The Logistics Confidence Index has ended a run of 14 consecutive months of negative results.
In keeping with the positive uptick recorded by the Index, there are some positive signs for global trade within industry media. For example, the Index reflected a more healthy environment in Air Freight, with The Loadstar noting a marked improvement in the seasonal peak this year, following a conversation with Cathay Pacific’s general manager of cargo sales and marketing.
Nonetheless, the salience of one month’s results can only truly be seen in hindsight. More data is needed to determine if the December Index results represent a genuine inflection point.
With regards to Sea Freight, all indications show that carriers are responding aggressively to the capacity problems in the industry, though many appear to be holding off on definitive capacity reduction. Following the news of previous months, Drewry, the consultancy, has stated that the global fleet of idle ships has doubled over the last year, amounting to a total of 1.7m TEU.
As such, the intense competition within the sector is unlikely to let up, particularly if Maersk Line succeeds in its efforts to acquire Hamburg Süd. Other lines have already consolidated, but pricing pressure may yet force further industry consolidation.
The weakness of transshipment hubs in the current environment of low growth is an important trend to watch. Notable news in this regard includes the release of statistics showing that the Port of Busan suffered a 6.5% decline in volumes compared to the previous year. Though the port has suffered more than most from the collapse of Hanjin Shipping, it has struggled to achieve growth throughout 2016.
At 50.6, the December Air Freight Index score represented a month-on-month increase of 1.3 points. The Index score was 4.0 points greater than in December 2015, but 5.2 points lesser than the score registered in December 2014.
The Air Freight Logistics Situation Index improved by 2.0 points month-on-month, to total 49.4. The performances of two trade lanes were decisive in producing this outcome. Europe to Asia increased by 3.7 points month-on-month, to 43.0. More significantly, Asia to Europe increased by 6.9 points to 55.3, the first positive score on this lane in over a year. Meanwhile, Europe to US declined by 2.2 points, to 46.2, whilst US to Europe was also down slightly, by 0.6 points, to 52.9.
The Air Freight Logistics Expectations Index score was similarly driven by improvements on the trade lanes between Europe and Asia, and vice versa. The former demonstrated a 4.7 point increase to 49.1 for December, whilst the latter gained 1.4 points to 52.3. Meanwhile, Europe to US declined by 2.4 points to 50.9, whilst US to Europe fell 0.9 points to 55.2.
For December, the Sea Freight Logistics Confidence Index recorded a score of 49.9 points. This represented a gain of 2.5 points against the previous month, and a gain of 5.6 points against December of the previous year. The result was, nonetheless, 9.1 points below the score of 59.0 registered in December 2014.
The Sea Freight Logistics Situation Index score stood at 48.4, having increased by 3.6 points month-on month. All lanes contributed to this growth, which marked an improvement from November. Though the lane score remained negative, Europe to Asia reported a substantial month-on-month improvement of 6.0 points, which brought it to 42.3 in total. This lane was followed by US to Europe, which rose by 4.0 points to 49.2, Europe to US, which gained 3.1 points to 49.5, and Asia to Europe, which increased by 1.5 points to 52.4.
The Sea Freight Logistics Expectations Index score rose by 1.4 points from November, to total 51.4. Three of the four lanes recorded improvements over this timeframe. Europe to Asia noted the greatest month-on-month increase of the four lanes, improving by 3.5 points to 50.9. Similarly, US to Europe gained 2.7 points to 52.0. Europe to US was the other lane to record an improvement, with a rise of 0.4 points taking it to 49.6 for the month. Declining by 0.7 points, Asia to Europe nonetheless retained a positive score of 53.0.
For this month’s one-off question, we asked Index respondents: “What effect will the Trump Presidency have on global trade volumes?”
There was no majority response group, though the largest collection of respondents, 27.8%, believed that the election of Donald Trump will be negative for global trade volumes. Countering this, 16.5% asserted the event would have a positive impact on trade volumes.
More significant, however, was the response group which stated it is too early to tell what impact the election will have. This group amounted to 25.3% of participants. A further 17.7% said trade volumes will be unaffected.
Another 11.4% of respondents argued that more significant than the election of President Trump is the wider trend towards protectionism, of which his election was seemingly a part. The final 1.3% elected for other responses.
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