for all players in the market. In the short-term the urgency of such measures may have eased a little as Maersk at least seems to have established some form of cost-competitiveness advantage over its rivals. This suggests that CMA CGM and MSC may be under greater pressure to look for other solutions. For smaller players the pressure remains even greater.

Meanwhile, a potential strike or slow-down for the US West Coast ports may prove disruptive. While the ports of Long Beach and Los Angeles still hold a large share of the Asia-Pacific cargo entering and leaving the US, each port has given up some share particularly since the last strike in 2002, a 10-day work stoppage that cost the US government an estimated $1bn a day. Shippers have long memories and have since balanced out shipments to other ports including those along the East Coast, in Canada and possibly Mexico.


Stifel Confidence Index: Sea Freight

Monthly Question

For this month’s question, we asked survey respondents if they are using more, fewer or the same forwarders than a year ago. A large proportion of respondents, 70.9%, noted they were using the same number while 13.0% noted more and 16.9% noted fewer.

An interesting point worth mentioning was a few comments noting that while the number of freight forwarders remains the same, there have been changes within providers. Another interesting comment centered on improvements in procurement which resulted in reduced transportation costs and thus fewer freight forwarders.

To take part in the latest Stifel Logistics Confidence Index Survey:

To download the full ‘Stifel Logistics Confidence Index – ‘June 2014’ document please use the following link: